POWER CORPORATION AMENDMENT ACT, 1991 / LOI DE 1991 MODIFIANT LA LOI SUR LA SOCIÉTÉ DE L'ÉLECTRICITÉ
ASSOCIATION OF MAJOR POWER CONSUMERS IN ONTARIO
NIAGARA FALLS HYDRO ELECTRIC COMMISSION
ST CATHARINES HYDRO-ELECTRIC COMMISSION
TAXPAYERS COALITION OF NIAGARA
RIVERWATCH INC
ONTARIO ENERGY ENVIRONMENT CAUCUS
CONTENTS
Thursday 30 January 1992
Power Corporation Amendment Act, 1991, Bill 118 / Loi de 1991 modifiant 18 Loi sur la Société de l'électricité, projet de loi 118
Association of Major Power Consumers in Ontario
Jim Lawn, member, Association of Major Power Consumers in Ontario; vice-president of finance, Quebec and Ontario Paper Co
Consumers' Gas
Jim Howes, general manager, Niagara region
Art Adams, regional sales manager
Niagara Falls Hydro Electric Commission
Bob Hanna, chair
George Hostick, general manager-secretary
National Council of Women of Canada; Provincial Council of Women of Ontario;
St Catharines Local Council of Women
Gracia Janes, president, St Catharines Local Council of Women
Canadian Oil Heat Association
Ken Wooton, manager, southern Ontario home heat, Ultramar Canada
St Catharines Hydro-Electric Commission
David Lines, general manager and secretary
Brock University
Terry Varcoe, vice-president of administration
Taxpayers Coalition of Niagara
Frank Sheehan, chair
Riverwatch Inc; Ontario Energy Environment Caucus
Dave Mochrie, president, Riverwatch; steering committee member, Ontario Energy Environment Caucus
Adjournment
STANDING COMMITTEE ON RESOURCES DEVELOPMENT
Chair / Président: Kormos, Peter (Welland-Thorold ND)
Vice-Chair / Vice-Président: Waters, Daniel (Muskoka-Georgian Bay/Muskoka-Baie-Georgianne ND)
Arnott, Ted (Wellington PC)
Cleary, John C. (Cornwall L)
Dadamo, George (Windsor-Sandwich ND)
Huget, Bob (Sarnia ND)
Jordan, Leo (Lanark-Renfrew PC)
Klopp, Paul (Huron ND)
McGuinty, Dalton (Ottawa South/-Sud L)
Murdock, Sharon (Sudbury ND)
Ramsay, David (Timiskaming L)
Wood, Len (Cochrane North/-Nord ND)
Substitution(s) / Membre(s) remplaçant(s): Conway, Sean G. (Renfrew North/-Nord L) for Mr Ramsay
Clerk pro tem / Greffière par intérim: Manikel, Tannis
Staff / Personnel: Yeager, Lewis, Research Officer, Legislative Research Service
The committee met at 1200 at the Parkway Complex, St Catharines.
POWER CORPORATION AMENDMENT ACT, 1991 / LOI DE 1991 MODIFIANT LA LOI SUR LA SOCIÉTÉ DE L'ÉLECTRICITÉ
Resuming consideration of Bill 118, An Act to amend the Power Corporation Act / Projet de loi 118, Loi modifiant la Loi sur la Société de l'électricité.
The Chair: We are going to be starting in 45 seconds. There are coffee and beverages over there. I am pleased to see that the clerk's request for Canadian beverages has been complied with at least in so far as the grape juice and most of the juices go.
I have explained to my colleagues, who are from all over Ontario including the north, that not even here in the peninsula do we have orange trees. It is remarkable that we would be serving orange juice here in the heart of grape and tender-fruit country, but somehow there is that strange fixation, and even the request for made-in-Ontario product cannot deter the omnipresence of Anita Bryant's favourite beverage.
This is an all-party committee. It is a standing committee of the Legislative Assembly. Among the Liberal representatives, their being the official opposition, is Dalton McGuinty, who is the Energy critic for the Liberal Party. With the Conservative caucus here is Leo Jordan, who is the Energy critic for the Conservative Party. Among the government NDP members is the MPP for Sarnia, Bob Huget, who is also the parliamentary assistant to the Minister of Energy.
We have 30 minutes per presentation. Most people have submitted written submissions and those will become part of the record and made an exhibit. We would like to reserve at least the last 15 minutes of each half-hour period for questions and exchanges, which have proven to be a very valuable source of information and have been very productive as this committee meets.
This is the last day of our travelling about. The committee has been through northern Ontario, Timmins, Sioux Lookout and Ottawa among others and is just completing its southern tour, Kingston, Chatham, Guelph and now St Catharines.
ASSOCIATION OF MAJOR POWER CONSUMERS IN ONTARIO
The Chair: The first participant is the Association of Major Power Consumers in Ontario. Would you please come forward, have a seat, tell us who you are and tell us what you will.
Mr Lawn: Good afternoon, Mr Chairman and committee members. My name is Jim Lawn and I am representing Quebec and Ontario Paper Co, where I am the vice-president of finance and chief financial officer. Our corporation is very concerned about the potential impact of Bill 118 and how it will affect the future cost and supply of electrical power and Quebec and Ontario Paper's resulting competitive position in its Ontario operations.
Quebec and Ontario Paper is the sixth largest manufacturer of newsprint in Canada, producing approximately 780,000 tonnes of paper a year. Our operation in Thorold is a leader in newsprint recycling, has been a major supporter of the blue box program in Ontario and is consuming approximately 200,000 tonnes of old newspaper and other paper products now.
Our company employs approximately 3,000 people at its three main operations in Ontario and Quebec. The Thorold mill and its related operations employ approximately 1,000 people.
In 1992 our Ontario operations are planning to consume about 80 megawatts of power at a cost of $31 million. Electrical power represents 20% of our total Ontario manufacturing costs and is the second-highest cost element behind total labour compensation at 21%.
Before I comment on Bill 118, I would like to take a moment and review the current situation of our industry and our company. The forest products industry in Ontario and Canada is one of the major exporters and employers, making up approximately 13% of total exports of the country. This industry is presently in a recession that has had far more impact than the 1982 recession and many feel today's conditions are similar to those of the 1930s.
Some of the problems facing the industry, such as the collapse of the newsprint prices, are self-inflicted and partially due to normal reduction in demand during recessionary periods. Our industry is trapped in an environment of high interest rates, overvalued dollar and a high tax structure.
Canada's forest products companies are expected to suffer losses totalling $2 billion in 1991. As bad as this seems, the prospects for 1992 are worse. Instead of bottoming out last year, economic indicators point to a further decline, and I anticipate there will even be greater losses and plant closures in 1992.
Based on this outlook, the equity position of the Canadian forest products industry will greatly be reduced, and in some cases companies will be bankrupt. The Canadian industry is facing declining competitiveness versus the US and other countries and the survival of the industry as we know it is at stake. For the industry to survive in the long term it appears there must be a major restructuring and a change in old business practices.
Investment is required for a number of reasons: modernization, environmental requirements, recycling demands and diversification. To attract capital, we must show investors that we can get a fair return on their investment. Throughout the 1980s we have not.
Price increases on input factors must moderate to achieve a fair return. As a result, wages and salaries must be tied to productivity, government-imposed benefit costs must be contained, and government-controlled sectors like Ontario Hydro have to reduce their rate increases to inflation immediately and below inflation in the future.
Governments at all levels have to be mindful of the critical condition our industry is in when developing new policies that could add to the difficult task ahead of the pulp and paper industry. We ask that government treat all companies the same so that the competitive positions within a province and the country are not artificially changed by government action. We ask that the government contain and reduce spending at all levels so that tax and social costs borne by industry do not add to our competitive difficulties.
To address Bill 118: There are three elements in the proposed amendments to the Power Corporation Act which Quebec and Ontario Paper feels should be addressed: the importance of maintaining the principle of power at cost, the removal of the directors' obligation to act in the best interests of Ontarians when the government uses its directive power under the act, and the provision which permits Hydro to promote switching to alternative fuels.
First, power at cost: One of the three major factors that established Quebec and Ontario Paper in Ontario was the supply of reliable power at cost. As a result of this principle, Quebec and Ontario Paper has operated in Ontario for almost 80 years, contributing to the economic growth and the quality of life in the province and in the region of Niagara.
Quebec and Ontario Paper is very troubled with Bill 118's proposal on the policy directives to Ontario Hydro that do not relate to the principle of power at cost. The recent action by Ontario Hydro to deal with the Elliot Lake and Kapuskasing issues at the government's request is a clear breach of this principle. These are social issues that the government of the day felt needed financial support and should have funded out of the general revenues, not at the expense of the Hydro ratepayers. These two actions alone could cost the ratepayers $500 million.
It is important that Ontario and the industry in the province continue to enjoy power rates that provide a competitive position. Without a reliable, economical and environmentally sound supply of electricity our company cannot promote new and continued investment which would allow us to maintain employment at current levels. Unless the government and Ontario Hydro recognize the need to focus on the economic interests of the province by maintaining power at cost, unencumbered by the inappropriate burden of social policy initiatives, there is a serious risk that our company will not expand and will look to new investments outside the province.
The Q and O mill in Thorold is one of the most energy-efficient mills in North America. Even with this, power is our second-largest cost element, and with rising rates Ontario Hydro no longer supplies power at competitive rates. Because of Ontario Hydro's rate structure and the province's policies, Q and O would not build a new operation in Ontario at this time.
Second, directors' accountability: In the past, Ontario Hydro's board had been a sobering second thought in the face of any government directives and considered it its duty to protect the interests of the ratepayers. Bill 118 relieves the directors of this responsibility because a director must comply with the government's policy directives. We feel this does not constitute a more open policy directive process as claimed by the Minister of Energy.
Third, fuel switching: Bill 118 fails to address the key problem, that of reducing total energy used by focusing only on electricity. To remain competitive, Q and O had to move away from a very labour-intense, high fossil fuel cost structure, plus an environmentally unsound process. As a result, the mill was rebuilt in the 1980s, resulting in the lowest costs and one of the most environmentally sound mills in Canada. But our electric consumption per tonne of newsprint increased 30% after that rebuild. Since that rebuild, Q and O has reduced its energy power consumption by 19% through many capital projects, but the new mill still consumes 10% more electrical power than the old mill.
The government has been motivated to encourage fuel substitution. As a result, it could save over 700 megawatts of electricity. Q and O feels the government should not intervene in the market by adding artificial incentives that are not good for the province's long-term economy or environment.
I would like to thank you for your time and would like to emphasize that for Quebec and Ontario Paper to remain competitive and to continue to employ at the current levels, it has to be able to buy reliable electrical power at competitive rates. In my view, the policies of the government and the direction of Ontario Hydro can only reduce electrical power consumption by sacrificing the competitive position of industry. This loss in competitiveness will result in a reduction in growth and closure in some cases. Bill 118 is unnecessary and for the economic good of the province it should be scrapped. Thank you.
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The Chair: Thank you, Mr Lawn. We have 18 minutes in total. Mr McGuinty, please.
Mr McGuinty: Thank you very much, Mr Lawn, for your presentation. I found it very interesting. You painted a picture in a very graphic manner as to how businesses do not any longer operate in a vacuum. Dealing with global markets and competition from across the borders are now a major factor.
You mentioned that one of the three major factors that established your corporation in this province was the supply of reliable power at cost. What were the other two factors?
Mr Lawn: You have to remember this is back in 1913 and it was the fact that in this area there was a labour force already because of the building of the Welland Canal and there was an infrastructure here. The town of Thorold was well-established. Wherever else we looked throughout the province we would have had to build the community itself.
Mr McGuinty: Many people who are seeing us and are proponents of Bill 118 or are advocates on behalf of the provisions contained within the bill tell us that the net result at the end of the day is that Hydro is going to be more accountable to the people of the province, to the government. You have raised a concern I have, and that is, what are we going to do with the board of directors? In particular, what is their function going to be and why do we have to have a provision contained within the bill that absolves them from liability only if they do as they are told?
We saw how this government has already operated through the actions taken at Elliot Lake. The government directed Hydro to proceed in a certain manner and the logical inference from the paperwork I have obtained is that Hydro's directors felt it was not the right way to proceed. The government was able to proceed with its directive by absolving the directors from liability. If I was a shareholder in your corporation and you told me your directors were going to be absolved from liability in certain instances, how would your shareholders react to that kind of pronouncement?
Mr Lawn: They would obviously wonder why the board of directors is there and what role it truly has. As a shareholder, I would be very concerned about who was looking after my best interests if it is not the directors I appoint to the board through normal election processes. This is the problem we are concerned about, the lack of accountability of Ontario Hydro. Although it has said it is accountable to the government of the day, that is such a large vehicle and has many different interests. Ontario Hydro is a corporation whose responsibility is to produce power, and that is how it should be managed, as that type of a corporation, not a government agency.
Mr McGuinty: This business of the policy directive, as well: People are saying it is going to make Hydro more accountable to government, but in fact it will be a discussion among a few of the elected representatives who happen to be in cabinet. The Elliot Lake directive, for instance, was not discussed, to my knowledge, in the government caucus generally. It was simply handed down on stone tablets after the fact. I had no opportunity to give any input either on behalf of my 65,000 constituents or as Energy critic for my party. So I fail to understand how this policy directive provision is going to make Hydro more accountable to the people of Ontario through government.
The Chair: Do you want to respond to that?
Mr Lawn: In both of those instances you quoted, Elliot Lake and Kapuskasing, this is the concern we have, that the government is dealing with social issues through the utility. I personally do not and our corporation does not have a comment on Kapuskasing as far as needing financial support. Everything should be done to help communities, but we do not think it should be done through the ratepayer. As a corporation, I do not think there was any obligation to do what was done.
In the Elliot Lake incident, again that actually comes back to a point that I commented on -- that is, government interfering in an industry's action and it has now tilted the competitive position unfairly. If we as a corporation were going to do a major project somewhere, would the Ontario government give us the waiver on an environmental assessment of any plant we did? Not likely. We are a corporation that has spent hundreds of millions of dollars keeping our facilities right up, top-notch. As I said, the mill in Thorold is probably the lowest-cost -- if not, the second-lowest-cost -- mill in Canada. But the mill in Kapuskasing was allowed to deteriorate to a point by its owners and investors, and at the end the government comes in and helps it. That is an artificial thing that has really hurt the competitive position of our industry now.
The Chair: Very briefly, Mr Cleary.
Mr Cleary: Thank you for your presentation, Mr Lawn. Coming from an area where we too have a paper company that is striving, I really appreciate your presentation. You said you had taken advantage of many energy-saving projects by your company in the past. Do you have any flexibility to take on any other energy-saving projects?
Mr Lawn: We are currently working very closely with Ontario Hydro to reduce our consumption of electricity by almost 10%. In doing so, we will also increase the output of our recycled-paper mill. Right now about 57% of our newsprint comes from recycled content. That will move that up to 75%. So not only are we going to do something that helps on the environment side as far as the old newspapers; we are also greatly going to reduce the consumption of electricity, not only the pure consumption, but moving a lot of our consumption of electricity to the off-peak hours at night. This project is before Ontario Hydro right now through its incentive grant process.
The Chair: Thank you. Mr Jordan, and I am going to leave some time for Mr Arnott.
Mr Jordan: Thank you, sir, for your presentation and your concern over Bill 118. I am going to start with your conclusion: "Bill 118 is unnecessary, and for the economic good of the province it should be scrapped." That happens to be not only my personal view, but the view of my party on this particular bill from the time it was introduced in the House in June 1991. My concern is that we are moving too quickly, for one thing, to try to turn the ship around from a nuclear base to a conservation base. I am wondering, if we table Bill 118 for the time being and establish a task force to look into an overall energy policy for Ontario -- would you comment on that?
Mr Lawn: Anything that would delay the implementation of Bill 118 I could not only support but agree with. I do agree that as an industry what we are finding is that you set the playing field here and government, on an ongoing basis, just keeps on tilting that, changing the rules we are playing by. As a result, the social costs or the benefits or the cost of the product we are buying are changing beyond our power. What we would like to see is some stability; do not change the rules.
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Ontario Hydro has been operating for a long time, longer than our corporation has, in providing very reliable low-cost power in recent years through a number of situations that I would not say are all Ontario Hydro's fault. It was partly that of the government of that day, which changed policies, and it has become, I think, very cost-inefficient, to the point where Ontario Hydro now has the second-highest cost of producing power in Canada and is comparable to some of the states.
I think this should be tabled and a committee should be formed to look at the cost structure within Ontario Hydro and take a real hard look at it, not only the way it is managed but also its own cost structure. I think that would help the province and industry a lot more than Bill 118 would.
Mr Jordan: There was $7 million on this lightbulb program to the householder. It was advertised as being in conjunction with and with the approval of your local utility. Our experience across the province has been that the local utilities were in fact not part of the consultation for this program. This was strictly an Ontario Hydro and perhaps a government-oriented program; we are not sure of its origin. But with the cost of $7 million, another $6 billion earmarked for conservation and a debt with Ontario Hydro apparently growing, it would not appear to us that this is a sound business approach to solving the energy problem of the future.
Mr Lawn: I agree on the lightbulb issue. That is an easy one. That will, I think, save about $3 million of electricity. It will only save $7 million if everyone goes out and tries to find those lightbulbs that have the same wattage in them. I know that I changed my 54-watt bulb from that package that burnt out and put a 60 right back into it. So if I am normal, there is going to be no return on that project. I think this was not properly thought through and probably not properly researched.
There are other programs at Ontario Hydro that are going on right now, projects like our own that they are working through, where I think the incentives may pay off well for Ontario Hydro and the province long-term. I agree with you that it looks like there are some that are shot out there very quickly. They get a lot of publicity. They are not thought through. We are grinding away on other ones very slowly.
I was just going to finish there.
The Chair: Wrap it up.
Mr Jordan: Okay. Given the fact that we are in a serious recession, as you said, almost in comparison with the 1930s, we really should not be doing anything that is going to add to the cost of power at the present time, because demand is dropping for the requirement. What we should be doing is projecting what we are going to do as the province spins out of this recession and how we are going to be prepared to meet it with the supply of energy as we have in the past. That is why I was glad to hear you say, "Table the bill, do some studying and get some direction on energy policy for Ontario." Thank you very much.
The Chair: Like Diogenes with his lamb, Mr Jordan has been carrying these bulbs across Ontario for three weeks now.
Mr Lawn: Is that where I can get a 54-watt lightbulb? From him?
The Chair: You have one right here. When he is finished with them, he may as well send them to you.
Mr Arnott: I just have one question. I am impressed with your brief. Would it be an exaggeration to suggest that those 1,000 jobs at Quebec and Ontario Paper Co may be jeopardized because of Bill 118 and the general energy policy of this government?
Mr Lawn: I do not think any company can sit before you and say that one action of the government would jeopardize 1,000 jobs. What this is and why I am here today and why our corporation is very concerned is the thousands of things. We do not know which one is going to be the straw that breaks the camel's back. As I say, we keep on getting things that interfere with our competitive position. The reason we were here was because of power. It was very competitive. We had disadvantages in a number of other things we dealt with, but now all our advantages are going away and all we are going to be left with are disadvantages.
So this one policy probably will not do it. I am not sure which one will, unless this one will, but unless we stop changing and put a hold on things, industry will be leaving this province. I know we will not build another facility here right now under this economic and political environment.
The Chair: Mr Dadamo, and leave some time for Mr Huget because he is the parliamentary assistant.
Mr Dadamo: I always do. Mr Lawn, good to have you here this afternoon in St Catharines. Something caught my eye on page 1. You are talking about spending at least $31 million for 1992, 80 megawatts of power. You also say it is the second-highest cost element behind total labour compensation of 21%. Not that the government or Ontario Hydro would give the money back, but are there any plans at this time, when electricity is so expensive, to trim that figure, or is this low at best?
Mr Lawn: This is low at best and I think one of the fallacies out there is that industry is fat and consumes power. We constantly look at it. As I said later on in my brief, when we converted our mill and made it a very modern mill, we actually consumed 30% more power in the new mill because of the process. Since that time, we have reduced the number by 19% and we are constantly reducing that number. As I said, we have another project before Ontario Hydro that would reduce the power by between 7% and 10% more. But other than shutting the doors and shutting the mill down, we cannot reduce power.
Mr Huget: Thank you, sir, for your presentation. It is very comprehensive, and I should compliment you and your company for your efforts in energy efficiency and conservation. I hope you continue with that because I think it is very important.
You mentioned on page 3 of your presentation that rate increases should be held to the rate of inflation immediately and to below inflation in the future in terms of hydro rates. I wonder how you would propose we do that when you look at this year's rate increases. A large portion, almost half of that rate increase, is attributed to the first costing in of the Darlington nuclear station, a huge supply project. How can we reduce the rates increases to inflation, bearing in mind that we have to pay for those decisions that were made in the past? If there is a difference between the rate you would like to pay and the rate we have to recover to pay for those huge generating projects, who is going to pick that up?
Mr Lawn: When I say we have to reduce it immediately to inflation, what I am saying is that through a number of actions such as cost restructuring, relooking at Ontario Hydro -- as I understand it, it has the highest administration cost of anyone in the province. We all understand that you have to invest capital and someone has to pay for that, but what we see is continuing increases in Ontario Hydro's rates way beyond what we would ever anticipate, even with additional capital.
I am not foolish enough to think that we could reduce the rate to inflation next year, but I am thinking that long-term, that is what it has to do. Ontario Hydro has to get back under control and be able to manage its process and know what is going on. It should have had rates well below inflation many years ago while these capital projects were not coming on, but it did not. It kept on having inflationary and above-inflationary rate increases. Now, when the capital comes on, that is added on top of that burden.
Mr Huget: It is a difficult dilemma, because the Darlington factor alone is greater than the rate of inflation. It is a difficult situation.
I want to go back to Elliot Lake and that issue. You mentioned in your presentation that Elliot Lake was a social issue and should not have been dealt with the way it was and that Hydro ratepayers should not have paid for it. I want to get your counsel on whether or not there was government interference and tilting of the market, as you refer to it, with Elliot Lake, and tilting of the market when the uranium contracts were signed in Elliot Lake that meant ratepayers, through their power rates, paid several times the world rate for uranium. That is the situation we were in in Elliot Lake. I wonder, if Elliot Lake assistance was a misdirected use of funds, was the signing of contracts that allowed for uranium at several times the world price, which is a fuel penalty, a misdirected use of Hydro funds as well?
Mr Lawn: Yes, I would agree with you. The initial contracts, if you are paying more than the market rate -- that market may not be at the spot rate, but market rate for long-term, you were subsidizing, and it was not the proper thing to do.
The Chair: Mr Lawn, all of us thank you and Q and O, as well as the association, for taking time to be here this afternoon. This is the first time the paper industry has been represented at these hearings, and you have provided us --
Mr Lawn: There was CP.
The Chair: I had asked the clerk because I did not want to err, and there it goes -- the first time in southern Ontario. That is what I meant to say.
Mr Lawn: There are not many of us in southern Ontario.
The Chair: The record, once it is transcribed, will undoubtedlyshow that we have heard from paper manufacturers. It is an insight that is unique. Everything you have said about Q and O I confirm in terms of its efforts along with, I will say it again, the commitment of the people who work there, the women and men who make that plant run, make it a valuable asset to the province. We appreciate your coming here and appreciate the input.
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CONSUMERS' GAS
The Chair: The next participant is Consumers' Gas. I have to tell you people before you start that we have heard -- numbers will follow me up every time -- at least twice from your colleagues from Union Gas. Why I mention that is because you may want to get down to the nitty-gritty. I suspect some of the common ground you have with Union Gas on the broader issues has already been covered. We would really appreciate the chance to ask questions and engage in some exchanges.
Mr Howes: Not really knowing what was in the Union Gas presentation, I am afraid I will proceed with my text.
The Chair: Do it any way you want, sir.
Mr Howes: Good afternoon, ladies and gentlemen. My name is Jim Howes, general manager, Niagara region of Consumers' Gas. Joining me today is Art Adams, our regional sales manager. We want to welcome you to the historic Niagara region and thank you for the opportunity to appear before the standing committee on resources development as it considers Bill 118, An Act to amend the Power Corporation Act.
As the committee has heard many times over the last three weeks, natural gas represents one of the most cost-effective means of meeting our energy needs. The natural gas industry plays a major role in the provincial economy and helps fuel local economies, providing a safe, secure supply of low-cost energy to the public.
As the cleanest-burning fossil fuel, natural gas can play a major role in improving the environment. When used in place of other more polluting energy sources, it serves to minimize some of our most serious environmental problems, such as urban smog, acid rain and global warming.
Because of the economic and environmental benefits, natural gas is the fuel of choice for many enterprises, institutions, industries, homes and key tourist attractions throughout the Niagara region. We firmly believe this abundant and versatile fuel can play a more significant role in meeting our energy needs in the future. As such, Consumers' Gas seeks to put forward its view to the committee on the concept of fuel substitution, one of the key issues addressed by the government in Bill 118.
In particular I want to address the following areas: first, the role of natural gas in the Niagara region; second, fuel substitution and its economic and environmental benefits; third, some of the initiatives undertaken by Consumers' Gas to encourage greater efficiency and conservation; finally, how Consumers' Gas is well positioned to meet any increase in demand for natural gas resulting from fuel substitution and Bill 118.
The Niagara region of Consumers' Gas provides a range of services to more than 123,000 customers. As the attached map shows, the distribution area extends to customers in the 12 municipalities within the regional municipality of Niagara, which includes the major communities of St Catharines, Niagara Falls and Welland.
After 24 years at our Church Street location in St Catharines we recently centralized our administrative, sales, engineering and warehouse services at new regional offices located in the Brock Business and Industrial Park in Thorold, in the heart, I might add, of the beautiful provincial electoral district of Welland-Thorold.
Natural gas has been available in this region since 1889, when it was first discovered in Bertie township, which is now part of the town of Fort Erie. Although most of the natural gas is now supplied from western Canada, several local gas wells are still in production.
Today many different enterprises in the region use natural gas for such energy needs as space heating, water heating, cooking or manufacturing processes. Indeed, natural gas is important to many market sectors that are unique to the Niagara region. We supply natural gas to eight major paper producers, including the large newsprint recycling mill of Quebec and Ontario Paper, which is located in Thorold.
The greenhouse industry is important to the local economy and over 150 growers use natural gas to grow a wide variety of flowers that are shipped to national and international markets. It should be noted that Westbrook Greenhouses in Grimsby not only uses natural gas to heat its growing facilities, but natural gas is also used to fuel its cogeneration plant, which generates 0.5 megawatts of electricity. Heavy industrial customers such as General Motors, Atlas Specialty Steels and Stelpipe use natural gas extensively in the manufacture of a vast array of high quality and cost-competitive products.
The availability of economical supplies of natural gas is also important to the success of the tourism industry, especially in the communities of Niagara Falls and Niagara-on-the-Lake, as many key attractions and enterprises use natural gas in heating, water heating or food preparation. In addition, natural gas is helping the Niagara-based wine industry at such wineries as Brights and Inniskillin to produce high-quality, world-class wines.
Consumers' Gas itself contributes in several other key ways to the economic stability and growth of the Niagara region. In fiscal 1991 we paid $3.1 million in local and municipal taxes and $13.4 million in wages and benefits to local employees.
The conflicts in the Middle East in the middle to late 1970s and the corresponding oil supply shortages and dramatic price increases caused many of us to rethink our energy strategies. Most of us understood that we had to take some of our eggs out of the oil basket, begin investigating different energy alternatives and get serious about energy conservation and efficiency.
During that time the federal government provided financial assistance, stimulating the substitution of natural gas for oil in both existing and new markets. This was an early, successful example of fuel substitution and it had an important economic benefit for many businesses and citizens in the Niagara region. This kind of activity enabled the company to provide natural gas service to over 95% of the residential dwellings and over 94% of commercial businesses in the Niagara region.
Our rate of growth in the Niagara region in recent years has been approximately 2,500 customers per year. Recently there has been a noticeable increase in the capture rate and requests for conversion from electricity to natural gas. Much of this may be attributed to the difference between natural gas and electricity prices and, in particular, some concern by electricity customers about the prospects of double-digit rate hikes over the next few years to pay for existing generating facilities. In our recent residential fall heating campaign 44% of our leads were received from electrically heated homes.
Over the course of the 1980s environmentalists began to demonstrate that our ever-increasing demand for energy of all forms was taking a huge toll on our environment as well as our pocketbooks. Once again energy conservation and efficiency were cited as key means of reducing the negative environmental impact associated with the use, production and transportation of energy.
Today many energy industries and governments have taken these lessons of recent history to heart and begun to entrench the ideas of conservation and efficiency in both corporate and public policy. Certainly this is true of the Ontario government, which has recognized that balancing energy demand and supply is central to achieving gains in conservation and efficiency. One of the ways this government is trying to foster the wise use of energy is by pursuing a policy of fuel substitution.
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The very nature of gas and the fact that energy is released from natural gas at the point of use makes it efficient. In fact, natural gas is more than twice as efficient to use as electricity when production, transmission, distribution and end-use losses are all considered.
Today fuel-switching savings are already being realized in public housing facilities across the province. Many of these public housing units subsidized by the Ontario government, however, still use electric-resistance heating. Ontario's natural gas utilities are working closely with the Ministry of Housing and the Ministry of Energy to convert the existing electric heaters in social housing facilities and to ensure that all new facilities use natural gas. As well, a program offered by the natural gas utilities finances capital costs for conversion to gas using the energy cost-savings resulting from these conversions.
In terms of how fuel substitution will impact on Ontario Hydro, it is very simple: When the electric utility encourages the use of natural gas over the use of electricity for targeted applications, it will save megawatts and simultaneously decrease its electrical load. This serves the best economic interests of both Ontario Hydro and electricity consumers because by decreasing its electrical load Hydro can successfully defer the need for new, large and very costly electricity generating facilities. It will also benefit society generally through reduced energy costs and reduced emissions from energy consumption.
Fuel switching will ensure that consumers will continue to have their energy needs met, and in a more efficient way. In addition, the activity of energy substitution will provide a much-needed economic stimulus to Ontario manufacturers and the construction sector. There are environmental benefits whenever and however energy is saved. Producing and using natural gas is not without environmental impact. But given our present situation and the unique qualities of natural gas I described at the outset, including significantly lower carbon dioxide, sulphur dioxide and nitrogen oxides emissions than current electricity sources, it is widely recognized that natural gas can and does play a significant role in combating some of our most serious environmental problems.
As I indicated earlier in my remarks, the overall trend towards the more responsible use of energy resources started in the 1970s. Certainly you can trace our commitment to the wise use of energy back to this period. Recent public and government focus on the concepts of sustainable development and environmental protection are not new to Consumers' Gas. Our company mission and goals specifically state that the company will promote the use of natural gas as an environmentally preferred fuel and continue to invest in the development and demonstration of technologies to improve its efficient utilization.
Consumers' Gas has been involved in the research, implementation and communication of energy conservation and efficiency measures for many years. As a responsible corporate guardian of a non-renewable natural resource, the company takes its role seriously. Indeed, we have been able to use our high profile in the community to serve as a role model for efficient energy use and to educate our customers and the public about the benefits and how-tos of energy conservation. Company research, products and services are all directed towards achieving optimum energy efficiency. Our regional utilization advisers are always ready to assist managers of institutions, enterprises and industries to reduce energy costs, enhance productivity, operate more efficiently and learn about new technologies and equipment to meet various needs and requirements. For example, we have assisted a local manufacturer of vehicle wheels to improve the combustion efficiency of aluminum melting furnaces. This improvement has paid off in greatly reduced aluminum scrap losses, fewer product losses and better product quality.
I am sure the members of this committee will not have failed to notice that my remarks today indicate clearly Consumers' Gas's support for fuel switching. Ultimately fuel substitution will benefit the gas industry in Ontario. But more important, it must be judged as in the best interests of the Ontario public because, as I have demonstrated, it will bring significant economic and environmental advantages to the people of this province, this government and Ontario Hydro.
We support fuel substitution and the switching from electricity to natural gas only where it is economic to do so. Within the communities of the Niagara region, where we currently distribute natural gas, there are electrically heated homes and in some cases subdivisions where all the homes are electrically heated. Currently we estimate that there are 1,500 electrically heated homes in the Niagara region. We are fully prepared to handle the expansion of our facilities to serve these homes when we can meet our economic feasibility. However, our ability to serve these electric subdivisions could be advanced, depending on the passage of Bill 118 and on how Ontario Hydro will manage its fuel substitution resources.
Our history of residential conversion indicates that substantial inertia from the point of economic savings is required to cause the customer to change to a different energy source prior to the total failure of his current heating equipment. There is no question that the current differential on energy prices would appear sufficient for the conversion from electricity to natural gas to take place. However, the conversion to natural gas could be greatly speeded up by assistance in the expansion of the natural gas distribution system to those streets and subdivisions where it has not been cost-effective to lay gas mains to date, basically due to the large percentage of electrically heated dwellings.
Let me conclude by assuring the members of the committee that Consumers' Gas is well prepared to accommodate an increased role for natural gas in the Niagara region economy. There is an abundant supply of natural gas in Canada. It is competitively priced and there is an excellent pipeline system in place to secure the delivery of a greater volume of gas to our market area.
Specifically on the natural gas pricing issue, which I understand has been raised a number of times over the course of these hearings, Consumers' Gas is forecasting that real prices for long-term firm gas will remain flat at current low levels until 1996 and rise slowly to 1999 because of a large North American supply and deliverability surplus. Prices are not expected to rise because it will take at least until 1995 to work the Canadian supply and deliverability surplus down to a more reasonable level.
Perhaps more important, in the United States a large new supply source, coal seam gas, is coming to the market. Two characteristics of this source will work to keep prices from rising. Exploration, development and production of coal seam gas is being stimulated by a US tax credit for production until the year 2003 from wells drilled by the end of 1992. In addition, I understand that once a coal seam gas well is on stream, production cannot be interrupted or the substantial front-end investment in water removal equipment will be lost. As a consequence, coal seam gas will aggressively compete for available markets until expected demand increments materialize in the late 1990s. This competition will be particularly strong in the California market and therefore will directly impact on Canadian gas prices.
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We have the expertise, supply and service capability to meet the needs of both existing and new customers seeking a clean-burning, economical fuel and energy-efficient equipment. In the Niagara region we have a staff of 300 employees and an infrastructure in place where all main and service construction is completed by either Consumers' Gas staff or contractors. All furnace and other appliance installations are completed by over 100 authorized dealers in the Niagara region, and service work to these appliances is performed 65% by employees and 35% by service contractors.
In the future we intend to work closely with the government, Ontario Hydro, our customers, the environmental community and all other interested parties to meet our energy needs in a cost-effective, environmentally friendly manner. Once again I want to thank the chairman and members of this committee for the opportunity to submit our perspective on some of the important energy and environmental issues facing our province. We would be pleased to answer any questions you may have of my presentation.
The Chair: Thank you, sir. Mr Arnott, three minutes.
Mr Arnott: Thank you, Mr Howes, for your presentation. This committee has heard presentations across the province for the past three weeks now. I do not think anyone disputes the fact that energy efficiencies should be a very high priority of this government and future governments and that fuel switching has many benefits, but for the life of me I still do not understand why Ontario Hydro customers and ratepayers should be asked to pay for fuel switching. I think it is fairly obvious that the gas companies in Ontario are going to realize an enormous benefit as a result of Bill 118 if it is passed. I just do not understand why they should not be asked to pay for part of the fuel switching at least, if not all of it.
Mr Howes: I think that if you look at our existing feasibility guidelines, we cannot expand our plant to add additional customers unless the revenues from those customers support that expansion.
Mr Arnott: Because you want to be fair to your existing customers?
Mr Howes: Those are the guidelines we have. As you know, we are a regulated utility and we must abide by those, so our current natural gas consumers will not be subsidizing that expansion. We think fuel substitution does make a great deal of sense, though, and it makes sense to Ontario Hydro. We think we can work with Ontario Hydro to help alleviate some of the problems it has. They do have a very serious demand-supply problem, and we think we are part of the solution.
I should add that within the Niagara region we are very fortunate in the fact that we have fostered a very good working relationship with our colleagues at Ontario Hydro. We see that relationship becoming even stronger in the future.
I think it is a win-win situation. I think it is a win situation for Ontario Hydro and ultimately for the electrical consumers as well.
Mr Arnott: I understand --
The Chair: Mr Arnott, I have to cut you off because Mr Jordan wants to ask a question too.
Mr Jordan: Thank you, Mr Chairman, and thank you, gentlemen, for your presentation this afternoon. I was interested in your report here that: "...an important partnership agreement was established among the gas industry, the Ontario Ministry of Energy, the Ontario Home Builders' Association and Ontario Hydro. Through the new provincial energy-efficient housing program (R-2000), natural gas appliances such as high-efficiency furnaces, water heaters and gas fireplaces, along with outlets for other natural gas appliances, will become requirements when an R-2000 house is built in a gas-serviced area."
I was wondering when this agreement was drawn up and on what authority or what ministry. Is it a regulation of the government, or how is that controlled?
Mr Howes: I wish I could respond to your question. I really do not know the details behind that agreement. Maybe my colleague Mr Adams may have the answer to that.
Mr Adams: I can only tell you, sir, that it is a very recent agreement and it came through the Ontario Natural Gas Association. I am afraid I cannot give you any more details than that. It is so new that we only recently got that information ourselves.
The Chair: Perhaps, Mr Jordan, Mr Huget can regard that as a question of the ministry.
Mr Huget: Noted.
Mr Jordan: Thank you very much.
Mr Waters: I am going to ask a couple of questions and I will get you to respond at the end. That way my colleague at the front cannot cut me off.
The Chair: Just watch.
Mr Waters: Ah, have a heart, Peter.
You talked about the industrial and residential, and we have heard from the Toronto board -- it is talking about switching 32 of its schools -- that it needs assistance to switch. I think the average person, the ratepayer out there, does not really care where the savings come from. The savings per year are $1.76 million on those 32 of 654 buildings, and I would ask, in that respect, is there a lot more that could be switched over to gas in the area than what is at present?
Also, I am curious about the expansion and the benefits you give now. I understand that Union Gas, as well as other gas companies, gives incentives to people to switch at the present time. Most gas companies have deals in the fall and the spring. If we subsidize for the rural people or anyone else, are you going to pull those deals back?
Mr Howes: I am glad I have my sales manager with me, because he is the one who comes up with the campaigns to try to stimulate sales.
Mr Waters: In other words, if Ontario Hydro is going to subsidize, are you going to continue to assist people to go on, or are you just going to let Ontario Hydro do it all?
Mr Adams: Our incentives right now I think would be aimed at a different market than the one I understood Hydro was directing to. But just to answer the first part of your question, sir, we have, as Jim has already mentioned, about 95% penetration. We would expect that we could conceivably pick up somewhere in the area of 330 non-customers on main in the commercial-industrial sector. If everyone converted we could only pick up about 5,200, 43 of which are on main and 900 are not even covered by main. There is not a tremendous amount left for us to pick up down here. I do not think we have thought through the idea of where the incentives would come from at all. If this bill were passed, then I would think we would not need to offer incentives.
Mr McGuinty: Gentlemen, thank you for your presentation. I want to --
The Chair: Excuse me. I know you wanted to ask a question, Mr Klopp, but Mr Waters clearly asked the question you wanted to, because he used your time. Go ahead, Mr McGuinty.
Mr McGuinty: I want to do something I did yesterday when another gas utility was before us. I might add, by the way, that I am a very satisfied Consumers' Gas customer.
I want to assume the role of a cynical consumer. You see, in the early 1980s the federal government told me it could not give me any guarantees with respect to price and supply of oil because of things going on in other countries which were outside its control, so it used my tax money to pay me to get off oil on to electricity. Hydro told me I could "Live better electrically," so I went with Hydro, and now I have learned that electricity is very expensive, and furthermore it is not a good thing for the environment. Now Hydro, if this bill goes through, if you can believe it, is going to pay me to go back to oil. I am not so sure I want to go back to oil, for the same reasons I got off it in the first place, so you are telling me, "Come on down to gas."
When I think about gas, I am concerned about the kind of guarantees you can provide with respect to price and supply. I am concerned about this free trade agreement I hear people talk about it, and it is my understanding that under the provisions of the free trade agreement Alberta does not have to give us in Ontario here any kind of preference with respect to price or supply vis-à-vis the American market. I read a couple of days ago in the Globe that there is a new line opened up that is going to serve New York, Connecticut, Massachusetts, New Hampshire, New Jersey and Rhode Island. So I am wondering, should I be switching to gas, and what kind of guarantees can those gas people give me?
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Mr Howes: Maybe I will try to respond to that. I think when you get into forecasting what is going to happen five, 10, 15 years out, that is pretty chancy. I can take you back 10 years ago and compare the price for natural gas 10 years to the price today. I think you will find it is basically the same. The price has not increased.
If you look at the current oversupply of natural gas in western Canada, there is a lot of shut-in gas because there really is not any market and the market is very depressed. We see new technologies bringing supplies of gas into the United States market. I mentioned coal seam gas. That takes place in the New Mexico-Colorado San Juan basin, and my understanding is right now they can deliver one trillion cubic feet of gas, principally to the California market, which is one of the big markets for western Canada producers. The potential is quite considerable from that one area alone.
We did talk about forecasts of prices and we did say that between 1992 and 1995 we do not see any major increase in prices at all; maybe inflationary prices but perhaps not, because of the soft market. We really do not see any increase until 1995, and we are looking then at a 1% per year increase and inflation added as well. For 2002 and beyond our forecast is 4% per year plus inflation.
I should say that we have long-term supplies, long-term contracts with producers in western Canada, and that certainly will ensure us of security of supply and I do not think we need to worry about that. The activity of exploration in western Canada has cooled considerably because of that oversupply situation. I think once the market picks up in California and south of the 48th you will see increased activity.
Your question is a good one: Can we guarantee that the price for natural gas will remain at its current levels? No, I do not think we can give you that guarantee, but we do not see a substantial increase in natural gas at least for the next decade.
The Chair: Mr Howes and Mr Adams, I want to thank you and Consumers' Gas for taking the time to come here this afternoon. It has been an issue that has attracted a wide range of opinion, as you can well imagine. We have been listening to people across the province. Yours has been a valuable input into the process. We trust you will keep in touch, and I tell you and others who are here that of course the transcript -- this is Pat Girouard who is here from Hansard. This will be turned into a Hansard publication and a transcript of not only today's proceedings but the whole proceedings of the investigation into this bill will be made available to you or anybody simply by calling your MPP's office or any MPP's office. That of course is free of charge and anybody who wants that can get it as of right. I welcome you to call in for it.
NIAGARA FALLS HYDRO ELECTRIC COMMISSION
The Chair: The next participant is the Niagara Falls Hydro Electric Commission. Gentlemen, here we are about a proverbial stone's throw from Sir Adam Beck. Tell us who you are and tell us what you will.
Mr Hanna: My name is Bob Hanna, currently chairman, Niagara Falls Hydro Electric Commission.
Mr Hostick: My name is George Hostick, the general manager-secretary at Niagara Falls Hydro.
Mr Hanna: Mr Chairman and members of the committee, it is with great pride that I present this submission to you on behalf of the citizens of the city of Niagara Falls, where the name Sir Adam Beck is as familiar to many as that of their neighbours.
In Niagara we are ever-mindful of the proud history which surrounds the generation of electricity in our province. It was with the leadership of such men as Mr E. W. Snider and Sir Adam Beck that a power commission was founded in 1903 under a bill giving cooperating municipalities the right to transmit power from Niagara with the understanding that the government would accept no financial responsibility in this matter.
The matter of public power was a political issue in 1905 when Sir Adam and all of his followers fought so hard for this concept of power at cost rather than profit-seeking private interests. I feel that all of these great leaders and politicians who fought so hard for this concept must surely be spinning in their graves in light of some of the proposed amendments to the Power Corporation Act contained in Bill 118.
It is the recent performance of the government which causes such great concern to be raised on this issue. The guaranteed purchase of future uranium supplies at Elliot Lake is a decision which will cost the ratepayers many millions of dollars. This decision alone was bad enough; however it was then terribly compounded by the order to have Hydro contribute $65 million to the northern Ontario heritage fund. What is the relationship between the cost of supplying electricity and this expenditure?
The Kapuskasing directive is another recent activity which is very difficult to understand. Hydro has been directed to supply free power to the Spruce Falls mill over the next 10 years and compelled to purchase a dam for $140 million which may or may not be usable depending on an environmental assessment and finally to provide power credits which could add up to another $34 million. None of this directive reflects the cost of power expenditure but rather a social expenditure payable by all the taxpayers of this province.
We agree that the government and all the taxpayers of the province have a responsibility to assist these communities and their citizens. This assistance should be in the form of a tax applied for all to see and be aware of, and not hidden as a cost of power.
We are encouraged by the statement made by the Minister of Energy, Mr Will Ferguson, at the opening of these hearings several weeks ago when he reiterated his comment made on October 2, 1991, where he stated, "We propose to make it perfectly clear that any policy directives that are issued must relate to the corporation's exercise of powers and duties under the act and not lead to an extension of those powers and duties by means of government directives."
The Niagara Falls commission strongly endorses and supports the position put forward by our industry association, the Municipal Electric Association, which calls for the complete withdrawal of any amendments to the Power Corporation Act that would permit the cabinet to direct Ontario Hydro to pursue activities unrelated to the supply of electricity.
The Niagara Falls commission supports the amendment proposing to increase the size of the Ontario Hydro board by four members. However, we do so with one condition: that providing at least one of the newly created positions be assigned to the utility industry representation either through the MEA or directly through the utilities. A strong communication link already exists between Ontario Hydro and the local commissions. There is, however, a great deal of expertise and direct customer contact which could be of great value to both parties when shared at the board table. We are confident that it would be in the best interests of the government, Ontario Hydro, the customers and citizens of the province and whole electrical utility industry if this proposed amendment were to include reference to the appointment being carried out as suggested.
Please give very careful consideration to our recommendation of the withdrawal of any amendments which would permit the issuing of directives directing Hydro to pursue activities unrelated to the supply of electricity.
The benefits of an appointment to the board of Hydro from within the electric utility industry appear self-evident. Please consider all of the benefits which could accrue to your constituents, the citizens and our customers.
I want to thank you for the opportunity to be part of this consultative process. On behalf of the Niagara Falls Hydro Electric Commission, we extend our sincere best wishes to the committee in your deliberations and considerations of all the material presented to you by the concerned citizens of the province. Thank you.
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Mr Hostick: I have a presentation as well, if I may. My submission will have three major thrusts for your consideration: fuel substitution, energy management incentives and future supply plans. The proposed amendments address the first issue directly and the second two are of major concern when any debate takes place regarding future plans for Ontario Hydro.
Fuel substitution: I submit to you that one of the most serious mistakes any government can make is to interfere in the natural forces of the marketplace. It is evident that current market conditions are incentive enough for any energy consumer to give every consideration to switching to a fuel other than electricity for purposes of home heating and water heating. It does not take a rocket scientist to figure out that if we have a limited resource in the supply of electricity we should be preserving its use for running our computers and advancing our technological industries and not for producing heat of any nature which can be derived from another source.
The costs associated with subsidization to consumers for purposes of fuel substitution are mind-boggling. Why should the electric consumers of our province be burdened with this additional cost in their electricity bills? Ontario Hydro is already under severe pressure, which I am sure you are all aware of, to maintain a reasonable rate increase in the future. With all of the contributions already existing forcing these rates to escalate -- for example, debt burden, aging transmission systems and an aging generating plant -- it does not seem like a reasonable action at all to add what could be enormous costs to these already being applied.
Has there been any research or study performed which indicates that the supply of these alternate fuels will continue under present market conditions? What is to say that future oil or gas supplies will not be adversely affected, particularly if any subsidization plan is put into effect? As with any market situations, any costs associated with fuel switching should be borne by those who will receive the benefits of such a program. The fossil fuel utilities and companies should pay for conversion, not the electricity users of the province. This amendment should be withdrawn pending further investigation of all these conditions.
Energy management incentive programs: The business of energy management has become an integral part of the utility industry, particularly over the past three years. I submit this matter to you as an illustration of how incentive programs can be made to work, and work most effectively.
We at Niagara Falls Hydro actively support the programs presently being put forward by Ontario Hydro. We sincerely believe it is in the best interests of our customers and the industry that these programs be carried out. The positive effects of these programs can already be witnessed in the Update 1992: Providing the Balance of Power report recently circulated by Ontario Hydro.
The main purpose of submitting this item, however, is to strongly recommend that the incentive program be expanded to include the single largest component of the electric distribution system in the province: the local utilities. If Ontario Hydro were to expand the incentive program to include some form of assistance to local utilities for the purpose of reducing their system losses through accelerated upgrades to the distribution systems, they could make significant gains in the efficient use of the product throughout the entire province.
If we in the city of Niagara Falls could cut our losses in half we would witness improved energy sales in the order of one million kilowatt-hours or better and revenue increase of approximately $100,000 per year. This can be related to lost production -- it is as if we had paid the cost of producing several automobiles but there is no finished product to show for our efforts or for our costs.
As responsible members of the industry we are working towards the betterment of our system. However, all of this could be improved at a much faster rate with assistance from Hydro, which would be for the good of all the consumers in the province.
The future supply: As mentioned in my introductory remarks, any discussion concerning Hydro would not be complete without some reference to the matter of future supply. It concerns us that throughout this whole review process there is no mention of guarantee of future supply of electricity. The only mention has been to invoke a moratorium on future nuclear development.
The previously mentioned updated report on the balance of power makes mention that future generation needs have been extended for a number of reasons. The contribution made by the energy management programs has been one major factor, and the other factor which I would like to address is that of non-utility generation or NUG.
The introduction of this resource has led to a whole new set of rules and conditions being applied throughout the industry. The entire concept of the power grid has been challenged and is under critical review. The system of distributing and sharing all of the electricity equally among the residents of the province has been key to our development over the past years.
There is a need, for the sake of future supply planning, to give very serious consideration to this resource. There is also a very critical need to make sure that everyone receives equal benefit from such development.
It is obvious through recent news releases and reports published by Ontario Hydro that it is on the horns of a dilemma. There is a great deal of planning, rethinking of past practices and some realistic planning for the future which has to take place to allow for this tremendously important resource to be developed for the good of all our customers. I urge you not to be lulled into a false sense of security regarding our ability to meet future demand, which is being deferred largely because of the current downturn in the province's economy.
In conclusion, the guaranteed supply of electricity at a reasonable cost has been a major contributor to our success as a province in our nation. We have provided leadership and been successful in attracting business and industry to locate in our communities largely through our ability to provide this service. Let's continue to show leadership and display our strength through this current adversity by working together for the good and benefit of all our citizens.
Mr Huget: Thank you, gentlemen, for your presentation. I want to specifically address the issue of fuel switching and the impacts it may have on your commission. Would it be safe to assume that the majority of your costs are the purchase of bulk power from Ontario Hydro?
Mr Hostick: Yes, for sure. They represent currently the average of 80% to 85% of our total costs.
Mr Huget: If we have a successful fuel-switching program, for example, that would in effect lessen your costs in terms of what you would have to purchase?
Mr Hostick: It would reduce the cost of power purchased from Ontario Hydro.
Mr Huget: You are still left with fixed costs, obviously, for transmission and distribution facilities, and you estimated those as about 10% or 15%.
Mr Hostick: Fifteen per cent or slightly better.
Mr Huget: Moving a little further on in your presentation, you mentioned incentives to utilities commissions, and as I see it unfolding, for utilities commissions it is a problem. The more successful we are with fuel substitution, you still have those costs to deal with. You mention incentives in your brief, but you do not elaborate. Do you have any suggestions on how we can deal with that issue?
Mr Hostick: It could be rather complex. What I am suggesting is that there are aging systems within the local utilities that need to be upgraded from a voltage distribution basis to make them more efficient in the distribution of the electricity.
As I also mentioned, we do have programs where we attempt to achieve those rebuilding programs over our own capital works programs, but my suggestion is that with government assistance we could accelerate that and make the distribution of electricity more efficient through the utilities. How we go about applying those incentives or awarding that assistance is a very complex situation and I cannot provide you with the answer.
Mr Klopp: I am under the impression that the things you are talking about are in Bill 118. A natural gas company was in here a minute ago. Of course they were talking about natural gas, but I believe the bill does not just say natural gas. It says "all forms of energy."
You mentioned energy management incentives. You think that is a great idea, and yet on the previous page you do not think it is a great idea to get some people not to use electricity. Then we go back to the next page about incentives and you say you could probably prove to Ontario Hydro -- if Bill 118 goes through it will allow it to look at this -- that you might be able to save one million kilowatts, which is effective -- you know, you used the car example. I do not see why the difference.
Mr Hostick: The point I was trying to make in there is that I think there is quite a difference between educating and advising our electricity consumers as to the proper uses of electricity, rather than switching to another fuel. If they are going to use electricity, then use it as efficiently and effectively as they can in its applications.
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Mr Klopp: Are we not reducing electrical needs in either case?
Mr Hostick: No, I do not think we are doing it in the same manner. I do not think there is a need --
Mr Klopp: I did not say the same manner. I say it ends up that the equation still equals -- X plus Y still equals Z at the end.
Mr Hostick: Yes.
Mr Klopp: Okay. Thank you.
Mr McGuinty: With respect to rates, if I were a ratepayer living within the area of your commission, could you offer me any guarantees with respect to the implications of Bill 118? If they go ahead with the fuel-switching program, are my rates going to stay the same? Am I going to be better off than if they had not gone ahead with it?
Mr Hostick: I am suggesting in my submission that the rate increases we are already seeing will be compounded by the suggested changes in Bill 118.
Mr McGuinty: So I will be worse off?
Mr Hostick: Yes.
Mr McGuinty: Okay. On the bigger picture, one of the things I think we are all learning here as a result of these hearings is that Hydro today presents us a problem. I say that, fully recognizing all the wonderful things it has done for the province and how it has been an indispensable partner in the development.
People are telling us it is a very large corporation, over 30,000 employees. It has a very large debt. There are allegations that those employees are overpaid and, as a result, it has become very inefficient, overcome by inertia.
Some of the proposed solutions that have been kicked around are that we give the Ontario Energy Board more teeth; that we privatize; that we would allow the politicians to get involved. I do not think that if I were to stand in a room in my riding and tell the constituents that we are going to put the politicians in charge of Hydro they would have very much confidence in the final outcome of such a plan. I am wondering what role you folks can play, the utility commissions, in terms of helping to reshape, redirect Hydro in order to meet society's expectations.
Mr Hostick: I believe the utility industry itself can play a very major role in offering direction to the future. There is a need, as mentioned in my brief, for a complete master plan for energy within the province. Obviously Hydro and the local utilities have become part of that sort of planning process.
Mr McGuinty: You have -- is it a couple of members sitting on Hydro's board now?
Mr Hostick: We have four elected plus the mayor by virtue of his office.
Mr McGuinty: No -- I am sorry -- I am talking about Hydro's board of directors.
Mr Hostick: Oh, I am sorry. No, there is no direct representation from the utilities on the board.
Mr McGuinty: I thought it was some kind of custom in place that --
Mr Hostick: Perhaps by custom, but not by virtue of any legislation.
Mr McGuinty: Right. Do you think it would be of any assistance to me as a ratepayer if I was to put more public utility commission people on Hydro's board?
Mr Hostick: Absolutely. It is a direct voice that could then express the concerns, as we have attempted to today, through the utility industry itself.
Mr McGuinty: All right, thank you.
Mr Cleary: Thanks, gentlemen, for your brief. I know the Chairman is keeping an eye on us on time and I think it is running out. But anyway, just a brief question to each of you. Do you think Bill 118 is necessary?
Mr Hanna: I believe there are certain portions that are beneficial; others are not, as expressed in our briefs.
Mr Hostick: In the same light, we have asked for the withdrawal of the amendments regarding policy directives and fuel switching but would support the expansion of the board. As far as the whole bill goes, we would have difficulty saying, "Withdraw it all."
Mr Cleary: Thank you.
The Chair: That might beg a follow-up question from you, Mr Cleary.
Mr Cleary: Not really.
Mr Jordan: Thank you, gentlemen, for your presentation this afternoon. One point you are bringing out here is that Bill 118 could lead to the loss of the concept of power at cost. How seriously do you feel about that?
Mr Hostick: That is the crux of our whole presentation, in fact. The policy directive issue, we feel, is the most serious of those being put forward. The issues that are, as we mentioned in the brief, already put forward as to social planning costs and costs not at all related to the generating of electricity are becoming part of electric consumption costs in the province. They are going to have just a devastating effect on our ability to provide that service.
Mr Jordan: Mr Lawn, who made an excellent presentation prior to yours, was in agreement with me that perhaps we should just table Bill 118 and establish a task force to look into the whole energy policy for the province. Rather than these Band-Aid solutions to what we think is a demand-supply problem, maybe we should be looking at a much larger view of the whole situation.
Mr Hostick: I would support that. I think we would support that as a position, and as I mentioned in answer to the previous question, there is a need, in our opinion, for a complete energy resource planning process to take place.
Mr Jordan: Thank you very much.
Mr Arnott: Thank you, gentlemen. I am a great believer in heeding the lessons of history. I just wondered, if Mr Snider and Sir Adam Beck were contemporary men, how do you think they would approach this Bill 118? Do you think they would see that times have changed and we have to take a different approach, or do you think they would still support their principle of power at cost?
Mr Hostick: Based on my reading of the history of the development of public power in Ontario, I think they were contemporary for their time no doubt. Their concepts have lasted these number of years since the inception of that bill, as I mentioned, in 1906, 1903, back to those days. It obviously indicates the strength of their forward thinking at that time. There was no mention at that time of anything other than the cost of producing electricity as being part of the cost.
Mr Arnott: Okay, thanks.
The Chair: Are there any further comments or questions, briefly, in response to these gentlemen?
Mr Jordan: My lightbulbs.
The Chair: Go ahead.
Mr Jordan: I was wondering what you think about the $7-million program. It says it is in conjunction with the local utility. I assume you have been consulted and have approved of this.
Mr Hostick: We knew it was coming but certainly we did not have much of a hand in the implementing of it.
Mr Hanna: And I have not received my lightbulbs, so when you are finished, I would appreciate --
The Chair: Those are Mr Jordan's peripatetic lightbulbs. He might not want to share them with you.
Mr Jordan: But it has been put forward by the Ontario Energy Board that the money being allotted for energy conservation, it fears, is not being wisely spent.
Mr Hostick: I would have to, as I have in my brief, support the incentives of Ontario Hydro to the extent that -- I do not know what cost you put on the awareness, but certainly it got the public's attention as to what could be done. I am not sure whether the value is there for the amount of dollars spent as to whether that is the right way of doing it, but certainly we got everybody's attention with.
The Chair: If anybody has taken up the slack, it has been you, Mr Jordan. If there was anybody who was not aware of that program, they sure as heck are now, and we are thankful to you.
Mr Jordan: We want them to use them, not leave them in the bag.
The Chair: Quite right. Mr Klopp, briefly, please.
Mr Klopp: Briefly. We talked on the power at cost. In my business I have always looked at everything has to be at cost. But in your brief it says Ontario Hydro has to maintain a reasonable rate, the debt burden and all that. All of a sudden we are talking reasonable rate. In my business as a farmer, the bill to the co-op has got to be paid or it ain't got to be paid. Either I spent it or I did not.
Mr Hostick: A number of years ago the definition of power at cost was amended by almost everyone in the industry to read "at every reasonable cost," reasonable cost including such things as the debt load and the things made necessary to produce the power -- no other costs except those associated with the production of electricity.
Mr Klopp: Okay, thank you.
The Chair: Mr Hostick, Mr Hanna, thank you very much for coming here from Niagara Falls today. We have not only enjoyed but obviously been interested in your submission. You have generated some insights that perhaps were not there before you spoke with us. We appreciate your coming. Take care.
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NATIONAL COUNCIL OF WOMEN OF CANADA
PROVINCIAL COUNCIL OF WOMEN OF ONTARIO
ST CATHARINES LOCAL COUNCIL OF WOMEN
The Chair: The next participant is Gracia Janes, president of the St Catharines Local Council of Women. Ms Janes, first, we thank you for accommodating us and rearranging your schedule so you could fill this new time slot.
Mrs Janes: Thanks. Is this on?
The Chair: Yes, ma'am.
Mrs Janes: I am not a technical expert.
The Chair: We have high-priced help over here in the corner who will make sure everybody is turned on at the right point in time.
Mrs Janes: I represent the National Council of Women of Canada, of which I am the environment convener, and the Provincial Council of Women of Ontario as well as the St Catharines Local Council of Women here.
Councils of women at the international, national, provincial and local levels represent a vast spectrum of citizens and have advocated for society and its wellbeing for over 100 years. In this regard, the International Council of Women has class I observer status at the United Nations and represents millions of persons worldwide. The National Council of Women of Canada represents close to one million persons and makes representations to the federal government yearly as well as on specific issues as they arise. Provincially, the provincial council of women since 1922 has represented over 500,000 persons and presents concerns to the provincial government in the same manner as the national council. Locally, the St Catharines Local Council of Women from 1918 represents 29 affiliates and 3,000 persons -- for example, the Business and Professional Women, the University Women and the Salvation Army -- and interacts with the local government and its area MPs and MPPs.
For all councils, environment has been a major concern, as evidenced by the fact that the National Council of Women of Canada was the first nongovernmental organization to draw attention to acid rain, in 1978, and, by its extensive international, national and provincial environmental policies, addressing such issues as energy conservation, alternative energy sources, global warming and nuclear power.
It is within the parameters of council policy on these issues that we are pleased to present our comments to this committee regarding Bill 118, An Act to amend the Power Corporation Act. The issues we raise evolve from long-standing environmental concerns about the nuclear industry and acid rain and a determination that energy conservation and alternative sources of energy are far more environmentally sustainable and less damaging to the environment than energy produced by coal-fired or nuclear generating plants.
While we understand the need for a secure energy supply, a prime motivator as Ontario Hydro's policy has evolved, we question the safety, security, need and costs, both environmental and monetary, of relying so heavily on these sources of energy. More specifically we note the inherent dangers of uranium mining, waste tailings, nuclear plant emissions and potential accidents if backup systems fail, plant deterioration as aging progresses, waste disposal, where all parties agree there is as yet no safe way to dispose of nuclear waste, and byproducts such as tritium, where there is a potential for use in weapons manufacture. Of concern also is Ontario Hydro's continued reliance on coal-fired generators, the use of cheap, dirtier coal and the environmental side-effects of acid rain.
Both of these energy sources have been favoured by Ontario Hydro and enhanced by previous governments rather than the promotion and use of a diversity of sources such as solar, independently produced small-scale hydro projects, natural gas and, most important, the promotion of energy conservation. Perhaps the change in Ontario Hydro's mandated task over the years from the transmission of power which would be produced by a variety of generators -- in the earlier years these were to be the municipalities -- to a monopoly producer-transmitter with enormous capitalization and production costs has led to a blinkered approach to safety, environment and change.
The original mandate would certainly have allowed and encouraged a flexibility of shared production, a diversity of energy sources and most certainly an openness to alternative energy forms. It would also have facilitated a closer working relationship with governments wishing to pursue sweeping energy conservation changes. Instead, and unlike many other countries and jurisdictions, Ontario Hydro as a monopoly producer and distributor of power has shut out these options while promoting the use of electrical power produced by nuclear and coal-fired generating plants as supposedly safe, cheap energy sources.
The issue of nuclear safety has been a concern of the national council of women since the 1950s when in resolutions to government it "requested a report on the unknown and known effects of radiation" in 1955 and noted "the need for protection against radioactive waste material" in 1959.
In 1974 the National Council of Women urged the government of Canada to: "(a) delay widespread siting of nuclear plants until there is a more thorough and unbiased assessment of their safety design; (b) that no plants be sited where the principal aim is to supply export power, whether long-term or short-term; and, (c) urge extensive studies into alternative sources of energy."
In 1980 the National Council of Women urged the government to "halt the promotion and sale of Candu reactors, nuclear fuel and nuclear technology to those countries that are non-signators of the non-proliferation treaty 1980." Most recently, in a 1991 emergency resolution which is not yet policy but was presented to government this year, the National Council of Women asked the federal government "to require the Atomic Energy Control Board to adopt immediately the recommendation of the International Commission on Radiological Protection, to reduce limits to public and worker radiation exposure."
For its part, the Provincial Council of Women has expressed a concern regarding the safety of Ontario's nuclear plants through a resolution in 1987 which requested the government to halt the expansion plans for Darlington. This resolution was put forward to the provincial council by the local councils of women of Niagara Falls and St Catharines.
Councils of women are not alone in their concerns regarding the safety of nuclear power and the increased dependency of Ontario Hydro on this energy source. In fact, many environmental groups have worried that the crown corporation has been out of control and successive governments have made futile attempts to assert control on the corporation in the public interest. This interest is paramount. Mounting cautions by such credible -- and, in one case, pro-nuclear -- bodies as Atomic Energy of Canada Ltd and Greenpeace about the safety of nuclear plants highlight the need for the province to act quickly through policy -- New Energy Directions -- and practice -- Bill 118. In the absence of safety assurances now and even in the foreseeable future, and with the knowledge that there are alternatives to nuclear power, many knowledgeable groups and individuals are urging the province to take hold and reduce nuclear dependency to protect its citizens now and for the future.
While we note with pleasure Hydro's recent change of scheduling which allows for no nuclear plants before the year 2009, this does not rule out future plants, nor does it speak to our long-term concerns regarding safety -- merely to the reduced, more realistic demand projections. It does, however, allow space for long-term, environmentally sensitive, cost-efficient changes that could possibly lead to a complete phase-out of the nuclear option over the long term, as is apparently happening in Britain, and a safer use of nuclear in the interim. In this regard we would presume that some funds thus saved would be put towards safety changes and upgrading of existing plants as well as to the stated goals of major energy conservation measures and conversion to alternative forms of energy. As an example, we commend the government for its recent funding of the solar initiatives to develop a demonstration photovoltaic cell project and a solar-powered generator that will produce hydrogen gas, which will be useful in the remote areas beyond the electricity grid.
Bill 118, which formally melds current government energy initiatives and the actions of its, to date, prime energy producer, will help ensure that such projects are initiated, funded and carried through on a broader scale than in the past, with a variety of energy partners, in the interests of Ontario's citizens.
The changes many Ontario citizens wish their government to make, as they relate to an environmentally sustainable future, involve very much the directions the government is embarking on in its NED policy. These changes are currently being explored worldwide as governments look to new alternative technologies, particularly energy conservation, as a way to reverse environmental degradation, most specifically as it relates to global warming. While some, most notably Atomic Energy of Canada Ltd, promote nuclear energy as a safe, clean option that contributes little CO2 to the atmosphere and which could help in the global warming battle, to others nuclear is a non-starter which, to offset 5% of the 1990 global carbon emissions, would have to see world nuclear capacity doubling.
For their part, councils of women have for many years advocated measures to improve the environment, particularly those relating to alternative energy sources and environmental impacts of energy use. For example, NCW's 1989 brief to the federal standing committee on global warming noted the important role of energy efficiency and conservation in the reduction of CO2 and the "other beneficial social side-effects such as stretched fuel supplies, which are not inexhaustible; decreased automobile pollution, which will lessen side-effects to health, of low-level ozone; reduced need to expend less economically efficient and potentially dangerous forms of energy, such as nuclear; reduced fossil fuel emissions, especially coal, which will reduce acid rain and improve air quality -- which in turn increase tree growth and thus improve the rate of CO2 removal; and reduced home and industry heating costs."
It also noted that the benefits of alternative forms of energy would include increased jobs; lower dependence on foreign supplies of fuel; limitless supplies of alternative sources such as solar; and a variety of sources -- wind, wave, biomass -- lessens the threat of failure of supply -- ie, for power, brownouts-blackouts -- due to almost complete reliance on hydro in some areas.
More recently, a 1991 resolution from the International Council of Women asked the National Council of Women of Canada to urge the government of Canada to develop deliberate energy policies which promote energy conservation and efficiency and the use of environmentally sound energy sources, practices and technologies, and create new incentives to increase energy efficiency.
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National Council of Women resolutions since 1974 have requested the federal government to conduct intensive research into alternative sources of energy, especially solar; facilitate the transition from a consumer society to a conserver society, with the government to continue to provide information, necessary leadership and financial resources to work towards better conservation of natural resources; to make conservation of natural resources a priority and to increase funding for the development of renewable energy technology equal to the amount provided for nuclear energy; and in 1989, sponsor and develop a program of public awareness regarding the continuing need to conserve energy, reduce energy consumption -- for example, through fiscal and regulatory action -- to prevent further destruction of the environment; and last, to restore funding for the energy conservation and alternative energy program.
Provincial and local councils of women and their affiliates across Canada have put these resolutions forward over the years and wholeheartedly support enabling government legislation and initiatives.
Bill 118 is a step in the right direction, as it reinforces government policy to promote energy efficiency and conservation measures; encourages new partnerships, for example, with the independent power producers; allows Ontario Hydro to promote fuel substitution and encourage the public to give up environmentally damaging and potentially dangerous energy sources; and formally, through legislation rather than non-public dealings, allows the government to play a stronger role in developing policy directions for Ontario.
Most important, these new measures, together with the delay in the construction of the new nuclear and coal-fired power generating stations, should allow the time and means to bring about greater ongoing commitment and actions to satisfy the public need and desire for environmentally sustainable changes in energy policy and practice in the years ahead.
The Chair: We have 18 minutes.
Mr McGuinty: That is all told.
The Chair: We have 18 minutes; you have six.
Mr McGuinty: Thank you very much for your presentation, Ms Janes. It was well documented and obviously the council of women have been involved in the conservation movement for a lengthy period of time. I want to make a point and then I would like to ask you a question. I hate to sound like an apologist for Hydro, but Hydro is us and we are Hydro. The 30,000-some people working there were not pumped out of some infernal nether region to be employed by Hydro and wreak havoc on all of us and the environment.
In my parents' day, certainly when they were younger conservation was not a buzzword. It had not permeated the public consciousness when it came to electricity, in any event. I was told to bring home my lunch bag after lunch, but we were not really thinking of conservation and electricity as environmentally harmful at the time.
Standards have changed as a result of the good work people did on the fringes earlier on. I do not use that term "fringe" in a disparaging way, either. Conservation is now a theme which has permeated the public consciousness and now we have it as our task to help Hydro change direction.
One of the problems we are facing, of course, is that Hydro, like any large bureaucracy, has tended to be overcome by inertia. That presents a bit of an obstacle but I am sure we will work things out.
We are going to be potentially funding people to switch off electricity to other forms of fuel. They can switch to renewables or non-renewables. I am wondering, if someone comes in to see Hydro and says, "I want to switch to gas," and the neighbour says, "No, I want to switch to solar," should there be any kind of discrimination in terms of the way we fund those two different projects? Generally speaking, with respect to fuel switching, should we be giving grants or loans? What about the people who have already switched because they thought economically it was a better thing to do? They may not have been able to afford it but they made the jump because they felt that in the long term it was the right thing to do.
Mrs Janes: My own personal preference would be more money for things like solar which are renewable, rather than for gas which may or may not be. Times do change. We change cars: We change the kinds of cars and we buy cars every so many years. When it comes to changing our method of heating or things in the actual household, we do not do that. We expect them to last for a lot longer than a car, and I think it is a very important issue. It is unfortunate that some people got caught switching to electrical heating. They were certainly lured into it with lower rates and a marvellous picture of very nicely heated homes, cleaner and such. That is a decision they made and I think now most people who are concerned will be looking at these alternative forms, whether or not they switched before. I think they will be quite happy if there is money for those kinds of changes.
The overwhelming fear of many people -- certainly councils of women have been aware of this for a long time -- are the enormous costs involved in the dangers of nuclear, if there was a nuclear accident. What are those kinds of costs? They could be enormous, so we are looking at it that way.
The other thing we are looking at is the future and whether one can sustain the use of coal and those kinds of production of energy.
Mr McGuinty: Back to my concern with respect to the kinds of grants or loans we would be giving: What if we have two different households? One household has a much higher income than the other. Should we be discriminating in terms of the income level?
Mrs Janes: I think you are getting into a whole different kind of situation. I really had not put much thought to it. Perhaps it should be non-discriminatory with a tax back. When you get into those kinds of issues, it is quite different. We have never really spent a lot of time thinking about whether somebody with money should have this or not. We think it is a good idea to have everybody on to renewable sources of energy, period.
Mr McGuinty: What do we do with this problem, too -- and I expect it is one we will encounter because of human nature. For instance, when I switched to natural gas it took me about three months to talk my wife into it because she was concerned about the safety aspects and I did not share those concerns. At the end of the day I won out.
I also happened to have had the benefit of having duct work in place. I had an electric furnace. What happens if a couple or a householder says, "I don't want to tear up the basement to put in the ducts"? Should we compel these people to make the change?
Mrs Janes: I do not think you need to compel them, there are enough people who want to do it. They will find ways to do it. It is amazing what you can do with your house when you really want something.
I would like to add to your question before this about the cost. You keep implying that these costs are amazing, but compared with the costs we have to date and the enormous debt with Ontario Hydro -- the major part of it being the nuclear costs and the costs we might have should we have to clean up after an accident -- I cannot see that the costs for a major program of this sort are anywhere in that ballpark. It is really important that we make every effort to give people the money to change in some way or give them the incentive to change.
Mr Cleary: Thank you, Ms Janes, for your presentation. I would like to follow up from Mr McGuinty. In order to prevent further destruction of the environment, funding should be restored for energy conservation and alternative energy programs. Where should this money come from -- directly from Hydro, the Ministry of Energy or from another ministry?
Mrs Janes: Actually, that is a National Council of Women resolution so we were directing it to the federal government program. But if you relate it to the provincial area, you are asking whether it should come from Hydro itself or the province. I really do not think it matters that much. It could come as a provincial program, to be quite frank.
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Mr Jordan: Thank you for your presentation. I notice you suggest that energy be produced by means other than nuclear, which would be less troublesome to the environment. How would you suggest that be done?
Mrs Janes: I am talking about all the alternative forms of energy. I am really talking about encouraging solar, wind and photovoltaic energy and any number of forms of energy that are coming on. My problem with Ontario Hydro has been the blinkered approach and the inability to look at sharing. The original mandate was to be the transmitter of power. One by one the municipalities gave up their right to do the generation, so Ontario Hydro has ended up with both those roles. I think it is important we understand that, that they should be open to all sorts of partnerships.
They are just beginning to admit that the independent producers can produce more power than they have ever admitted before. The power producers certainly know they can do this. There are all sorts of new things coming on the scene, such as smaller kinds of generators that can be used. So it is just an openness. It is not that they will not have control; it is that they will have these partnerships.
We do not have any policy that advocates that Ontario Hydro should privatize. That is not our policy yet, but we think they should go back to the original mandate, which was to share and to bring in the power, as they do in the States and in many other countries. They allow independent power producers to hook into the grid and they pay them. We have just begun to do that in the last few years. We have not been as open. So I am talking about all these sources that we consider less damaging.
Mr Jordan: In your previous answer to my colleague you said you had not given much thought to certain aspects of the bill.
Mrs Janes: About getting the money, yes.
Mr Jordan: Would you consider that perhaps we need to give it more thought, the whole concept of change, and table the bill and get a task force, including people like yourself, to sit down and come up with an energy policy for the province of Ontario?
Mrs Janes: We have had an awful lot of studies about nuclear power. I do not know how many there have been.
Mr Jordan: I do not like to see us concentrating on nuclear. I would like to look at energy for the province of Ontario.
Mrs Janes: I would not rule that out but, as I say, we do not have any policy on the books on that so I cannot speak to it. It does not hurt to have a commission that draws attention to the issue and comes up with helpful recommendations that are farsighted. At the same time, I do not see any point in tabling this. I think you can have both.
Mr Jordan: Until we do get a plan, industry sees us as having uncertainty of supply and uncertainty of cost, and they are not comfortable. We could have a real problem on our hands if we do not get our thoughts together and put a concrete plan, relative to price and supply, on the table for the province so that industry and people who want to come to the province or expand here feel comfortable in doing so.
Mrs Janes: I see them as two different things. Commissions are excellent as far as they go and as long as the results are not put on the shelf, which is a tradition in Ontario. I think the bill is merely formalizing what has gone on for years, making it more open and tangible for people to see what is happening. In the past, each government, as it has come along, has tried to control Hydro. Many of the initiatives they take have not been out in the open; they have been internal, so there has not really been control by the government over Ontario Hydro.
Mr Jordan: I think in order to control it you have to understand it first. It is a huge corporation with many different departments.
Mrs Janes: It seems to me Bill 118 would not have come this far forward from the government if there had not been an understanding of the workings of Hydro and a need to make some changes.
Mr Arnott: Thank you, Ms Janes, for your presentation. I must say it was very detailed and very well researched. We appreciate the work you have done to benefit our committee. I think you mentioned something in your brief about the importance of safety of the existing nuclear facilities. Would you agree we should continue to have research, even encourage more research, to ensure that the existing nuclear generating facilities we have operating in Ontario are as safe as they possibly can be?
Mrs Janes: Absolutely. It is a very frightening thing to have Atomic Energy of Canada Ltd agree with Greenpeace. It is the most extraordinary thing. They both have the same facts; they both are saying the same thing. There is a real problem with the aging of the plants. I know a lot of engineers and I have this reaction always: "It must be safe; it's engineered." Even with regard to the radioactive emissions from Pickering, for instance, 20 years ago the levels were ones where everybody said it was safe. Now it is down to here and it is safe, and now it is down to this much. People do not have the trust they should have. Now we want to see some evidence that these sites are safe.
Mr Arnott: Atomic Energy of Canada Ltd also presented to us a couple of weeks ago. I believe they made the presentation that the government's moratorium on new nuclear development, which was announced in the first throne speech back in November of 1990, made them look pretty embarrassed in the eyes of the world and in potential markets where they might be trying to sell Candu reactors. If their own provincial government did not have confidence in the safety of the Candu reactor, how could they sell them abroad? They suggested the future of their high-technology industry might be jeopardized because of the nuclear moratorium.
Mrs Janes: I think the chickens have come home to roost. They have been promoting this technology internationally and I think it is irresponsible to be promoting it in some of the countries where there are no safeguards or far fewer safeguards than here. It is okay for over there, but here they might have to abide by some regulations. They cannot avoid the responsibility any longer. The first step they have made to not avoid it is this announcement that they have looked at Pickering. They have admitted they have asked Ontario Hydro to shape up in Pickering: to do some work on their nuclear installations, to worry about the aging and such. I think they see the writing on the wall. Until they can tell us it is safe in all its aspects, then I think we have every right to worry, because of the enormous ramifications of a nuclear accident and even just the radioactive emissions and such. In the United States since 1973 there have not been any new plants built and they are extremely worried about the waste that comes from the existing plants, so everybody is worried.
Mr Arnott: They use a different design in the United States than in Canada.
Mrs Janes: Yes, I know they do, but --
The Chair: At that, though, we have to move to Mr Huget. Maybe he is going to ask the question you intended to ask.
Mr Huget: Thank you for your presentation. I would also like to congratulate your organization for its interest and participation in energy and energy-related issues, particularly conservation, over the years. It is much appreciated. I think you have provided sound guidance to at least the federal and provincial governments in dealing with these issues.
Ontario Hydro has allocated a substantial sum of money for energy efficiency and conservation. Do you think it would be a sound investment if part of that money went to consumer education around the whole area of energy efficiency and conservation?
Mrs Janes: I think some of the money has already gone that way. It may not have come from Ontario Hydro, but I got a calendar from my local MPP and it is just full of energy tips. I used one of them last Sunday. That is why I am really noticing. I cooked my roast at a lower temperature for a longer time and it tasted better. Little things like that.
In the 1960s and early 1970s when we had the oil crunch, we thought we were going to run out. People really responded well and they have continued to respond in terms of their cars. We have more cars on the road, almost double, but we are using less fuel. I think people are open and intelligent, but they can always learn more. We need to get to the broader public and make sure everybody understands the simple things that can be done to save energy. That would be a very worthwhile thing for Ontario Hydro to do.
Mr Huget: You mentioned the transition from a consumer society to a conserver society. I think there is a necessity for some awareness around that in terms of the general public. I take it you think that would be money well spent.
Mrs Janes: Absolutely. There is another thing that comes into it. There should be more money spent on mass transit. It is one thing to say people have to get out of their cars; I think they will do as much as they can to cut down on their car use by taking another person along or getting a small car, but a lot of people do not have that ability. They might not even have the chance to change to a newer car because they cannot afford to do that. Mass transit is where a lot of the money should be spent to make sure people can get to places easily and not have to have cars and such. It is a little off the topic, but it is the same kind of thing. The bulk of the people have to be with us.
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Mr Huget: It is interesting. With increased education, we may even get Mr Jordan's lightbulbs out of the bag.
Mrs Janes: I took mine out.
Mr Klopp: Your remarks are interesting. One of the things I have been saddled with from some of the groups I have been hearing is that we are completely throwing the mandate of Ontario Hydro out the window. We referred to Sir Adam Beck, power at cost: also reasonable cost, I have heard, or at the lowest possible cost or whatever. A few minutes ago I was told -- we got that cleared up -- well, we did kind of change Sir Adam Beck's quote a little bit; we modified it for maybe the 1970s or whenever it was changed.
You brought up a point here about how Ontario Hydro's mandate was transmission of power and then it was changed. Could you expand on that a little bit?
Mrs Janes: I got that from "Power at What Cost," which is one of my sources with the page number. It was written a few years ago by Energy Probe. They traced the history of Ontario Hydro. They indicated that municipalities such as Niagara, where of course the falls are, were going to produce the power. The local power people would do the production and Ontario Hydro would transmit that power around the province.
Basically that is the way it is in the States. In many of the states there is the grid and the people in charge at the state level decide as to which power will go where. They buy the power from one source -- they even have computers hooked up so they can buy quickly and switch it from one state or one part of the state buying from another part, because it is better at that point in time, and then back again. It is more of an organizational thing than actual production. Originally that was the idea, as I understand it -- again, my source is "Power at What Cost" by Energy Probe -- Ontario Hydro's mandate was to transmit power, and maybe produce some. The municipalities and areas were to produce the power and then Ontario Hydro would transmit it.
Now it has changed; it has become a monopoly. It has become not only the transmission but the production and it is completely all-encompassed by Ontario Hydro. The independent producers are saying: "Hey, we have power. We'd like to do it like they do it in the States. We'd like to hook in. We'd like you to pay us. We can do it really cheaply and you can still have control of transmission. We are not insisting on setting up our own transmission lines. We want to hook into the grid."
The Chair: Ms Janes, before you go, on behalf of the whole committee, let me thank you and the St Catharines Local Council of Women for a very insightful and valuable presentation and express some thanks for the long-time work the council of women has been doing in this and in so many other areas and I trust will continue to do.
CANADIAN OIL HEAT ASSOCIATION
The Chair: Gentlemen, tell us who you are and then tell us what you will. Try to leave us the last 15 minutes or so for questions and exchanges.
Mr Wooton: My name is Ken Wooton. I am the manager of southern Ontario, home heat for Ultramar Canada. I brought with me today Al Catling, who is the manager of our Champion Fuels group here, covering the St Catharines, Welland and Thorold area. Al will be able to assist in the question and answer period later if you have specific questions in regard to oil heat as it relates to our customers in this specific area.
I have been asked to present my views on behalf of COHA in regard to the benefits of oil heat as an effective alternative to electricity. Ultramar's southern Ontario operations geographically stretch from the Oakville area to Port Dover and down to St Catharines. We support approximately 16,500 oil customers through three standalone businesses located in St Catharines, Hamilton and Oakville, each with its own support mechanism.
Through these locations, over 80 people are employed directly and an additional 40 people indirectly. These people provide a full range of services including delivery, 24-hour service, equipment installation, sales and customer service. Our equipment line includes oil-fired furnaces, boilers, oil-fired water heaters, air cleaners, humidifiers, air-conditioners and duct installations into homes.
All equipment can be acquired from us on a purchase or lease basis through very aggressive interest rates. We are currently using an 11% rate to help the consumer. Additionally, we carry oil-fired water heaters under a rental program which runs at $7.95 a month with no installation cost to the consumer. We provide the consumer the opportunity to acquire an oil-fired furnace for $1 a day over a five-year period, again, to assist the consumer in moving into the oil equipment industry.
We also provide a replacement furnace program under which we will supply consumers with a free furnace if their furnace requires replacement within the period of time they are covered under that program. Last year, we replaced 572 oil furnaces under that program free of charge to the consumer. Over the last five years, we have replaced over 2,000 furnaces and have been installing water heaters throughout that period of time, although recently, 1990 versus 1991, we have seen a growth of 313% in our installed base of water heaters, replacing both electric and gas. The breakdown on that is about 90% electric and 10% gas.
During the early 1980s, the government's off-oil program destroyed the fuel oil industry by providing consumers with substantial subsidies to convert to electricity or natural gas. Throughout the 1980s and the real estate boom, the large natural gas monopolies and demand for electricity generated from the nuclear future grew at a rapid pace. The growth was at the direct cost of independent business people working in the oil heat industry. Hundreds of oil heat businesses were closed during the 1980s.
The survivors, although few in number, compete very aggressively to maintain their customer base in a declining market. The results have been depressing for many who have worked in the industry, as the results of the off-oil program still have an effect on customer perception of our product as environmentally unsafe and expensive, all untrue in today's market. However, we are unable to get the message we need to get to the public because of the massive advertising budgets that are available to the gas and electric utilities.
Due to the intense competition of our marketplace, the real winner of course is the consumer who has the ultimate power -- supplier choice. He can fill his home-heating requirements with a number of fuel suppliers based on price, programs, services and promotions. This is not available with gas monopolies or electric utilities. Our industry excels at customer service and value to our customers.
It is critical that the government take action to undo the damage it has done in the heating oil market over the 1980s by diverting consumers of electricity for water and air heating to oil. Under this basis, I strongly support the aspects of Bill 118, specifically section 5, which eliminates subsection 56b(3) of the Power Corporation Act. That deals with the diverting of $240 million to fuel substitution.
I do not see any conflict in these incentives as subsidized by all electric users. First, the biggest residential electricity users are the ones most likely to benefit directly. Second, all of Ontario and all electricity users are the ones who will gain directly through environmental benefits and ultimate tax benefits. Market forces alone are not sufficient to encourage fuel substitution in today's economic realities.
Oil for the future: Does it have a future? The National Energy Board thinks so in its report entitled Canadian Energy Supply and Demand 1990-2010. It predicts that from 2000 to 2010, natural gas demand will be moderate because gas prices will exceed oil prices and this will lead to the substitution of oil for gas. This was based on a price of US$27 a barrel for oil. Today it is below US$19 a barrel.
The board further predicted that in 2010, 37% of Canada's energy would be supplied by oil, 25% by gas and 22% by electricity. This is a major change from where we were in 1990, which was 14%, 26% and 40% respectively. Combine this outlook with the reality that oil-fired equipment lasts an average of 30 years versus gas equipment which lasts an average of only 20 years. Also, gas prices continue to rise; oil prices are currently at 1984 levels.
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Oil-fired water equipment is the best on the market today, having recovery rates for water heating two times faster than gas and five times faster than electricity. In addition, it operates at a higher seasonal efficiency than natural gas water heaters and is significantly less expensive to operate than electric water heaters, saving between 25% and 50%, depending on the specific location being evaluated.
There is no question that oil is the fuel to invest in for the future under those bases. As you know, there is much for Ontario to gain. Over 800,000 homes in Ontario are currently heated by electricity; 1.5 million have electric hot water tanks. Over 160,000 of these electrically heated homes are duct, making them easy for conversion. Ontario is currently building approximately 54,000 new homes a year, and about 12,000 of them are in places not serviced by gas, making oil the premier alternative. In addition, 100,000 of the 564,000 existing homes serviced by oil could be equipped with higher-efficiency oil furnaces to meet the government's new energy directions. Approximately 380,000 electric hot water tanks are in homes already heated with oil, making them easy for conversion. This represents a significant potential saving of electricity as a fuel in Ontario.
Why drive it with incentives? Because without them, the truth will not get out. The truth is, oil-fired space heating and water heating equipment have led the way in technological advances and increased efficiencies over the last 20 years. The flame retention oil burner was introduced to the market in 1970. It increased burner combustion efficiency from 60% to 98% on conventional furnaces, taking steady-state operational efficiencies up to between 85% and 88%. Condensing-flue-gas oil furnaces are available today with seasonal efficiencies in excess of 95%. The majority of gas furnaces installed in Ontario are operating at less than 70% seasonal efficiencies. These are the conventional furnaces installed up until 1991 by the gas companies.
Oil is less expensive to install, as government documentation shows. For electric furnaces, baseboard heaters, with an efficiency of 100% annual fuel utilization efficiency, the estimated cost of installation is between $1,000 and $1,500. A new oil furnace with 83% AFUE is between $1,200 and $1,800 for installation. An old oil furnace with an upgraded burner can be done for $400 to $800, and that is just a burner replacement.
In comparing the cost of oil versus gas, the installation cost for oil is around $1,800, mid-efficiency gas is around $2,100 and high-efficiency gas is around $3,800. When you look at purchasing that equipment over a five-year period, as a consumer today you are looking at an interest rate from the gas company of approximately 22%. In the program our company offers, we charge no interest to the consumer over that five-year period.
The capital outlay for the consumer over that five-year period is significantly different, as you can well imagine, because of the interest rate differential. When you take into account that oil equipment lasts approximately 30 years versus 20 years, the difference in price to the consumer is significantly different. The cost over the life of oil equipment is approximately $60 per year, the cost of mid-efficiency gas is approximately $180 a year and the cost of the high-efficiency gas is approximately $315 a year.
Heating oil is one of the safest fuels. Statistics from the Ontario fire marshal implicate heating oil in just 1% of all fires for which there is an identified fuel or energy source cause. By contrast, electricity is implicated in 31%, wood in 15% and natural gas in 3.5%. Oil is non-explosive at room temperature and will in fact extinguish an open flame -- hard to believe. Heating oil is biodegradable, and therefore holds the position of the safest fuel.
The social aspects of oil: Much has been written about the importance of small independent businesses in Ontario's economic recovery. An incentive program to assist home owners in fuel substitution must give oil suppliers the opportunity to compete fairly. These suppliers are important economically to the communities they serve, particularly the rural communities, because of the employment they provide and because of the revenues they generate and keep within those communities. Utilities are not generally putting their revenues back into the communities from which they draw. Monopolistic utilities cannot give the approach to freedom of choice that is critical and so important. Competing independent fuel oil businesses can.
The cost of energy is only part of the overall total heating cost to a consumer. The consumer must look at energy costs, equipment costs and operating costs over the life of the equipment. Based on September 1991 energy costs, for a home of approximately 1,300 square feet, we were able to determine, as shown to you in the letter that has been passed around, that oil, taking into account both equipment and fuel costs, is actually cheaper for the consumer in the Hamilton-Niagara area to operate than is natural gas or electric.
Oil and the environment: The amount of carbon dioxide produced in fossil fuel heating or water heating systems goes down as the firing efficiency goes up. Since oil equipment technology has efficiency rates equal to or higher than other fossil fuels such as natural gas and propane, its overall environmental impact is less.
One concern we have heard for years in regard to oil is security of supply. Not one Ontario home serviced by oil has had its supply of fuel interrupted over the past 25 years due to product shortage. In fact, when temperatures in Ontario are into prolonged cold spells during the winter months, the natural gas monopolies turn off their supply to commercial customers due to the demand they are incurring on their network. This in fact is a result of lowering pressure in the network, which is dangerous for home owners. During these times when our industries are shut off by the gas company, your independent oil suppliers take up the slack with their excess supply and fill the needs of industry in Ontario.
I think the question of supply is not a question at all. We have sufficient, if not ample, supply to supply not only all our customers during peak load but also the gas companies. Without these backup facilities, what would happen to those businesses?
If the oil industry is allowed to continue to decline, as was directed through the off-oil program in 1980 and as it still sits today, affecting our industry, declining our market share, the number of independent fuel oil businesses that will be available to pick up the slack in those communities will diminish. Those businesses will be required to either shut down or the gas company will be forced to supply, which will result in an unsafe environment for the residents that utilize gas or will cause brownouts throughout significant components of the network. The net effect will be homes without heat and a potentially dangerous situation for all of us.
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Another consideration we have to keep in mind is that the bulk of the gas appliances currently sold in Ontario are manufactured in the United States. Canadian gas manufacturers are hurting badly. Oil appliances sold in Ontario are primarily Canadian-built, and Ontario communities -- Fergus, for example, Toronto and Hamilton -- are the supply locations for water heaters. If fuel substitution money goes to the gas monopolies, it will result in the strengthening of the US gas appliance manufacturers at the expense of the oil appliance manufacturers. We will be making their market stronger and taking away more jobs in the Ontario area.
Finally, on incentives, as I am also here as a representative of COHA, I will be reiterating its requests for incentives. They are looking in total for incentives up to $2,500 for the installation of duct work into homes currently heated electrically -- this would specifically be your baseboard radiant heat type of situations and would affect approximately 640,000 homes -- and also incentives of up to $2,000 for the installation of oil-fired furnaces and tanks into homes currently heated electrically. This would be reasonably easy for homes which currently have a duct system, which, as earlier stated, was about 160,000 homes. In total it would represent approximately 800,000 homes. They also seek incentives up to $1,500 for the installation of oil-fired water heaters into homes currently heated electrically. This again would affect approximately 800,000 homes. These incentives would be maximum, and in fact within the oil industry a reduction of up to 50% would still be very workable for your independent oil dealers to work with through reduced interest rates or long-term programs with customers to ensure that customers could take advantage of the program and incur savings while making payments. That is really the name of the game, to save money for the consumer from the day he makes the conversion appropriately.
In conclusion, the fuel oil suppliers are confident of the future, based on what I mentioned in regard to the energy studies and the outlook of the future. We look forward to establishing aggressive programs with the government and Ontario Hydro to ensure all Ontario residents are provided the quality of oil products and services they need for the future. The oil industry desperately needs the government's support. The effects of the 1980 off-oil situation are still quite vivid for many of the people today who are buying homes and we need to reverse that. Thank you.
The Vice-Chair: Thank you, gentlemen. We only have about two minutes per caucus, and we will start this round of questions and answers with Mr Jordan.
Mr Jordan: Thank you, gentlemen, for coming this afternoon and giving what I would like to say is one of the better marketing presentations I have had the pleasure to listen to. I think you have put a lot of thought into the actual marketing of your product, the opportunities of fuel switching you are giving the customer through a time payment plan, a rental plan with eventual ownership; and with the difference in the cost, as you have demonstrated, I really and truly feel that with a program like that we would not need to worry about incentives, that the people are in a good position to make a choice between electrical energy and oil.
Mr Wooton: I think the situation today is that many of the electrically heated homes converted from oil back in the 1980s. They still suffer from the perception of oil that was left with them in the 1980s. There is no question the oil industries have some marketing to do. As for people having the cash, the capital, today to go into a program whereby they can invest for the future, if you are looking at a baseboard-heated home today, you are looking at an expense to convert that, only from a duct perspective, without considering fuel, of about $2,000 to $5,000. So a $2,000 subsidy does not cover the cost of entirely converting that home.
Mr Jordan: Were you aware of this agreement for R-2000 homes, that where gas is available, they shall be gas?
Mr Wooton: No.
Mr Jordan: I hope the research will give us that information, because it is documented here in the 1991 annual report of Consumers' Gas that an agreement has been reached with the Ontario government that where gas is available and it is an R-2000 home, gas shall be the fuel for that home. I just thought it is a point of information that your people should also be aware of.
The Vice-Chair: Thank you, Mr Jordan. You may respond.
Mr Wooton: I just want to finish responding to the incentives. The incentive programs we have put in place as an industry we have been forced to put in place, and we have been forced to walk away from very little revenue on the equipment side; where the gas companies, because of their monopoly, have the opportunity to enjoy significant revenues and 22% interest rates from the consumers, at whose cost? The consumers' cost. Without those incentives, that will continue and you will be doing a great discredit to the residents of Ontario.
Mr Dadamo: Obviously your marketing plan is a very intense one, and you are out there vigorously looking for new clients all the time. Are you finding that more and more people are coming to you, your association, looking to make the switch?
Mr Wooton: We find there are a lot of people on electric today who have heard about the government's program to look at subsidies, and there is definitely a pent-up demand of people waiting. We ourselves have put together a program whereby we were willing to offer a $500 rebate to get them to convert over to oil, and people are still saying, "No, we're waiting for the government's program."
The government got us in this position through the 1980s. They were mucking around and deciding which fuel people should be on, and it is for that reason we are in this predicament. So there is a pent-up demand.
Mr Dadamo: Are people, consumers out there, as confident as you are that the supply is vast out there and will remain vast for many years to come?
Mr Wooton: On oil? I think they are getting more so now. Certainly what happened in 1990 with Iraq and Iran has convinced a lot of people that here we are operating quite effectively in the marketplace without any of that oil. That oil will all be coming back on stream from Kuwait in 1992 or 1993. I think everybody is now quite confident that there is an abundant supply of oil to last for generations to come.
Mr McGuinty: Thank you, gentlemen, for your presentation. I want to take issue with something you have been saying. The logic you are using is that the government got us in this mess so the government should get us out of it. Just to be clear, and there is an important distinction to be made here, first of all, it was the federal government and it was federal taxpayers. What we are asking here is not that the Ontario government or even Ontario taxpayers but rather Hydro's ratepayers help you out.
Mr Wooton: That is right.
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Mr McGuinty: I do not think it is fair to use that kind of logic to place that kind of burden on Hydro's ratepayers. They are, if anything, the innocent party in all this. Now, it seems to me -- and I will look at it from a different perspective -- that if you stand to benefit from this, and benefit considerably, the oil industry should be providing some kind of incentive.
Mr Wooton: Like zero per cent financing?
Mr McGuinty: Whatever it is. I am not sure.
Mr Wooton: In regard to your issue of who should pay, who will benefit? Which consumer group will benefit from the incentive?
Mr McGuinty: Public utilities commissioners are telling us over and over again that our rates are going to go up as a result of Bill 118. I can tell you about another group we met with, and that is the people in Sioux Lookout, who do not have access to natural gas and who told us that it is not economical for them to switch from electric to oil because of the costs of oil up there. So I do not think it is as simple and as straightforward as you would have us believe.
Mr Wooton: So the people in Sioux Lookout felt that the cost of electricity was less than oil?
Mr McGuinty: Yes.
The Vice-Chair: Thank you, gentlemen, for an excellent presentation. It has been most insightful, and if you wish to contact any of your local MPPs or anybody on the committee, we could give you the answers as they come down in a couple of weeks; we will be going through clause-by-clause.
Mr Wooton: Very good, thank you.
ST CATHARINES HYDRO-ELECTRIC COMMISSION
The Vice-Chair: The next group would be St Catharines Hydro-Electric Commission. Could you please come forward and identify yourselves for the sake of Hansard and the members?
Mr Lines: Good afternoon, ladies and gentlemen. My name is David Lines. I am the general manager and secretary of the St Catharines Hydro-Electric Commission. There are many aspects of the proposed amendments to the Power Corporation Act, known as Bill 118, which are worthy of discussion, but the St Catharines Hydro-Electric Commission believes there are three topics which are of particular importance and we propose to address them today.
You have doubtless heard many times the credo of all municipal electric utilities, which is, "power at cost." Under Bill 118, the definition of "cost" becomes blurred. While utilities struggle to maintain a safe, reliable source of energy for all their customers, the cost becomes less and less affordable for many. While the people of St Catharines in general support the proposed social programs of this government, we will be faced with the spectre of people unable to pay their utility bill because of the high cost of funding these social programs hidden in the electricity bill as a result of policy directives.
With the limited information available to us, we estimate that a 1% increase in Ontario Hydro revenues will garner $75 million. Our best estimate of present taxation for 1992 is as follows: debt guarantee, 2%; water rentals, 1.5%; rural rate assistance, 1.5%; Elliot Lake, 0.5%; and Spruce Falls, 0.1%.
We would be the first to admit that the vast majority of these hidden taxes were inherited by this present government. It is disappointing, however, to find this government, with its promise of openness, trying to hide yet more taxes in the cost of electricity.
With respect to fuel substitution, the St Catharines commission supports the Municipal Electric Association position, which basically is that market forces should prevail. Given the present price differentials, market forces substantially favour fuel switching without incentives.
There is no reason why all utilities should not work in harmony to provide our customers with the best energy policy for their needs. For example, this commission does not pursue electric space-heating in new development. The local gas company may wish to attack the domestic cooking market. This is good business practice.
It would seem premature for the government to legislate fuel substitution when there has been no long-term study conducted into the supply of natural gas, oil, coal, propane and other alternative fuels. What will happen if eventually these alternative fuels become more expensive than electricity? If memory is correct, oil companies were not required to subsidize the off-oil program of the first Organization of Petroleum Exporting Countries oil embargo; market forces were allowed to prevail at that time.
The third area of concern today is the Ontario Hydro demand-supply plan, and in particular the energy management incentive programs and non-utility generation. In the first case, we propose that Ontario Hydro place a moratorium on the expansion of energy management incentive programs until their economic justification can be determined.
It appears that corporate Ontario Hydro views the affair as a well-orchestrated exercise in public relations. It can certainly be claimed that several thousand kilowatts of connected load have been removed from the system through Ontario Hydro incentive programs and the efforts of its local field staff supported by the municipal utilities.
It is virtually impossible, however, to definitively measure the long-term effects, particularly in the present economic climate. To illustrate this point, a major industry in St Catharines consumed more electricity in 1991 than ever before. This occurred despite considerable cutback in production and the installation of energy-efficient motors and lighting.
In contrast, corporate Ontario Hydro has ignored its major customers, namely the municipal utilities, since none of the incentives have been directed towards these organizations to assist them in the reduction of losses in the distribution system. For example, in St Catharines the transformer losses amount to approximately 1% of the system load. This translates into about 3,300 kilowatts, or half the output of our generating station.
By installing amorphous metal transformers, these losses could be reduced by 60%, which would mean that 2,000 kilowatts would be permanently removed from the system. While these machines presently carry a premium, it would not take long for manufacturers to ride down the experience curve to reduce the cost, thus eliminating the necessity for subsidies. This would enable all consumers to share in the savings.
An allied subject is non-utility generation. This utility has had the opportunity to consider several first-rate proposals which have now been negated by Ontario Hydro's latest edict. While the engineering details of these proposals are irrelevant to these discussions, the fact of the matter is the implementation would have resulted in manufacturing and installation jobs in the Niagara Peninsula, together with some permanent jobs, all of which are desperately needed.
The Vice-Chair: Thank you very much, sir. We will start into the question and answers with Ms Murdock.
Ms S. Murdock: I want to thank you for this, but I just need a clarification. The workings of different kinds of energy systems are not in my bailiwick or my general level of experience, so I need a clarification on page 3, if I might. In terms of the incentives to municipalities and installing amorphous metal transformers, am I understanding from that section that you would recommend a discounted subsidy, a subsidy that would be discounted over the years until such time as the metal transformers could reduce the effect?
Mr Lines: Correct. We have in actual fact put $100,000 in our budget this year to install amorphous metal transformers. This is about 20% of our transformer budget for the year. We do not believe that St Catharines can afford to do more in any one year, given the present state of the economy and trying to hold our rates down.
However, if these incentives were made available so that more utilities were able to purchase and install these transformers, then obviously with production costs and experience, the manufacturers can bring the cost down to the level of the present regular-distribution transformers.
Ms S. Murdock: On top of that, what kind of incentives would you be looking at? A percentage of the kilowatt usage or what? I do not know exactly what kind of incentives you are looking at.
Mr Lines: Any incentives we could negotiate with Ontario Hydro. We are not hung up on percentages or fixed sums or anything, just some incentive which will enable us to reduce our costs and remove load permanently from the system.
The Vice-Chair: Ms Murdock having eaten up about three minutes leaves you, Mr Huget, with about four minutes for your caucus.
Mr Huget: Thank you for your presentation. I notice on page 2 of your presentation that you refer to the costs of Elliot Lake. At mid-paragraph there you say, "It is disappointing, however, to find this government, with its promise of openness, trying to hide yet more taxes in the cost of electricity." I do not recall this bill having anything to do with taxation, so I think that is a little off the mark.
Mr Lines: Could I reply to that?
Mr Huget: Yes.
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Mr Lines: Hidden costs, costs to do other than provide electricity, in our opinion is taxation.
Mr Huget: Then would you agree, sir, that taxation includes the hidden costs of paying several times the world price for uranium and the contracts for uranium by Elliot Lake?
Mr Lines: Yes, I would.
The Vice-Chair: Anyone else from your caucus? Seeing none, Mr Cleary.
Mr Cleary: Thank you for your presentation, sir. One thing I would like you to comment on is the present makeup of the Ontario Hydro board and the proposed makeup. What is your opinion on that?
Mr Lines: The present makeup of the Ontario Hydro board includes two representatives of the MEA. When you consider that the MEA represents the bulk of electrical users in the province, I think the MEA is vastly underrepresented on the board. I believe that the composition of the board is weighted in favour of government appointees, and that really is a government policy decision to make. However, if the appointees are appointed by the government, they surely know government policy and I think the government should allow the appointees to run the utility in the way they see fit and not interfere with the decisions once the appointments have been made.
Mr Cleary: Are you in favour of increasing the size of the board?
Mr Lines: I believe the present size is about 20 and I would suggest that this is probably sufficient.
Interjection.
Mr Lines: Seventeen, yes. I would say that was probably sufficient to run the utility.
Mr Cleary: Is Bill 118 necessary in your opinion?
Mr Lines: In my opinion, no, it is not necessary at all.
Mr Cleary: If Bill 118 goes ahead as proposed by the government and these incentive programs are put in place -- I think I know what your answer is going to be but I am going to ask you again -- should the cost of this program be borne by Ontario Hydro or should it come from the Ministry of Energy or another ministry?
Mr Lines: I think it should come from one ministry or another but not from Ontario Hydro.
The Vice-Chair: Mr McGuinty, you have about three minutes.
Mr McGuinty: There is a proposal contained in Bill 118 which would have Hydro's board of directors absolved from liability. They would have the benefit of that shelter as long as they followed the government's directives. My concern is, from the perspective of ratepayers, they sometimes wonder, "Well, who the heck is out there looking out for my interests?" because governments, if they are going to run Hydro, have been known to do things for reasons purely political.
It may be that Hydro's board of directors has not been 100%, as far as I am concerned as a ratepayer, in terms of protecting my interests, but at least it is there as some kind of a protective mechanism. It is something that I find incredible. It is something that could never happen in the private sector -- that you would absolve a director from liability.
To my understanding, Hydro's directors are the only people in law who are accountable to me. They owe me a fiduciary duty. They must look out for my best interests. A government can play one off against the other. It might say: "Well, we're in the context of a recession. We don't have enough money to pay for certain things and we want to keep it off the government books. Let's use Hydro." Maybe that is what happened at Elliot Lake. Do you have anything to comment on that?
Mr Lines: I would agree that if the directors of Ontario Hydro are free to make their own decisions, then they should not be absolved of liability. However, if they are being directed by the government, then one surely cannot hold them accountable for the whims of the government.
Mr McGuinty: I am not sure if you are aware of this, but at Elliot Lake the directors, it is my understanding, demanded and received an exemption from liability because they felt it was not in the interests of Hydro's ratepayers to proceed with that program.
Mr Lines: Yes, I was aware of that.
Mr Jordan: Thank you for your presentation. I have had the privilege of being a member of this committee and going across the province and certainly I have been fortunate in attaining a good cross-section of the feeling on Bill 118 as it presently has been presented.
You are making a point here that has been concerning me regarding the update of this demand-supply plan being so dependent on energy conservation now. You have pointed out an industry, for an example, where through energy efficiency, if you want to refer to it that way, the resultant factor was a very noticeable increase in the use of electricity. Listening to other large industries and manufacturers that have been doing an awful lot of work on the efficient use of electricity, because it is a big factor in their costs, I have a certain fear that perhaps we are rushing into this and overestimating what we can do for the people of Ontario through energy conservation and putting off facing the fact of new generation. Do you have any feelings in that regard?
Mr Lines: Yes. First of all, I fully support energy conservation. We participate to our maximum ability in energy conservation plans within St Catharines. However, there does appear to be a headlong rush into so-called energy conservation without looking at the ultimate results. Let's take the example of your lightbulbs. Who is to say that the recipient would not replace a 40-watt lightbulb with one of those instead of the 60-watt for which it was intended? I think this is one of the fallacies of the energy conservation program as it now stands. I would not like to see any abandonment of the energy conservation program, but I think we have to take a closer look at its effects and perhaps put some more money into educating people in the wise use of electricity rather than just rushing headlong into trying to reduce the load.
Mr Jordan: I was also interested in your bringing out the point that some consideration could be given to the utilities relative to the use of new and updated products, such as new transformers. Also, there are a number of utilities, perhaps not only the smaller ones, whose distribution systems have deteriorated and the line losses are more than they should be. Would that not be another area where we could show considerable savings at the retail level?
Mr Lines: Oh, certainly. We pride ourselves that our line losses are kept to a minimum in St Catharines. However, we could reduce those line losses if we had the money to spend on upgrading the system.
Mr Jordan: Would you enter into a consultation with Ontario Hydro relative to that as part of the $6 million that is being spent on conservation?
Mr Lines: I certainly would.
The Vice-Chair: Mr Arnott, very quickly, please.
Mr Arnott: We in St Catharines are in the southernmost part of the country. I am just wondering if you can tell us if your peak load at the present time is a summer peak. Are you anticipating that in the next few years you are going to have a summer peak load?
Mr Lines: We have had a summer peak load for the past two or three years. It is marginally above the winter peak but it is in fact a summer peak.
Mr Arnott: Bill 118 implies that it is going to be attacking winter peak, is it not?
Mr Lines: Right.
Mr Arnott: We are probably not going to be realizing the demand savings we think we are.
Mr Lines: That is true.
The Vice-Chair: Once again, as with a lot of your predecessors from the public utility group, you have put on an excellent presentation. I thank you for that.
Seeing as how we have a few minutes before the next one, and it will be a long afternoon, we will stand in recess till 3:15 so everyone can stand, enjoy the coffee or juice, whatever is left, and stretch your legs.
The committee recessed at 1451.
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BROCK UNIVERSITY
The Chair: Terry Varcoe is here from Brock University. Sir, please be seated and tell us what you will.
Mr Varcoe: For those of you who are not as familiar with the university as the Chairman I hope is -- I am sure he is -- Brock University was founded in 1963. We started our campus on top of the escarpment in 1965. At that time electrical energy was a very inexpensive item and the university, it was decided, would be an all-electric campus. I do not know what our rates were at that time, but they were low. So in 1965 we went all-electric. We now have 1.3 million square feet of space which we have to heat and cool with electricity. Electricity is our major source of power.
We have done some major conservation items. We heat the boilers between 11 pm and 7 am. We have put in a very sophisticated load-shedding program. We have done virtually all of the things that can be done in order to cut consumption. We draw a maximum of nine megawatts, which is fairly significant as our rates are based on peak and the consumption, and peak is about 50% of the rate. So electricity has become a very major cost to us. Our December bill was $224,000; our annual bill is about $1.8 million, so any time we are looking at electric rates increasing, it means a significant amount to us. This year, the PUC in St Catharines is looking at 11%. That means $180,000 or thereabouts to us. As you are all aware, we received a 1% grant increase. It is very difficult to get that sort of money out of a 1% increase.
The point that Brock University wants to make is that we feel Hydro should be generating power and selling it to local power authorities at cost and should not be burdened with costs which are not directly involved with the generation of power, so that things such as Elliot Lake and Kapuskasing, where we really have had subsidies going to these areas -- I do not think we have any problems with social programs as such. It is just that we do not think they should be part of the power rate we are paying.
When we look at the other universities in the province and say that none of them is all-electric, what it means is that any time we have something going into the power base that is not just the cost of generating electricity, we are being taxed and they are not being taxed. What it means to us is that we have less money for books, equipment and wherever else we might put the money, because we are being hit with a tax that is going to major power users but in fact is not going to them. Although they are major too, they are not doing their heating and cooling with electricity. From our point of view, it really hurts when we end up having items that are non-power-generation costs included in the base electric rate. That is the major point we really have.
There is one other thing I would just like to take a couple of seconds on, though, and that is the amount of money, the $6 billion, that Hydro has to finance getting people off hydro or for conservation. We have a very major project which we just signed with Hydro where it is putting up $1,044,000 on about a $2.2-million project. We are putting in a major thermostorage. It is just a big hot-water tank, but it has a fancy name. It is thermostorage, but what really makes that project go is that we are using a gas boiler to heat during the day, and we heat it with electricity at night.
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Of the money that Hydro is contributing, it contributes nothing to the gas boiler, because it does not contribute to anything where there is a substitute source of energy. It seems to me if we are going to make the best use of the funds that Hydro has for conservation, there should be some way of including within that the possibility of using other sources of energy. This is about a $2.2 million project. What makes it economically feasible is that we pay $75,000 ourselves in order to attach a gas boiler to the project. Without that, the conservation would not be worth spending the money, yet we get no contribution from Hydro on that part.
So I guess I would like to see Hydro be able to provide funds out of its conservation fund to substitute sources of energy. That really is it; very short. It will give you time for another coffee or the next people.
The Chair: No, sir. It gives us time for some questioning and some exchange of views.
Mr Dadamo: Thank you very much. I was not expecting it that quick. Welcome to the recession, Mr Varcoe. You were mentioning with much disdain the 1% increase in subsidy the government is giving you.
Mr Varcoe: I do not think I said much disdain. We recognize that things are tough everywhere.
Mr Dadamo: I realize that you realize that, but there was a little quiver in your voice I noticed.
Mr Varcoe: It is tough.
The Chair: There is one in mine when I talk to you.
Mr Dadamo: A couple of questions. What plan does the university have to possibly tailor or cut your electricity bills? Are there any areas that you are ready to take the money from in order to pay for these bills?
Mr Varcoe: What we have basically told our physical plant department is that its budget will be the same as last year and out of that it has to pick up the energy cost increase. What that really means is that we will be doing less in the way of maintenance and renovations. We will just be watching all of the areas in physical plant.
Mr Dadamo: Are you cash-rich in any other areas that you could take it and put it to this area of paying the electricity bills?
Mr Varcoe: No. No universities are cash-rich in other areas.
Mr Dadamo: Yes, there are some that are cash-rich.
Mr Varcoe: The objective at most universities is that we spend the amount of money we have; if we have less money than we would feel is necessary, we have to cut in certain areas. We will certainly be making cuts this year in non-people areas. We are not at the point that we are going to be laying off or things like that, but we certainly do not have as much money for particular equipment as we have had previously in the last couple of years.
Mr Klopp: I appreciate your talk. One of the things that you have pointed out was the substitute sources of energy. This bill will allow Ontario Hydro to do that.
Mr Varcoe: Yes, we are in favour of that part of it.
Mr Klopp: Because that is one of the things that other people are quite mad about.
Mr Varcoe: That is where we differ.
Mr Klopp: The $1.4 million that you are receiving for --
Mr Varcoe: No, $1,044,000. Sorry.
Mr Klopp: Of course. The $1 million that you are receiving is out of the rates of Ontario Hydro.
Mr Varcoe: It is out of the conservation fund, I guess.
Mr Klopp: I live in Zurich. I am not going to get any benefits of your getting -- that $1 million is going to be in my electrical bill, is it not?
Mr Varcoe: I guess it is going to be in your electrical bill one way or the other. If they do not reduce the consumption, it is going to be in your bill another way, so I do not think it is going to affect your bill overall.
Mr Klopp: Okay. But a few minutes earlier you said we tried to put in a social program at Elliot Lake, but Elliot Lake was to save Ontario Hydro's spending over $1 billion in excess costs. They cut a deal. That, to me, is not a social cost. Is that not a business --
Mr Varcoe: It seems to me that Hydro is paying for uranium at a rate that is above what it could buy uranium for.
Mr Klopp: They cut a deal to get out of that, and saving over $1 billion, is that not a good deal?
Mr Varcoe: That is a good deal, but they also put in a fair chunk that is in our rate.
Mr Klopp: They also put $1 million in my rate for your university, but you say that is all right.
Mr Varcoe: That is definitely all right.
Mr Klopp: Thank you.
Mr Varcoe: We like our cake and eat it too.
Mr Jordan: Thank you, sir, for your presentation. I think you had good foresight when you decided that Brock University should be all-electric. I am sure, as time goes on, you will not be disappointed.
My question is relative to your residences. Are they also all-electric?
Mr Varcoe: Yes. The whole campus is. When we say all-electric, the major source of energy is electricity. In some cases it is electrically fired boilers; in other cases it may be direct electric heat. But it is all-electric, yes.
Mr Jordan: From my experience, I know at home sometimes university students walk through the house and from the room they start in to the room they leave, all the lights are on. I was just wondering, do you have any program to try to --
Mr Varcoe: Yes, we have, and it is a very effective program. It is called User Pay. In our new residence which we built a couple of years ago the students pay their own energy costs and the houses -- they are like town houses -- are electrically heated. They are air-conditioned and it is really interesting to look in the fall to see those students who have their windows wide open and their air-conditioning on and, in the winter, their windows wide open and their heating on. We can tell because we give them very detailed bills every month that show them what their costs were, what their consumption was and what the consumption of other housing units in the complex was. So they can see that some kids are paying $20 each a month for energy and others are paying $35 or $40. It is a very good way to teach students that you do not keep the windows open without some cost.
Mr Jordan: I can tell you from experience, because one of my daughters received her bachelor of education from that university, and when she is at home, I have to tell you that if I drove in in the evening I would not know there was anyone there, because there is only one little light on in the whole house.
Mr Varcoe: It works.
Mr Jordan: It does work. Going back to Bill 118, do you have areas of Bill 118 that you would like to comment on as not being required in order to have the utility in government reform?
Mr Varcoe: I think, as somebody has recognized, we have pluses and minuses on it. The one, obviously, that we have difficulty with is the costs associated with generating power. However, we do feel the money available to get us off electricity or for substitute fuels is good. I am not sure in fact I would say the Minister of Energy should not be able to direct Hydro to do things that are non-generation of power. I guess that is where I would disagree with Mr Klopp.
Mr Jordan: And what about the part absolving the board of directors of any responsibility or accountability?
Mr Varcoe: I guess it seems to me if you tell them what to do and they do it, it is pretty hard to hold them responsible for doing it.
Mr Jordan: Do we need a board, then?
Mr Varcoe: Well, I have not thought too much about that. I would say you probably do need a board. There are other things the board does besides determine rates so that I think, yes, you do need a board. But it has to be very difficult to be a board member and feel you are doing your job if, on major decisions, you are told what the decision should be.
Mr Wood: Thank you very much for coming forward. I find it interesting that you are saying that back in 1963 the decision was made to go all-electric and that some of the students have their windows open and one thing and another. My wife and I managed to have two of our daughters educated through university and they are teaching now, and it seems to me, having gone through that over a period of 10 years, that it is the parents throughout Ontario or throughout Canada who end up paying those bills. The decision was made to go electric, which is very expensive now.
Mr Varcoe: Yes.
Mr Wood: Okay, that is just a comment.
Mr Varcoe: It is the parents. In all honesty, it is the government too. As you know, 75% of our funding comes from the province. The only thing is that in our internal distribution obviously we have to put more money to utilities than we would like to. We are above the provincial average in terms of how much of our total expenditure goes to utilities.
Mr Wood: Just along that line, it seems to me that with everybody involved, such as students, parents and the taxpayers of Ontario, everybody would benefit if fuel switching and the cost of heating and cooling the university could be reduced by 50% or 60%. Everybody would benefit in the long run.
Mr Varcoe: Yes, they sure would, any money that is saved. It is like when we discuss salaries with faculty. I keep telling them that money that does not go to them does not come to me; it stays in the system and goes to books, equipment and all the other good things that everybody likes. It is the same with energy. Money we do not have to put to energy goes some place else that we need to put some resources into.
The Chair: I thought you were going to argue that everybody would benefit if funding kept pace with increased costs. Mr Varcoe, thank you very much for coming here today. We appreciate your participation.
Mr Varcoe: Thank you.
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TAXPAYERS COALITION OF NIAGARA
The Chair: The Taxpayers Coalition of Ontario is here. Come forward, have a seat and tell us, of course, who you are and your capacity with the coalition. We have 30 minutes. Give us time for questions and answers.
Mr Sheehan: My name is Frank Sheehan. I am the chairman of the Taxpayers Coalition of Niagara and I am secretary-treasurer of the Taxpayers Coalition of Ontario, which is a federation of various taxpayers coalitions. I would like to speak on some of the aspects of Bill 118.
We would like to object somewhat strenuously on two specific points: (1) the expansion of the number of directors; (2) the expansion of the powers of the Minister of Energy to dictate policy which is not related to the production, generation or distribution of power to the board of directors of the Ontario Hydro corporation.
Historically, crown corporations in Canada have enjoyed a certain degree of independence from the Legislature which gives them life and the political party which happens to control the Legislature at any given time. The proposal to expand the board of directors of Ontario Hydro by five immediately is a blatant attempt by the governing party to seize instant control of the board of directors of Ontario Hydro rather than to wait for the opportunity to replace existing members on the board as their term of office expires.
Similarly, by expanding the powers of the minister, the act will enable a government to use the Ontario Hydro corporation as a means of implementing and financing various social policies which it deems necessary or expedient.
Ontario Hydro was not designed to be a vehicle for any political party to implement social policy. Hydro's mandate is for the production, generation and distribution of electrical power at cost to the population of Ontario. Since Ontario Hydro's total asset value is approximately $42 billion and its current debt is $37 billion, it is in no position to finance anything except power.
The following acts appear to have occurred or are proposed: (1) There has been a $67-million donation to the Elliot Lake heritage fund; (2) Between $250 million and $354 million has been paid against uranium contracts which had been cancelled by the previous government; (3) It is reported that job-saving adventures at the Spruce Falls paper mill in Kapuskasing will cost Ontario Hydro an estimated $167 million for the purchase of a power generating station, a further $500 million for the development of dams and for improvements to the power plants to augment production capacity of these power stations, plus provide 80 years of free hydro to the paper mill. It is estimated that these mandated costs are equivalent to about $3.5 million for each of the 600 jobs saved.
The Taxpayers Coalition of Niagara and the Taxpayers Coalition of Ontario object strenuously to the cancellation of this long-standing separation between the crown corporation and the ruling government and to the consequent wanton waste of scarce resources in a questionable maintenance of a non-productive facility.
It is regrettable that a major supplier of work has ceased to be competitive, but it is unreasonable for the government to expect the rest of Ontario to pay such an outrageous price for the protection of these jobs. History indicates that there will be no end to the cost of subsequent subsidies required to maintain these facilities. We respectfully suggest and request that the government cancel these proposals.
The Chair: I should indicate we have a healthy amount of time, some eight minutes per caucus.
Mr McGuinty: I do not think I will require that amount of time, but why do I not begin? Will you expand a bit more on why you are objecting to the expansion of Hydro's board?
Mr Sheehan: I think the board, its present size, has been that size for a long period of time and it has been doing a fairly effective job. What is the reason for it?
Mr McGuinty: I am not sure of the reason for it, but some of the peoplewho have come before the committee have indicated that they would be in favour of such an expansion on condition that they or a representative from their group were appointed to the board. There is some thinking going around now that is rather fashionable. It says that if we have representatives from various groups on certain bodies, that will somehow make the body operate more effectively and efficiently. I am just wondering what your reaction is to that.
Mr Sheehan: I would suggest that if you want to make it a broader representation of the people who are on that board, as the people who are currently on the board retire, you replace them with people from that group. Bigger is not better.
Mr McGuinty: Those are my questions. Thank you.
Mr Jordan: Thank you, sir, for your concern about Bill 118. Are there sections of the bill that you do accept as necessary?
Mr Sheehan: Some of them I am not knowledgeable on. The ones that have bothered me are the political ones I have mentioned. As to the others, I am not knowledgeable enough on the subject of the hydro-electric commission to comment.
Mr Jordan: The projected cost of hydro could go up 44%; they have indicated that possibility. Do you see as a result of this bill that we are going to be able to turn that around?
Mr Sheehan: I do not know if the bill is going to do it, but I would certainly hope that you could do something about the size of the bureaucracy that runs Ontario Hydro. It is a colossus. It has done nothing but get bigger. I have never seen anybody cut the size of it -- have you?
Mr Jordan: When you are saying "cutting the size," you are talking about operation, maintenance and administration?
Mr Sheehan: The whole thing. With Ontario Hydro, like most municipal vehicles, it is the classic syndrome of four trucks to lift up a manhole cover to see what is underneath the manhole cover. Hydro seems to enjoy the same surfeit of staff and vehicles to go around and pursue whatever. The threat is always that we have to have them so when there is an ice storm we will have the people on hand to do it, but that is a big price to pay for the last ice storm we had around here.
Mr Jordan: What recommendations would you make as to identifying the areas that you feel need reorganization?
Mr Sheehan: I am not qualified to sit in -- we could make a study on that, I guess. We have other things on our plate. We object to the politicization of Ontario Hydro. That is our main thrust. To me, the government is using its authority to make social policy, and that should not be funded out of something whose sole objective is very specifically stated to be the production, generation and distribution of hydro. I think that Hydro should be run like a business and that, notwithstanding errors of the past, those errors should not be compounded, such as paying out the uranium contract.
Ontario Hydro is leveraged up beyond what most businesses could be leveraged at. Its debt capacity, I am told -- and I am a pretty good authority -- is $37 billion against assets of $42 billion. I would say they have some big-time problems because they have some big-time operational problems that we read about in the paper. So I think Ontario Hydro should do what General Motors is having to do and any other business is doing, down to the corner store: looking at its operational costs and sticking to its business, not getting outside of that business.
Mr Jordan: Thank you very much.
Mr Arnott: Thank you, Mr Sheehan, for coming in this afternoon and giving us your views. The latest update to the demand-supply plan that Ontario Hydro is working with, which came out a couple of weeks ago, indicates that a full $6 billion is projected to be spent on demand management initiatives over the next 10 years. What figure did you use for the net debt of Hydro?
Mr Sheehan: It was $37 billion.
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Mr Arnott: If you compare those two numbers -- I was working under the assumption it was $30 billion. I do not know how they are going to spend $6 billion. Maybe it is a socialist's dream to have an opportunity to spend $6 billion on certain things, but they will couch it in terms of demand management, I guess. What do you think they are going to use our money for? Do you have concerns about that?
Mr Sheehan: I do not have any problem with them teaching me a better way to manage my electricity. The lightbulb, I think, is an excellent idea. That is a good promotion.
The Chair: Mr Jordan, do you want the floor again for a moment?
Mr Arnott: Mr Jordan will tell you a thing or two about the lightbulbs; $7 million on those lightbulbs.
Mr Sheehan: I do not think $7 million against the gross revenues of Ontario Hydro is a lot of money. I know, for example, that the local hydro-electric commission's budget is larger than the city and the region when you throw out education, so it is a big business. I think they should be looking at their processes. I think they should be looking at their buying; I think they should be looking at their personnel; I think they should be looking at the kind of savings and the wage increases they are passing out. I think there are other ways to skin that cat.
Just as a matter of interest, we thought we were wailing into the dark, but the secondary school teachers' federation down in Blenheim is announcing that it is making a deal with the school board to work towards a zero increase in that budget. So these things are possible. I think Hydro had better start applying the business principles that have to be applied by myself in my little business and by fellows in this room who have businesses and who are trying to survive and make a living.
Mr Arnott: Including counting millions of dollars, in fairness. I think $7 million is $7 million no matter how C. D. Howe counts them.
Mr Sheehan: C. D. Howe pleaded, "What's a million?" It will never be forgotten.
Mr Arnott: Thanks.
Mr Dadamo: Mr Sheehan, thank you. Not in defence of Ontario Hydro -- I am curious like most people are, and I just want to ask you a couple of questions. I wanted to segue back to the thought that Mr McGuinty had about the size of the board. What I am trying to extract from you is what everlasting damage, permanent damage, there would be if we increased the board size from 17 to 22, and possibly added some groups out there who are not represented on this board. For heaven's sake, we could probably bring a plethora of different ideas and another perspective, something like that.
Mr Sheehan: Can you tell me who some of these groups are? I have not read anything about them.
Mr Dadamo: I do not know who these groups are and I am not pretending to know, but I am thinking there must be one, two or three out there who are not represented. I am asking you, do you know of any?
Mr Sheehan: I do not know of any group. I think people who run that board should know about production, generation and distribution of hydro-electric power to the province at cost, as was the mandate. I do not know who they are, but I could guess there are probably going to be ecologists and probably some women's groups and some multicultural people; I do not know. Everybody seems to have an axe to grind. I think you are running a very large business which impacts in a very heavy-duty way on this province and that you should have people who are competent to run that business and not people who have a special interest or an axe to grind.
Mr Dadamo: Are you saying there are not competent people in those groups that we could put up?
Mr Sheehan: That is not relevant.
Mr Dadamo: That is not relevant?
Mr Sheehan: No, I do not think it is. If they are competent -- whether they belong to that group is neither here nor there. They should be there because of their competence first, not because of their association.
Mr Dadamo: Okay, I guess we could argue for ever.
Mr Sheehan: No, you have given me 30 minutes. We are now at about 10.
The Chair: Thank you very much. Mr Wood.
Mr Wood: I just wanted to have a little bit of discussion or a question. You have raised the issue of Kapuskasing, the Kimberly-Clark/New York Times operation that was there, and they owned the powerhouse. I do not know if you are aware of the fact that going back probably 40 years ago, a decision was made to build three powerhouses there and that they would buy the fourth one and would have the four powerhouses there.
A decision was made, I guess from 1984 to 1989, where an agreement was signed, an option to buy the powerhouse, with the money to be turned back into modernizing and updating the paper-mill. Then the decision was made later on, "No, we just want to get out of the operation and take the $100 million, plus interest, and leave." And then the negotiations; we have had a lot of praise that the negotiations that took place were to the benefit of everybody in the province. They benefited Ontario Hydro; they benefited Kimberly-Clark and the New York Times; they benefited the new owners, Tembec, employee ownership. There were all kinds of benefits there with a very small amount of money involved in the whole situation. It is a matter of three governments that have basically all decided the same thing over the last 10 years -- to proceed with that type of transfer of the privately owned powerhouse to Ontario Hydro. I am wondering if you have any views on it.
Mr Sheehan: Am I correctly informed that the paper-mill was having a hard time being economically sound?
Mr Wood: No, that is not the case. They always made a profit in the 75 years they were there. It was a viable operation.
Mr Sheehan: Our source of information is the newspaper, so take that as a qualifier.
Mr Wood: I worked in there for 30 years. It was a viable operation that always made money.
Mr Sheehan: Why did they want to get out of it, then?
Mr Wood: They just did not want to make newsprint any more.
Mr Sheehan: If the thing is viable, why do we have to have Ontario Hydro committing to give 80 years of free hydro-electric?
Mr Wood: It is worked into a 10-year credit. That was an arrangement that was made back in 1989 on a five-year option, and they fulfilled that agreement.
Mr Sheehan: So Ontario Hydro is giving the private enterprise people free hydro as well?
Mr Wood: There is a loan in there of $34 million that will be paid back over a number of years.
Mr Sheehan: Are you saying they were giving them free hydro?
Mr Wood: Before?
Mr Sheehan: Yes, before the government went in and worked this 10-year deal.
Mr Wood: The mill had its own powerhouse and it wanted to sell it off.
Mr Sheehan: They had a mill, and now Ontario Hydro is buying a power plant whose sole purpose is to supply hydro to a private enterprise, right?
Mr Wood: There are four powerhouses there, one after the other, along the river.
Mr Sheehan: But this one in particular.
Mr Wood: Yes. They will continue to operate it under Ontario Hydro.
Mr Sheehan: Is anybody arguing with the numbers I have read?
Mr Wood: There is a number out there, and if the environmental approval is not granted to expand the three powerhouses, there is a cost that could be involved somewhere along the line. The intention for 40 years has been to expand them. The three powerhouses that Ontario Hydro built there in 1959 to 1963 were built and designed for expansion with the idea that they would buy Smoky to have a fourth one. These are the plans they have had for 35 or 40 years.
Mr Sheehan: If the paper-mill closed down, would Ontario Hydro still buy that hydro plant because they had put it into the grid?
Mr Wood: Yes.
Mr Sheehan: How come that does not come across when we read it in the papers?
Mr Wood: The papers do not always give the factual information.
Interjection: Do you believe everything you read?
Mr Sheehan: I can only do with the source of information I have in my hand.
Mr Wood: All the reporters who have been doing the reporting have not been up over there to visit the area and talk to people in the community personally. They have taken secondhand information and reproduced it.
Mr Sheehan: If they bought the plant for $167 million --
Mr Wood: It was $100 million plus interest.
Mr Sheehan: Is that accrued interest or accumulated interest, or is that forgivable interest?
Mr Wood: We would have to talk to Peterson about that. He is the one who made the deal.
Mr Sheehan: The current government completed it, though, did it not?
Mr Wood: They completed the option that was there for five years, yes.
Mr Sheehan: Let me put it another way. Is it going to cost the province of Ontario approximately $3.5 million a job to retain those jobs?
Mr Wood: It has not cost the province of Ontario a penny so far. There is no intention of costing the province of Ontario any money at all.
Mr Sheehan: Is Ontario Hydro not committed to give 80 years of free hydro? Does that not have a value?
Mr Wood: Yes, but they are generated from the powerhouse and from the other three powerhouses.
Mr Sheehan: Who owns the powerhouse now, Ontario Hydro?
Mr Wood: Ontario Hydro owns four powerhouses there.
Mr Sheehan: Are they going to get any money from the paper-mill?
Mr Wood: There is a loan of $34 million that Ontario Hydro is giving for modernization.
Mr Sheehan: I guess I would never make a politician.
Mr Wood: Briefly on the Kirkland Lake situation -- I do not know if I have time -- I understand from the information I have that had the agreements with Elliot Lake not been cancelled, the cost would have been about $1.4 billion to the ratepayers in Ontario. By cancelling those agreements with Rio, Algoma and Denison Mines, and by putting about $65 million into the heritage fund, the ratepayers in Ontario are saving somewhere between $1.3-$1.4 billion as a result of a token amount that was put forward to help out that area of Elliot Lake.
Mr Sheehan: The point is that Davis's government made a bum deal about 10 years ago, I think it was, when he committed to buy all that uranium.
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Mr Wood: At an inflated price.
Mr Sheehan: Peterson cancelled it. I assume he did it on a legal basis and he paid whatever penalties he had to pay. That was already done, from what I understand, and now we have this government making a $65-million payment out of Hydro funds.
Mr Wood: In order to save $1.4 billion; that is the information I have.
Mr Sheehan: The information was they were contracts that had been cancelled and had been done.
Mr Wood: That is not the information --
Mr Sheehan: Did the uranium mining people say it was okay to cancel their contracts as long as you give $65 million to the citizens? That is effectively what you are saying, because the heritage fund, I assume, is the city of Elliot Lake.
Mr Wood: They have told Ontario Hydro to buy the uranium after a certain point in time at world prices, which is a saving of $1.4 billion, from what I understand, to the ratepayers of Ontario Hydro.
Mr Sheehan: The point is you gave $65 million from a company that has financial trouble. You made a charitable donation.
Mr Wood: A lot of the financial problems are decisions that were made to build nuclear power stations that have been very ineffective. They have run up an enormous debt over the years, and we as a government are trying to correct that. Hopefully, with information that is coming forward at this committee, we will be able to do that with Bill 118.
Mr Sheehan: Are you suggesting to me that I am not reading it correctly, that there are no social policies involved in any of these payouts?
Mr Wood: I have never accepted that there is a social policy payout, no. Some people have made that presentation, that they see it that way. But a lot of the newspaper reporting that has come through is not saying the same thing. The people who represent 75% of the land mass of the province of Ontario do not feel the way you do.
Mr Sheehan: You are talking land mass; you are not talking population. There is a hell of a difference.
Mr Wood: Well, yes, there is a hell of difference, that is for sure.
Mr Sheehan: What about the people who are paying the bills?
The Chair: Mr Wood, Mr Huget is going to get angry with me, and I am just a sensitive kind of guy. I do not want people mad at me. Mr Huget.
Mr Huget: You raise an issue you have discussed in detail with Mr Wood about some of the past and present situations with Ontario Hydro and its activities. My question to you is, to whom do you think Ontario Hydro should be accountable?
Mr Sheehan: I think the shareholders, the people of Ontario. That is who I think own it.
Mr Huget: Accountable to the general public of Ontario, you and I?
Mr Sheehan: Yes.
Mr Huget: The other issue is when you look at policy directives. You are quite strong in your opposition to having government meddle with Ontario Hydro. I would suggest that government has indeed meddled with Ontario Hydro for a long time. They have not done it in front of you, but they have been doing it. What I am saying is that policy directives can incorporate a whole bunch of different things, depending on your viewpoint, I think. Energy efficiency and conservation, for example, is a policy directive. Productivity and cost-effective delivery of service may be a policy directive; I do not know. But you are saying that government should not really do that, that there should not be any political influence.
Are you saying, then, that government really has no role in Ontario Hydro for things like energy efficiency and conservation, things like environmental regulations, things like the decision-making process that led up to the implementation of a nuclear strategy? Does the government not have any role in that?
Mr Sheehan: The government had the right, on behalf of the people of the province, to appoint directors to this corporation. The directors of the corporation, as I understand corporate structure, are responsible for the policy and direction of the corporation. That buffer has been one of the things that have kept Canadian crown corporations somewhat successful. But when you get direct political philosophy being able to impinge on the authority you have given to those directors, then you are subverting the concept. You are not elected to do that.
Mr Huget: What I am trying to get to is that we are elected and accountable to the public, and I think you have said that Hydro should be accountable to the public. We think things like energy efficiency and conservation, for example, are in the public's best interests. I do not see anything subversive about that.
Mr Sheehan: You have appointed the directors and you can control who the directors are, and I would assume -- for any board I have ever been on, if I had a chance to control who the directors are, I sure wanted to make sure they were somewhat sympathetic to my point of view, but I also wanted a broader perspective because I know my point of view is not 100 cents on the dollar; it is just one point of view.
Mr Huget: I appreciate your views.
Mr Waters: I have heard a lot about energy at cost. Do you feel it was Hydro's mandate, let's say, in the broad spectrum -- I have heard that it is not to produce power, only to transmit power, but we will even take what other people have said, the production and transmission of power. Do you feel the rates should also include the cost of disposal of the fuel rods safely and the decommissioning costs of these plants? Do you think that should be in our rates at the same time?
Mr Sheehan: It is the cost of doing business.
Mr Waters: So that should be part of the rate structure of Hydro at this time. They know there is going to be a cost there. Should that not be part of their rate structure?
Mr Sheehan: It has to be factored in as part of the overhead.
Mr Waters: Thank you very much, because it is not, at this time.
Mr Sheehan: It has been a long time since Hydro was perfect.
The Chair: Mr Sheehan, you and the taxpayers coalition have done it again. You have provoked and caused us to reflect on some things that probably warrant reflecting on. Thank you very much for taking the time. You are quite right, if it comes to pass that those new board positions are created, the likelihood or the possibility of, let's say, somebody from the Provincial Council of Women of Ontario being on the board is very much there. Then again, maybe the prospect of somebody from the Taxpayers Coalition of Ontario being on the board is not such an unattractive proposal either. We thank you, sir, for your participation, your interest and for the work you put into all your tasks.
Mr Sheehan: Thank you for the time.
RIVERWATCH INC
ONTARIO ENERGY ENVIRONMENT CAUCUS
The Chair: We have with us Dave Mochrie, the president of Riverwatch Inc. Sir, come on up, be seated.
Mr Mochrie: Good afternoon. My name is Dave Mochrie. I am, as you know, the president of Riverwatch. Riverwatch is an environmental group located in Cayuga, Ontario, just southwest of here. This is greater downtown metropolitan Cayuga, of course.
I am on the steering committee of the OEEC, the Ontario Energy Environment Caucus, which is working with the Ministry of Energy on a two-year contract. There was a presentation to be made subsequent to mine by another member of the OEEC steering committee, but he got tied up with Bill 143 and was unable to make it today. So I am here as a member of Riverwatch and as a member of the steering committee of the OEEC. I want to touch on a couple of points.
The Chair: OEEC, you are referring to the Ontario Energy Environment Caucus?
Mr Mochrie: Right. What I want to do is touch on a couple of topics very briefly with Bill 118. Others presenting on other days, in other areas of the province, will do it a lot more eloquently than I will on some of those areas. Then I will focus on one point which is of concern to a large segment of the population of Ontario, an area being covered again with Bill 143 right now. I will get to that.
First off, we feel that Hydro must be accountable. It has been stressed by past governments for the last 20 years that we have to be accountable to the people, and I think Bill 118 helps greatly in that regard.
The second point is with subsection 56a(3) of the act. It clarifies the intention of the utilities to look at overall energy efficiency. The old act looked at electrical efficiency. I think it is important that we look at overall energy efficiency, not just electrical.
My main concern I wanted to speak to you today about was with clause 56d(a) of the present act. This section is not included in Bill 118 but we believe it should be. This section deals with alternative fuels and, if I may, I will read it:
"The corporation, with the approval of the Lieutenant Governor in Council, may,
"(a) use any of its works to produce heat energy, by the use of any fuel, whether alone or in addition to or in lieu of the use of the works to produce power."
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The concern we have is with the words "any fuel." The problem with any fuel -- and we are coming up to this in the province now -- is in the area of garbage incineration. This is something we will get into later. Our concern is that because the way the law is right now and the ruling by the Supreme Court of Ontario in re Canadian Environmental Law Association and Pitura, it noted that waste disposal approvals are necessary only if the materials to be disposed of are "wastes." If not defined or designated as a "waste," the material will not require the plethora of approvals. But, given the definition of "waste" in part V of the Ontario Environmental Protection Act and the great number of wastes designated pursuant to the waste management regulation, in most instances if a material does not have a further beneficial use it will be found to be a "waste."
The concern now is that incinerator proponents are looking at municipal and industrial garbage as having a future use, the future use being energy. We feel they will be coming in and trying to make use of the Power Corporation Act to give credibility to their incinerator proposals.
My concern is with the proponents of "energy recovery," a process which, by definition, is "incineration." in the Guidance for Incinerator Design and Operation, December 1988, Jim Bradley, Minister. By this definition it is another term for incineration of municipal and industrial waste. Proponents of energy from waste will be arguing that municipal garbage or RDF, refuse-derived fuel, has a use so it is not a legitimate waste.
A little bit of my background: I have been involved with large incinerators and combustion instrumentation for approximately 20 years, mainly in the steel industry. I work day to day with huge furnaces and pollution control equipment. The last couple of years I have been working on a contract basis building large mills around the province. This is 20 years, I feel, that has given me the experience and the credibility to make some comments on incineration and the purported beauties of the pollution control equipment that goes along with it.
As well, I own a heating business that deals in the residential and light industrial markets. I have found in my conversations with many consultants working for proponents of garbage incinerators that I have a lot more experience than many of them working for the proponents trying to build these. That is a little of my background.
Last year Mrs Grier issued what many still believe is a ban on incinerators, but is really only a press release stating some of the very real reasons why waste incineration is a dangerous practice. I realize the government is under a lot of pressure from proponents, from Metro Toronto and from the Association of Municipalities of Ontario to drop this ban. There are advocates even within various ministries. The problem is that all their reasons revolve around easing Metro's garbage woes and not with the health of the people and the environment of Ontario.
Energy recovery proponents are trying to convince the government and the residents of Ontario that their proposals are not incinerators but recycling and energy-recovery facilities. RDF, which is refuse-derived fuels, as I have said, is the making of fuel pellets by combining municipal waste, plastic and wood chips.
Bill 143 is before committee and deals with changes to the EPA. An obvious omission that has been pointed out over and over again for the last few weeks at the committee hearings is that Bill 143 does not include a ban on incineration and has no controls or regulations dealing with the private sector. What it states is that the proponents do not have to consider garbage incineration in their proposals for environmental assessment. They do not have to consider it. It does not say, "Thou shalt not in the province of Ontario."
I could give you a long list of the health and environmental impacts of incineration, but you are all aware of those. It has been discussed to death for the last number of years. The problems with incineration and burning of these RDF pellets or used oil, which has the occupational health and safety people concerned, have been, and are being, spelled out again and again to the committee looking at Bill 143 right now. But on the energy side, energy recovery, EFW or whatever, is extremely inefficient. A good example is Sweden. They burn 50% of all their garbage. They produce, from EFW, 1% of their power. That is 1% of their power at a cost of large environmental and health problems. They now know, as does the federal minister's advisory committee on dioxins and the burning of waste, that municipal garbage is the major source of dioxins and furans into the ecosystem.
The Ontario select committee on energy estimated that energy from waste has a maximum potential of only 300 megawatts. If you combine this with Ontario Hydro's recent reduction in demand forecasts we can see that Ontario does not need incineration of waste as an alternative energy source. We have in Ontario many small mothballed hydraulic plants sitting idle whose cost to retrofit would be extremely less than the hundreds of millions of dollars for each EFW plant or energy recovery facility, however you want to label it. We also have the whole field of renewable energy, solar and wind power. What it boils down to basically is that incinerators are out of style, out of fashion; they are low-tech at best. The technology involved in incinerator pollution control equipment -- and I know this from having worked on them for 20-plus years -- has not evolved greatly in a long time. So the high-tech they talk about, the state of the art, is very low-tech at best.
For all these reasons we feel it is imperative to clarify clause 56d(a). Bill 118 must include a detailed definition of the types of fuel which would be allowable or included in conservation programs or qualify for funding programs. This list should not include municipal or industrial waste in any form. Thank you.
The Chair: Thank you, sir. Mr Jordan, then Mr Arnott.
Mr Jordan: Thank you very much for your interest and your presentation. Do you not see a future for energy from waste?
Mr Mochrie: Not at all.
Mr Jordan: Can we just pull the curtain on it and not --
Mr Mochrie: We can list very quickly the reasons: It is inefficient. At less than 25% efficient you are getting down below nukes even, in efficiency. The health hazards are horrendous, the cost to build them is horrendous, the payback period is long, and municipalities in the United States right now have pulled the plug on the EFW units because they just do not generate enough to pay the loans.
Mr Jordan: What about the one at Oswego, New York? Are you familiar with that one?
Mr Mochrie: No, unless it goes by a name other than I am familiar with.
Mr Jordan: No, it is not a large community. It is across from the city of Brockville, near Ogdensburg. That is beside the point, but they are --
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Mr Mochrie: What it boils down to with incinerators is that there is one final argument you cannot get around. When I bring these up to the consultants for Toronto's proposed incinerators, generally it ends the topic. It ends the discussion and they walk away. There is a law called the conservation of mass. You cannot destroy mass; you cannot destroy weight, if you want to call it that. If you put three tons of garbage into an incinerator, the rule of thumb -- a friend of mine at CELA would scream if she heard me say that. She told me that "rule of thumb" comes from an old law that it was the size of a stick a man could beat his wife with; it could be no bigger than his thumb. I will get choked if she finds out I said that.
It is very basic to all garbage incinerators, even brand-new; I can tell you of one that is only a couple of years old. Basically one third of what you put in goes out in ash -- bottom ash and fly ash. If you put three tons into an incinerator, you will get one ton come out in bottom ash and fly ash. Fly ash is what is collected in pollution control equipment. Pollution control equipment can collect solid particulates very well. That is not the problem. It is not chunks of garbage coming out the stack that you breathe in. If they are big enough they may hurt you when they hit you, but it is not what you are breathing in. The problem is that two thirds of any amount of garbage you put in an incinerator comes out in the form of gas vapour.
Mr Jordan: Can that be controlled? That is my question.
Mr Mochrie: It cannot. There are no incinerators that retrieve any more than 35%, a percentage in the high thirties, of the garbage they put in. So if you put in three tons, you take one ton of toxic ash out and you have two tons that have gone up the stack. That ends the discussion. It is real. It is true.
Mr Jordan: I do not just live that way, that this ends the discussion, because this is January 30, 1992, and God help what we may see five years from now even, or 25 years. I am just saying, is it not an area where some money could be well spent in research to find if in fact it can be controlled at the stack level?
Mr Mochrie: Industries such as the steel industry, which I am familiar with, are the big innovators in pollution control equipment. They have been pushed, and pushed very hard, by our provincial government and the federal government on their emissions. As I say, they are some of the big innovators in large-scale pollution control equipment. I am not talking about catalytic converters that go on the end of your car. We are talking big volume, big stuff. They have gone as far as they are going to go for a long time.
The movement around the world right now is to shut incinerators down. We do not want to be starting them up here and learn the lessons -- we already have five in Ontario going now. They just do not work. They are inefficient. They interrupt your waste reduction and recycling programs. They are the death knell for recycling programs in a lot of communities, because you are committed to introducing this amount of garbage into an incinerator.
Mr Jordan: But are we not trucking some garbage to Detroit now, in that area?
Mr Mochrie: Some communities are.
Mr Jordan: To an incinerator.
Mr Mochrie: But as I say, that does not justify using incinerators. What that points out is the lack of proper waste management programs in some areas of Ontario.
Mr Jordan: I read an article where they were still doing considerable study on emissions from waste. It was in the chemistry area of it. It was not that they were going to stop it but that they were going to, in some way, neutralize it, that it would not have the effect it does at the present time.
Mr Mochrie: The technology does not exist. We would like to have colonies on the moon and orbiting space stations for millions of people above the planet, but --
Mr Jordan: Maybe when they come back today they will tell us.
Mr Mochrie: They made it back. But it does not exist right now.
Mr Arnott: Thank you for your presentation. I am pleased you brought up the issue of waste management in this discussion with Bill 118, because one of the issues that has not been raised enough, I think, as one of the drawbacks of Bill 118 is that if it is passed as is and we spend great quantities of money on demand management schemes, many people are going to end up taking out their perfectly good, working baseboard heating units as well as electric furnaces and, if we get into, as some have suggested, subsidizing the purchase of high-efficiency appliances, all those things that are in perfect working order probably are going to end up in the waste stream. I asked that of a couple of presenters and one fellow said, "Well, we'll recycle them." We do not have recycling programs for old stoves.
Mr Mochrie: They are trying to develop facilities like the Waste Wise facility that keeps coming up. Good friends of mine are the ones who put that together.
Mr Arnott: Is that going to be ready in the next year when these incentives are in place?
Mr Mochrie: Do we compound errors in the past because we are worried about a few baseboard heaters and a few pieces of equipment this year? Do we keep cutting our nose off --
Mr Arnott: All I am saying is that is a drawback of this legislation that people are not considering.
Mr Mochrie: Again, you are propagating the problem. What is the future cost and the damage of these nuke stations that nobody knows how to mothball? The British are looking at trying to mothball one very shortly. They are guesstimating $30 billion. That would buy a lot of baseboard heaters. They still do not know how to do it. We will have some coming up in the future and nobody knows how to do it.
Mr Jordan: It is not the same system.
Mr Mochrie: I am saying that we are nitpicking, worrying about a few baseboard heaters and a few electrical furnaces. I do not mean to belittle --
Mr Arnott: I know, but in my riding waste management is a big issue.
Mr Mochrie: I know it is.
Mr Arnott: It is something people feel is important.
Mr Mochrie: But as I say, what is the cost of these megastations in comparison? Look at Darlington, $13.5 billion. That is a lot of baseboards.
Mr Jordan: Half of it by delays.
Mr Arnott: Half of it by delays and half of it because of enhanced safety measures that have been put into it, and delays because of political interference, I understand.
Mr Mochrie: Equipment is going to fall apart just by normal attrition, so if people are encouraged when equipment fails to switch to better forms -- natural gas where it is usable, where it available. There is less carbon released into the atmosphere, burning oil even, in each household than in generating inefficient-
Mr Jordan: What effect will that have on the global warming?
Mr Mochrie: The problem right now is that the effect is worse because we are producing power out of, say, oil-driven stations. By the end of it we have a 25% efficient station pumping huge amounts of carbon and greenhouse gases into the air when home oil furnaces are 75% to 85% efficient.
Mr Jordan: I only know of one oil-fired generating station in Ontario.
Mr Mochrie: I cannot give you a list of how many.
Mr Jordan: The question comes up, is it easier to control the emissions from burning oil in one large stack and how do you control the emissions from 650,000 homes? What is the relationship of the individual quantities to the total?
Mr Mochrie: If you have a million furnaces burning at 75% to 80% efficiency versus heating those houses and a single source that is operating at about 25% efficiency, then your overall efficiency is 25% versus 75% to 80%. It speaks for itself, as far as I am concerned.
Mr Jordan: I think there is a lot of work to do on it.
The Chair: We are going to move on to the next caucus. I should not do this, which is why I will, but I think that people who had those electric baseboard heaters would simply leave them there after they have installed their forced-air system. In the event that Mr Jordan is right, you have a dual heating system and heck, why would you want to throw them out, in any event?
I have to tell you that down at the Welland dump -- I take the pickup truck out there occasionally on a Saturday morning -- Ben Lacroix has the contract and I have seen the occasional electric stove come in there. The people down at the Welland dump are very careful. That stove is picked over, isolated and stripped down. The copper is separated. The other metal parts are separated. I do not know about other parts of the province, but you can come down to the Welland dump with me any Saturday morning and watch a recycling program we are exceptionally proud of. In any event, Mr Klopp wanted to ask a question, but Ben Lacroix deserves a lot of the credit for that. He is as hardworking, effective and committed a dump operator as you are ever going to find. I enjoy his friendship and I respect his skills. Go ahead, Mr Klopp.
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Mr Klopp: You had some reasons for wanting to have section 56b in this bill. I would love to discuss some of those reasons with you, but that is another issue, about the burning and all that good stuff. One of the things we are changing this time in the bill is allowing Hydro to not just look at electricity. It has taken 60 or 70 years to get it changed; if this bill passes, it will be changed. I think there are enough other safety factors -- the Environment minister probably overrides stuff -- for us not to put in the bill, that you cannot just have any form, that you have to have them all written down. God knows, say we forget to write solar down as one of those energy sources. God, you never know. Then we might tie ourselves so that somewhere down the road some government has to come in and try to force exactly what Bill 118 had to do to get Hydro and the government to show that they could also work on other sources than electricity.
Your argument is one that I would have discussion with as a rural Ontario person because it seems my farm is where everybody wants to dump their stuff. I know we are working on those other issues, but for us to put in, "Here are all the five areas they can have and nothing else," in 10 or 15 years it might be very hard for somebody to -- other groups would have to fight like hell and take 30 years for whatever government to wake up and force Ontario Hydro to change 56b and add, I do not know what, divots. I think there is enough. I disagree with worrying about that now because I think the Ministry of the Environment, for better or worse, probably overrides those things that you actually talked about.
Mr Mochrie: First off, I disagree.
Mr Klopp: Sure. Otherwise you would not have brought it up.
Mr Mochrie: Yes, I would not be here. As I mentioned, Bill 143 is before a committee right now, as we speak. As it stands, the ban on garbage incineration has no teeth. It is basically a decision by a caucus, I guess, that this is not a desirable thing in the province. It does not exist as a policy statement. Policy statements themselves have no teeth. We can see that from the wetlands policy statement. It means nothing unless it is law, even a policy statement. This ban on incineration is being argued by members of the Ministry of Energy. A gentleman named Barry Beale with the Ministry of Energy writes articles in the AMO extolling the virtues of incineration. There are members of the Ministry of the Environment staff -- not the minister's staff, but the staff of the ministry -- who argue in favour of garbage incineration because it is an easy out for Toronto's garbage woes.
I am not saying that we list every fuel possibly known in this new bill. What I am saying is that we just eliminate municipal and industrial garbage. Take the one fuel, municipal and industrial garbage, and eliminate that as a fuel. That does not eliminate wind, solar, river or anything else.
Mr Klopp: What I understand of Bill 143 -- when it was in the House in discussion I looked at it a little bit -- is that it does state very clearly that energy from waste is in that bill but it is not up for discussion for the GTA. It is in the bill; it is not a policy statement. That is why people are coming up and arguing that they do not want it in there. They want it deleted.
Mr Mochrie: What it states in Bill 143 is that proponents of waste management systems, when they fill out an environmental assessment document, have to list, according to the Environmental Assessment Act, all the alternatives to their proposal for the minister to look at. They have to list all the alternatives. One of the alternatives Bill 143 has is that they no longer have to list that as one of the alternatives. You see the difference. It does not say that incineration is not allowed in the province. What it says is that proponents no longer have to list that on their EA applications. There is a very big difference between the two.
Mr Klopp: Yes, you are right. Bill 143, though, is for the Toronto area, the GTA. It is not for the province.
Mr Mochrie: The minister also says that the waste of Toronto will be handled by anybody who has a proper waste-handling licence.
Mr Klopp: In the GTA.
Mr Mochrie: That has as much clout as the ban on incineration. It is not law. All it takes is a change of government. It takes a change in ministers or enough pressure on the current government by the various parties I listed to change that right now. I say rural Ontario is being held hostage to these big dump proposals. We are in the Brant-Haldimand area, which is currently having a by-election. This is my experience with one incinerator proposal. In meetings with the candidates from the various parties with one proponent, the proponent trundled out this little bag of RDF pellets, which is refuse-derived fuel, a mixture of garbage, plastic and wood chips and said: "This is what we're going to do. We're going to recycle; we're not going to incinerate. We have these RDF pellets. We'll burn those and get rid of them, because this is cogeneration." Those are good words in Ontario right now: cogeneration and recycling. Incineration is a dirty word right now so nobody is even talking about it. A year ago when Mrs Grier's press release on banning incineration came out, this proponent publicly stated in the Hamilton Spectator -- this is for a 4,000-tonne-a-day incinerator -- that it does not affect him because he is an EFW plant, energy from waste.
There are proponents in this province who are lobbying to be classed as recycling plants and they are going to try to be looked at as EFW recycling plants. This is the fourth R, recovery of energy. So I can give you one proponent definitely who considers that this is the route to getting an incinerator established in the province. The one I am talking about is the Enviromax proposal in my area, Haldimand, like I say, for a 4,000-tonne-a-day facility. Proponents such as Ogden Martin are lobbying like crazy right now because they want to build incinerators. The problem I have is that we are running into politicians such as the Metropolitan Toronto council, which just passed a resolution to lobby the minister to lift the ban on incineration and transporting waste between regions, and at the end of the resolution it states that their technical information was obtained by Ogden Martin, which is a huge incinerator-building company internationally.
If that is not a conflict of interest, I do not know what is. We have Metro politicians who are looking to an incinerator company for guidance on how well its incinerator is going to work. What I am saying is that the idea with these proponents right now, and with the one in particular that I have been dealing with for a considerable amount of time, is that this is the route they are going to gain respectability: through this recycling, with a little bit of energy recovery. The whole idea is to build an incinerator. This is a very real attitude with the proponents in the province right now.
Mr Waters: I just want to go back to ask a question about how they would get rid of these terrible baseboard heaters and furnaces. If you did not have the option that Mr Kormos talked about, I would assume they would use the normal thing. When you go to municipal waste sites you have a place to put your metal products, and those metal products in most cases would then go either north of Toronto or to Hamilton, where they would be ground up into nice little pieces, separated and sent back for remelt. Do you not assume that is what would happen with any of those?
Mr Mochrie: I would assume, with electrical appliances like that, that they would be done into scrap and recycled through the steel industries.
Mr Waters: They separate the copper and all that nowadays with the modern plants, so I would assume that would happen. There is another little point I wanted to get on to. You talked about incineration. I want to talk about a different type. I represent Muskoka. It starts in my riding and goes east and west and north. We have incinerators. They burn sawdust. Nothing happens. They do not produce anything out of it; they just burn sawdust. Do you not think that if we are going to be doing that we should be recapturing some of that and using it as a form of fuel in some way, shape or form? I would like your opinion on that.
Mr Mochrie: There are a couple of points there. With people who are burning a carbon-based product like wood chips, you have all sorts of avenues. You can make fuel for industries such as hydro. They have used them in the steel industry; they have used them in various industries. If you are talking about wood chips, there is a hell of a lot of difference between wood chips and municipal garbage. Municipal garbage has a combination of everything known to man thrown in there: toxic volatile chemicals, plastics, plastics loaded with a myriad of chemicals. The chlorine content of plastics --
Mr Waters: Yes, but we are talking about straight wood chips that are just being burned for no advantage to anyone else. They are just being burned for the sake of getting rid of them.
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Mr Mochrie: I thought you were leading up to the pollution problems; sorry.
Mr Waters: No, I just want to know if you feel we should be starting to look at this as one of the alternative forms of fuel in this province.
Mr Mochrie: Somebody burning wood chips just for the sake of getting rid of them is wasting a valuable source of energy. All it is going to do is to pile up compost, cause fire hazards, whatever. If it is a byproduct, this is where we as a province should be getting into encouraging -- the Ministry of Energy right now, through our experience with the Ontario Energy Corp, is trying to encourage cogeneration, which in that case would be an ideal situation, cogeneration using that, creating heat, using the heat to drive a small turbine to create its own power for around the plant, to run its machines. It saves power from the grid, it saves costs and it is a win-win situation encouraging that. My experience right now is that the Ministry of Energy says it is trying to encourage more cogeneration, which a lot of industries have been doing right now.
Mr Wood: The question has really been asked, but for the last 75 or 80 years, I guess, the residue in northern Ontario has been used to generate steam electricity in paper-mills. The trend now seems to be to use this residue -- I am talking about shavings, bark and sawdust -- with a small mixture of natural gas to produce electricity and steam to heat dry kilns and paper-mills and one thing and another. You are saying this is a good way to go.
Mr Mochrie: The wood chips are --
Mr Wood: We make paper with wood chips in northern Ontario.
Mr Mochrie: Yes. I just finished building a paper plant north of Toronto. The wood chips are there anyway, so burning those and using those -- it is much better fuel than burning garbage; it is there anyway. If it is used, then it decreases the load on the grid, which is good.
Mr Wood: Thank you very much. There are two running in my riding right now and it looks like there will be a couple more in the next 10 years or so.
Mr McGuinty: I enjoyed your presentation. I want to put something to you that has confused me a little bit. We have heard from a number of people who were advancing environmental causes and it had been my understanding that the best thing we could possibly do, the biggest leap we could take, is to go from using electricity to using our renewables and not our non-renewables, which seems to me to be only an intermediate step. It only puts us halfway to where we want to get ultimately.
But there is one exception. We heard from a gentleman yesterday who brought that to my attention. I thought he made a very good point. Why is it that this has happened? Do you know why?
Mr Mochrie: I am not quite sure if I understand your question.
Mr McGuinty: Why are environmentalists not coming forward and saying, "No, we're only going halfway; what we should be doing is going all the way to renewables"?
Mr Mochrie: One, I think because a lot of environmentalists are realistic and realize that Ontario cannot turn around next week and have all of us running on solar power, wind power, completely renewable sources. It is a huge prospect. It would be lovely if our entire province ran on a renewable power supply, but it is impossible to do. It is advocating more programs to encourage more people. The lightbulb program is great. The savings there alone are estimated -- with the cost of generating power right now, any conservation program that we do to cut down our total consumption is good, but I do not think it is realistic. I talk to people all the time about renewables. We are looking at building a school for an environmental project that is on the go out of completely recycled material, renewable energy sources. This is one project. It is not possible to get the whole province over. It is best to go one step at a time and do what we can.
Mr McGuinty: Okay. You make a good point, but my understanding is that there are over one million homes now in the States that are heated with solar. I know there are different climate conditions that are obtained there, but what if someone came to Hydro and said, "I'm going to switch and I am going to switch to solar; I can do it," and someone else came and said, "I'm going to switch to natural gas; I can do that"? Should they both be awarded the same grant or subsidy?
Mr Mochrie: For one thing, I do not believe we should be funding everybody's whim in the province. If it is economically feasible for me to switch to solar power -- believe me, living in this neck of the woods it is not. This is not a good area for it. I do not believe we should be funding an individual who is going to get a payback over a certain period of time. That is my own personal view. I do not expect the government personally to come along and pay for me to go to another form of energy. I think the problem right now is to go to renewable sources. The payback period is too long because the costs of the equipment are too high. I cannot give you a learned, very good answer on that because it is not my field.
Mr McGuinty: Back to the principle then. Should we simply be engaging in some kind of advertising campaign to educate people and to attempt to move them off electric heating?
Mr Mochrie: I think so. You can see the effect of Hydro's advertising campaign over the last 40 years. We still have a great percentage of people who are putting in electric heat in areas where natural gas is available. Electric heat for the home owner is two, two and a half times more expensive, but people are not aware of the long-term total cost of heating electrically, so it has worked very well for Ontario Hydro for the last 40 or 50 years. I think there would be great payoffs in an advertising campaign to educate people, especially new home buyers, on what they should be looking for.
Mr McGuinty: Okay. Just so that I am clear on this, then, are you saying we should engage in and undertake an extensive advertising program but we should not, in addition to that, go through with loans or grants?
Mr Mochrie: The money involved -- costs, savings for a program like that -- I have no information on. Like I said, I cannot give you an intelligent answer on that because it is not an area I have researched and it is not an area that I am involved in.
Mr McGuinty: Fair enough. Thank you.
The Chair: Mr Mochrie, we thank you very much. We have taken more of your time than we might have anticipated.
Mr Mochrie: It is okay.
The Chair: Obviously you have generated some interest in your proposition. We thank you very much for spending time to be with us this afternoon.
That is the last of the presentations for today. We appreciate the hospitality the city of St Catharines has shown us, the transportation capital of Ontario, as Mayor McCaffery would call it, as it will be, I presume. I appreciate the committee's cooperation and the interest of all the people who came forward here in the St Catharines and Niagara area.
The staff have been particularly helpful to us, especially Ms Manikel, the clerk of the committee, who has juggled transportation, dealt with presenters and who took care of us this week and last week in Toronto and the week before in northern Ontario. The whole committee expresses its special gratitude to Ms Manikel for her proficiency and skill, compassion and caring for the folks who have been trying to participate in this committee. We thank her and we commend her.
There being no other business, we are adjourned until 2 pm, February 17, 1992, at Queen's Park in downtown Toronto.
The committee adjourned at 1640.