Chair /
Président
Mr John Gerretsen (Kingston and the Islands / Kingston et les
îles L)
Vice-Chair / Vice-Président
Mr John C. Cleary (Stormont-Dundas-Charlottenburgh L)
Mr John C. Cleary (Stormont-Dundas-Charlottenburgh L)
Mr John Gerretsen (Kingston and the Islands / Kingston et les
îles L)
Mr John Hastings (Etobicoke North / -Nord PC)
Ms Shelley Martel (Nickel Belt ND)
Mr Bart Maves (Niagara Falls PC)
Mrs Julia Munro (York North / -Nord PC)
Ms Marilyn Mushinski (Scarborough Centre / -Centre PC)
Mr Richard Patten (Ottawa Centre / -Centre L)
Substitutions / Membres remplaçants
Mrs Leona Dombrowsky (Hastings-Frontenac-Lennox and Addington
L)
Mr Dave Levac (Brant L)
Mr Gerry Martiniuk (Cambridge PC)
Also taking part / Autres participants et
participantes
Mr Erik Peters, Provincial Auditor
Clerk / Greffière
Ms Tonia Grannum
Staff / Personnel
Mr Ray McLellan, research officer,
Research and Information Services
The committee met at 1004 in committee room
1.
COMMITTEE BUSINESS
The Chair (Mr John
Gerretsen): I'd like to call the meeting to order,
please. First of all, I'd like to compliment the staff for
providing us with all the necessary background information as
quickly as they did. We appreciate the speed with which that was
done.
We're currently dealing with
the motion that was brought forward by Ms Martel, and the auditor
wanted to make a few comments with respect to some of the
questions that were raised last week.
Mr Erik
Peters: There was a whole raft of questions, as you will
remember, raised in the meeting and you probably have quite a
package in front of you, which resulted from those questions that
were given.
Mr Maves asked about the
frequency of special assignments requested by the committee. I
had said at that stage that I could not give an exact frequency
but that normally we have averaged about one or two a year. In
fact my office has handled a total of seven special assignments
from this committee since I've become the Provincial Auditor.
The Chair:
That's about one per year, then.
Mr Peters:
Yes, on average. One year it was three and then there were other
years where we had none. You have the reports and I will point
out to you some of the more relevant ones in the process.
Mr Maves also asked us to
provide the committee at some point in time with examples of past
assignments, and we have prepared a listing of the special
assignments performed by the office for this committee pursuant
to section 17 of the Audit Act covering the period from 1985 to
1999. I believe the clerk has distributed those to you.
Mr Maves also asked what
would happen legally if the committee assigned a certain number
of assignments that competed with assignments my office wanted to
do and had selected actually, based on risk assessment, to do. I
responded that the act says such special assignments shall not
take precedence. If I may elaborate on that for just a moment,
resourcing is, as I mentioned to you, always a consideration for
my office. Up to now we have been able to respond to the
committee's requests without causing disruption of our audit
plan.
What we foresee with this
assignment is that we would like to acquire some expert
assistance in carrying out the work required by this motion. In
this regard, relevant is section 23 of the Audit Act, which I
would like to read into the record:
"Subject to the approval of
the board"-of internal economy-"the auditor from time to time may
appoint one or more persons having technical or special knowledge
of any kind to assist the auditor for a limited period of time or
in respect of a particular matter and the money required for the
purposes of this section shall be charged to and paid out of the
consolidated revenue fund."
In other words, the point is
that this money does not increase my budget. I go forward with
the estimate to the Board of Internal Economy. They give me
money. For this money I have to get special approval, but when it
comes through it's charged, if you will, below the line as a
statutory item against the consolidated revenue fund. It's a
small technical difference, but I have to point it out to you.
The only other area incidentally that is in that section is my
salary. So it would be a non-budgetary transaction.
However, if the board should
not approve the extra resources required for expert assistance,
then I would simply advise the committee of the board's decision
and we would attempt to carry out the assignment as current
resources permit. That would be my reaction to your motion.
There was also some question
that dealt with whether my office had ever done an audit of a
government contract that was not yet signed or had not yet been
completed and was in the process of being worked on. In this
regard, we identified to the committee the following three
special assignments: (1) the financing arrangement for the
construction of the domed stadium; (2) the Wood Gundy evaluation
of the Urban Transportation Development Corp Ltd; and (3) the
audit of the Workers' Compensation Board's new headquarters. In
some of these cases, the contracts were not yet signed. I believe
that in the domed stadium the RFPs were about to go out, the
requests for proposal.
Interjection: They had gone
out.
Mr Peters:
They had gone out at that stage, but the contracts had not been
let. Wood Gundy-the valuation was there. In the audit of the
Workers' Compensation Board's new headquarters, the contract had
been signed, but the work had barely commenced at that stage.
Furthermore, we had a correction from Ms Mushinski
concerning the domed stadium and the UTDC's special reports. We
have sent you, in response to that question, the deliberations
that were made by the committee at that time, the summaries of
the issues that the committee was facing at that particular time
and the process that actually led up to this special
assignment.
1010
With respect to the mandate
of the Ontario Energy Board in connection with the operations of
the OPG and the proposed leasing arrangement that is subject to
the motion before the committee, from our reading of the Ontario
Energy Board Act, the OEB's interest is strictly from the
licensing aspect. Specifically, section 57(c) of the OEB act
provides as follows:
"No person shall, unless
licensed to under this part,
"(c) generate under this
part, electricity or provide ancillary services for sale through
the IMO"-which is another part of the broken-up
Hydro-"administered markets or directly to another person."
A licence is required for
them to generate the electricity.
In discussion with the
secretary of the Ontario Energy Board, my office was informed
that on September 18, 2000, this prospective lessee submitted an
application to the OEB for issuance of a licence that would
authorize it to generate electricity. So an application to
receive a licence was received on September 18.
This concludes my opening
remarks.
The Chair:
Thank you.
Mr Bart Maves
(Niagara Falls): Can you expand on that? What does that
mean? They can't operate a facility until they have a
licence?
Mr Peters:
That's right; exactly what you're saying, they cannot operate the
facility unless they are licensed to do so by the OEB.
Mr Maves: So
unless they have a licence, they also can't close a deal to-
Mr Peters:
I'm not sure how that was written into the contract, but I would
expect in a normal contract that provision is made for the
obtaining of a licence.
The Chair:
Comments by anyone?
Mr Ray
McLellan: Further to Mr Peters's points on the
licensing, we had talked about the licensing under the Canadian
Nuclear Safety Commission. Currently, there's a licence for the
Bruce. British Energy has requested and submitted an application
July 31 for a licence for operating under its authority. It will
take about four to five months for that review to be complete, so
by December 2000 the Canadian Nuclear Safety Commission should
issue its licence, and that licence would cover safeguards,
environmental protections, design and operational components.
Currently, there is obviously a licence there for the operation
of a facility under the province, but this new licence will be
issued to British Energy by December of this year.
It's what they refer to as
class 1 operations, and I've got the documentation here on
exactly what a class 1 licence would cover. As I said, it's
preparation of the site, licence to construct, to operate, to
decommission, to abandon, and that covers the application. Then
there's a certification of persons and then two, three or four
sections dealing with that-if anybody's interested in exactly
what that licence would look like.
Mr Maves: Mr
Peters talked about his office already having looked at the
prospective of this assignment and decided they would probably
need to hire some outside expertise. Last week you said that if
you got this assignment, the first step would be to contact-I
think it was Ernst and Young who you said were OPG's
auditors.
Mr Peters:
Yes.
Mr Maves:
You would request work they had done on this project and review
that, and if you thought you needed to do further investigation
upon reviewing that, then you would do so. Would you hire a
person prior to reviewing what you received from Ernst and Young
or do you think you'd make that decision after reviewing what you
received from Ernst and Young?
Mr Peters:
No, I would do that after, because what I outlined to you are the
specific steps that are required that my office takes in
accordance with the Audit Act.
Section 9 prescribes that I
must first contact the auditors of the organization to assess
what information they have so that we don't end up with a
duplication of any work. It's only when we then determine that
further work has to be done that we would require access
ourselves to the OPG information, and once we reach that stage, I
would need probably expert advice, particularly in the area that
I pointed out to you, which is to assess the decommissioning
liability that was referred to and the reasoning.
Mr Maves: In
line with that question, I think I am prepared to go along with
the motion, as I said last week, with one concern, that being the
exception of timing. But in that motion, it seemed to me very
specific that the request was for you to look for value for money
achieved by that leasing agreement.
Throughout the day we began
to talk about a whole variety of issues, and I think the scope
that Ms Martel started to add to the motion in her comments makes
me a little leery. If you already, in looking at the prospect of
doing this audit, taking on this assignment, have thought you may
need extra staff, that means you've already thought about what
scope this audit would take on. Could you tell the committee what
scope you think this assignment would actually take on? and how
far-reaching do you think this motion asks you to go?
Mr Peters:
What I've reacted to were actually the five principal reasons
advanced by Ms Martel for why she thought it would be a good idea
for us to conduct the audit. When I looked at those reasons, I
determined that one of them was certainly to determine whether
the overall liability for decommissioning, which has been stated
as $15 billion, was properly considered in this particular
arrangement because of the numbers that were in there. I went
strictly by that reason that was provided. These reasons that
were provided and read into the record would certainly become
part of the criteria we would use against which to judge the audit. We would then
proceed to develop our own, of course, in this.
However, your question, if I
may expand for just a moment: in the motion itself there's the
word used to determine if the deal "guarantees" value for money.
That is a fairly tough order. In order to be practical, I would
possibly suggest to determine if the deal "provides" value for
money, which would be a better wording, because if something
guarantees to do something, it develops a totally different
mindset from whether it just provides. I would think, to answer
your question as to scope, that we would prefer the word
"provide" in the circumstance, but I believe it is sufficiently
narrow inasmuch as it speaks strictly to the leasing arrangement.
I think that pretty well circumscribes the transaction.
Mr Maves: I
think, Chair, before we take any vote on this, I'd like to be
comfortable on exactly what the audit will entail. I don't want
to get into-
The Chair:
We're having copies of the motion made, because I know there was
an awful lot of discussion last week and maybe people have sort
of lost sight of what the actual motion is. I guess they're
coming. The motion is only a three or four pages.
Mr Maves: To
me the motion sounds fairly straightforward and somewhat narrow.
We should go and look at the leasing agreement between OPG and
the Bruce Power partnership. But as the day wore on you talked
about trying to determine the decommissioning costs and a whole
bunch of other issues that would roll into this, and that raised
a red flag with me that this could become-I want to know the
scope of the audit. I want to know that it's going to be narrow
and capped to that leasing arrangement. I don't want you guys to
be doing international research on decommissioning costs and
getting all kinds of opinions about the value of this asset and
the value of that asset, and making judgments about different
ownership models and so on and so forth. This is what I got
worried about as the conversation wore on last week.
1020
Mr Peters:
Mr Chair, may I respond to this?
The Chair:
Sure, please.
Mr Peters:
There is one practice that has been done in the past that you may
wish to discuss. I forget in which year, but there was a motion
before this committee that we should take a look at how the
Toronto Area Transportation Operating Authority was dealing with
budget cuts, and whether they were properly instituted and what
the impact was on the schedule at that time. As the discussion
went on and the scope was broadened, the committee as such made a
decision actually to hear from TATOA directly, to have just one
hearing from them, to have an idea as to what the lay of the land
was, and to raise some of the questions-which also helped my
office to more clearly frame the terms of reference for the
particular audit. So that would also be an option. If you wanted
to narrow it or do it more, now that the province is the owner
and shareholder of OPG, it would certainly be within the purview
to ask them a few questions before we determine the full extent
of the audit. There's precedent; that's all I'm putting on the
table.
The Chair:
Mr Hastings and then Ms Martel.
Mr John Hastings
(Etobicoke North): Mr Peters, my question, like Mr
Maves's, relates to the scope of this scrutiny. In your
estimation, would it include a re-examination of the assumptions
of value that Goldman Sachs, CIBC World Markets and the Salomon
brothers placed on it when they made their examination of this
situation? Do you see that in the original assumptions included
in the leasing agreement? If you don't, it seems to me they're
inextricably interwoven to a great extent and that you'd have to
include those assumptions in the value those three firms placed
on this transaction to start with.
Mr Peters:
Very much so. You're right on; they would. We would have to
examine the assumptions, but they would also form the basis for
formulating the criteria for value for money on the deal, because
that's really where the decision was made.
Mr Hastings:
Wouldn't Ernst and Young, or whatever their new name is, have
examined this proposition already, if you had these initial
conversations with them, if it gets to that point?
Mr Peters: I
already have had a conversation, and that was just as a matter of
courtesy, to advise them that the motion was before the
committee, that I was not yet sure of the outcome-but I had to
alert them that if the motion is passed, I would have to approach
them for any material they have under section 9 of the Audit Act.
My understanding at this point, although that was just a verbal
conversation, is they examined this only to the extent they
considered it necessary to formulate an opinion on the fairness
of the financial statements, that they did not do any extra work
on this particular contract.
Mr Hastings:
That would mean, then, that you would have to get access to the
financial considerations, all the documents from those three
brokerages, would it not?
Mr Peters:
Not the supporting documents necessarily, but the reports they
issued and the conclusions they reached. Certainly the reports
should be explicit enough as to the assumptions they used. So our
initial approach would be to the documentation they provided to
OPG. We may in fact have to have a meeting with some of the
people who prepared it, but I doubt very much whether we could
actually use their working papers or whether they would be
willing to make them available to us.
Ms Shelley Martel
(Nickel Belt): My response is to Mr Maves. I just wanted
to try and be helpful with respect to the issue around
decommissioning, because it seems to be a flash point. If you
look at the media reports that came after the deal was announced,
it's clear that the money is to be used in a couple of different
ways, which led to my concern about decommissioning. The money
from the deal will go in part to a fund that was set up to cover
the eventual costs of decommissioning. The estimate of that for
the Bruce has been estimated by the Ministry of Energy at $3
billion, which I referenced last week. It also says that OPG has
been committed to paying $400 million a year into this fund for
decommissioning all of its
sites, and the revenue from the Bruce facility's lease will now
cover part of the payment.
The reason I have referenced
decommissioning is to know whether or not, from the lease, which
is the lease of a public asset, enough money will be coming for
OPG to meet its commitments. It's not clear to me whether or not
enough is there. The second problem is, if the decommissioning
has been underestimated, then we really will have a serious
problem later on if not enough revenue is coming from the lease
to go into the pot to pay for that eventual cost.
The second piece to
this-because we talked about stranded debt last week-is that the
references to the deal also make clear that, "The money from
British Energy will also be used to help OPG cover the cost of
disposing of spent fuels, other waste from the nuclear process
and to paying down the $7.8 billion in so-called stranded debt."
I was trying to reference where some of this money, some of this
revenue from the lease, is supposed to go. Clearly there is a
concern about the stranded debt: how much will be coming; how
much will be used to pay? And for me there is clearly a concern
about the decommissioning, because we know some of the revenue
from this deal is supposed to pay for those costs. My concern is,
frankly, is it enough? What was the estimate based on and is the
estimate it was based on realistic to cover the eventual cost
too? That's why I included it last week in that list of
concerns.
Mrs Julia Munro (York
North): I want to get back to the conversation we were
having a moment ago about the value-for-money audit and ask the
auditor, in layman's terms, how that differs from a regular
audit. What are we asking for when we look at the motion here and
it talks about value for money? I just wondered what, in layman's
terms, is the difference.
1030
Mr Peters:
I'll try to answer that as concisely as I can. A regular
statutory audit such as the one conducted by Ernst and Young is
an audit examination designed to express an opinion on the
fairness of the financial statements of OPG overall. In that
connection, they would look at this transaction only from the
perspective of whether the resulting monetary amounts are fairly
reflected in the accounts of OPG, but they would not necessarily
get into the matter as to whether the deal provided value for
money to the organization. In fairness, if the deal was a
horrendous profit-maker, they would assure that the profit was
fairly recorded. If it made a loss, they would assure that the
loss was fairly recorded. But they would not go deeper to assess
whether or not a profit should have been made or when a loss
actually existed. As long as the transaction is fairly reflected
in the accounts, that's where the responsibility of an attest
audit stops.
The value-for-money audit
focuses on whether in the transaction itself there was due regard
for economy, efficiency and operational effectiveness. That would
be beyond the scope of a statutory attest audit. In my act, the
attest audit that I do, for example, on the public accounts is
covered in one section, and my value-for-money audit is covered
by another part of the same section. And that actually uses these
words that I just gave you. It was their "due regard for economy,
efficiency and effectiveness."
Mrs Munro:
Thank you. That's really helpful in terms of understanding what
the difference is.
I notice that in the material
you handed out today, that has not been your practice in response
to the history of these requests from the committee. I may have
misread these. Am I to assume that when you have been asked by
the committee to look at a specific transaction such as those
listed here, you have not been asked in fact to do a
value-for-money audit?
Mr Peters:
Let me answer that with respect to the one I'm most familiar
with: the audit of the construction contract for the headquarters
of the Workers' Compensation Board. That was very specifically
aimed at value for money. Actually, the idea was, is the WCB
getting a good deal on the contract they have granted? So that
was very specifically aimed at value for money. In fact, I would
think most assignments from this committee have had a
value-for-money aspect, because I bring that aspect to virtually
all the work we are doing, which makes us somewhat different from
the statutory private sector auditors that audit these
organizations.
Mrs Munro: I
just thought it's really important for us to understand (a) what
the difference is, and (b) where that had been done previously.
So the one in 1986, is that what we are-
Mr Peters:
The one in 1993 or 1994, the Workers' Compensation Board.
Mrs Munro:
Oh, the building. Right.
Mr Peters:
The building. It may have been changed afterwards but the
original wording was whether a construction cost of X dollars per
square foot was reasonable. It was that detailed originally. Then
I believe the committee reworked the motion somewhat, because it
ended up with broader questions also: the authority to go ahead,
the formulation of subsidiaries at the particular time, whether
certain sections of the act were properly applied etc. It took a
much broader scope at the time.
Mrs Munro:
Much has been said about the issue of decommissioning. Last week,
when you responded to the whole issue of decommissioning, you
made reference to an American circumstance where they had in fact
declined to give an opinion because of the complexity or the
difficulty or whatever of being able to give a comment on that.
What are the circumstances that are different here that would
allow you to do something like that, that didn't happen in the
American circumstance?
Mr Peters:
Thank you for that question. Firstly, let me clarify that the
decommissioning costs of facilities in the United States-I took a
look at a draft of Hansard. There's a small error. It was just
one of the many reasons why they declined. It was just one item
where they were in trouble.
They simply had not recorded
the liability at all and that's why the general accounting office
was concerned. They also had not recorded the pension liability
for veterans and a whole
raft of other issues which added up to close to $1 trillion. That
was the estimate, or something like that.
To come to the second
question, we would probably initially rely very heavily on this
Canadian Nuclear Safety Commission, because in the past the
practice was that what used to be the Atomic Energy Control Board
used to go into the plants and review that area. They had the
expertise, and they would also determine the rates at which the
liability for decommissioning should actually grow. They very
often expressed that as an add-on to the electricity rate. It was
so many fractions of a cent per kilowatt hour produced by the
facility that had to be set aside to meet future decommissioning
of the plant.
We would certainly rely
initially on the expertise and the documentation that is received
by OPG from organizations that regulate the rate setting. Expert
advice would only be required in terms of allocating that between
the plants. For example, in the basic reasoning, the question
that was outlined to us-and that's what I was reacting to,
without doing any further work on it-was that the overall
liability was estimated to be $15 billion. The Bruce plant was
said to have about a third of the capacity and therefore the
question was raised, have we allocated the right amount of the
overall liability to the Bruce plant? We would actually only
require expert advice if there were questions raised in the way
the allocation was made and any questions as to the
reasonableness of the amount that was determined.
This is sometimes done
internally. Sometimes these questions are raised. We don't know
the numbers that were bandied about. I remember in the very
beginning, when Ontario Hydro had only reflected a liability of a
little over $2 billion, the chairman giving a speech to the
Empire Club and saying, "The real McCoy is some other and much
greater number." So there are always questions about that.
The Chair:
Can I ask the indulgence of the committee for a minute? I am
scheduled to speak on the bill that's in front of the House and I
would request that Mr Levac take over as Chair in my absence. Is
there consensus on that? Thank you.
The Acting Chair (Mr
Dave Levac): Can we also get consensus that I get his
pay?
Interjection: Agreed.
The Acting
Chair: Carry on. Thank you.
Mr Peters:
That was the end. I hope I answered your question.
Mrs Munro:
Yes, thank you. That is what I was looking for.
The Acting
Chair: Anyone else?
Ms Marilyn Mushinski
(Scarborough Centre): I just have a couple of questions
for clarification, because I knew right from the beginning this
was a very complicated issue. I need some clarity on a couple of
items contained within your 1999 annual report.
In chapter 5, you state "In
our 1998 annual report, we stated that, while Ontario Hydro
acknowledged that the charging of $6.4 billion of future expenses
to be incurred in the years 1998-2001 to the year 1997 was not in
accordance with generally accepted accounting principles for
business enterprises, Ontario Hydro and its external auditors had
concluded that this accounting treatment was acceptable for
enterprises operating in a rate-regulated environment."
1040
You go on to say, "Expenses
are included in operating results of the year in which those
expenses are incurred." Then you say, "In our view, the ability
of Ontario Hydro's successor companies to raise funds through
public issues is essential to containing the risk to the
government of Ontario under guarantees provided on existing
Ontario Hydro debt amounting to $26.2 billion as at March 31,
1999, and to deal with the recovery of stranded debt now recorded
in the books of the Ontario Electrical Financial
Corporation."
I think I understand what
that means. You raised this last week and I guess I'm just
looking for clarification on what it all means.
You say in your overview,
under "Local Services Realignment," "The LSR initiative has had a
significant impact on the comparability of government
expenditures with the previous year." Then you go on to say,
under Ontario Hydro Successor Companies, "Under the Energy
Competition Act, Ontario Hydro was succeeded effective April 1,
1999, by five entities. The three largest of these are OPG, OHSC
and OEFC. The OEFC's preliminary opening balance sheet shows a
debt of $38.1 billion, $21 billion of which is the latest
estimate of stranded debt."
You say, "The government has
a long-term plan in place to retire this stranded debt portion of
the debt from dedicated revenues, such as payments from OPG and
OHSC in lieu of property taxes, corporate income taxes, capital
taxes and, if necessary, a competition transition charge that
most likely would be levied on all ratepayers as part of their
electricity bills. The effect of this plan is reflected in the
preliminary opening balance sheet of the OEFC as a $21-billion
deferred charge to be recovered from future dedicated revenue
streams."
I think the most important
part is the next two sentences, and this is what I need
clarification on. "We have accepted this approach, contingent on
being provided annually with independent assurance of the value
of the dedicated revenue streams. If this assurance is not
maintained, the deferred amount, or a portion thereof, would at
that time worsen the provincial government's operating
results."
You go on to say, under
Restatement of Certain Financial Statements, "In our view, the
ability of Ontario Hydro's successor companies to raise funds
through public issues is essential to containing the risk to the
government of Ontario under guarantees provided on existing
Ontario Hydro debt amounting to $26.2 billion as at March 31,
1999, and to deal with the recovery of stranded debt now recorded
in the books of the Ontario Financial Corporation."
Given the fact that you have
already clearly made public statements about this whole
decommissioning or privatization, do you not already have the right
to do what's being requested of you today?
Mr Peters:
When this split was carried out-
Ms
Mushinski: When?
Mr Peters:
When Ontario Hydro was broken up into the five entities, out of
these entities, I became the auditor of only one, and that was
the Ontario Electricity Financial Corp.
Ms
Mushinski: Just a minute. I'm sorry to be a bit slow in
following this. So you became the auditor of right for OEFC?
Mr Peters:
That's right.
Ms
Mushinski: And the Ontario Electricity Financial
Corp-can you explain the difference between that one and the
other two?
Mr Peters:
The Ontario power generating company-at that time it was called
Hydro Services; it's now called Hydro One. The audit was awarded
to Ernst and Young.
Ms
Mushinski: Just tell me which one was Hydro One-OPG?
Mr Peters:
The OHSC; you'll find it there. It's the Ontario Hydro Services
Co. They changed their name during the year to Hydro One.
Ms
Mushinski: OK. And OEFC continues to be OEFC?
Mr Peters:
OEFC continues to be OEFC; OPG continues to be OPG. IMO and the
other company, whose name I always forget-ESA or something like
that, energy safety something-are audited by other auditors than
me. Certainly on OEFC I have all the rights of the auditor. The
full-blown Audit Act applies directly.
Ms
Mushinski: Your statements, however-OK, I see. So you're
saying that your statements-in assessing the approach of the
OEFC, you had every right to do that and continue to do the
checks and balances because it's a provincial-
Mr Peters:
I can carry out any value-for-money audit in OEFC directly
without approaching another auditor. I can do it directly. That's
really the essential difference. With OPG, my first approach
would be to Ernst and Young, as the statutory auditors of OPG,
and then move on from there. The result is effectively the same.
It's just the process that's different.
Ms
Mushinski: Does that apply to OHSC or Hydro One?
Mr Peters:
Hydro One as well, yes, because they are now all crown-controlled
corporations, which they weren't. They became that on April 1.
The government of Ontario declared itself the owner and
controller through shareholdership of all these
organizations.
Ms
Mushinski: So there's no relationship whatsoever between
what's in front of us in terms of Shelley's motion and OEFC?
Mr Peters:
There are quite a number of relationships that exist. The Ontario
Electricity Financial Corp, originally called Holdco, was
actually, if you will, envisaged as the organization that held
all the debt and held the productive assets of Ontario Hydro.
When OPG and Hydro One-let me call it that from now on; it's
easier-were created, they were only given and only paid for the
productive assets. OPG received and paid for, and the government
became a shareholder of, the productive generating assets of
Ontario Hydro. The government became the owner of the productive
distribution system of Ontario Hydro.
Ms
Mushinski: Did you say the "surrogate" of Hydro One?
Mr Peters:
No. I had trouble with the name. I don't think I used the word
"surrogate."
Ms
Mushinski: I probably didn't hear you correctly, then.
I'm sorry.
1050
Mr Peters:
Oh, it's Servco. It was at one stage also referred to as
"Servco." Originally, before they got the two names, they had
Genco, which is now OPG, and Servco, which first became Ontario
Hydro Services Co and is now Hydro One. That's what you may have
heard.
The Acting
Chair: Any other clarifications or questions?
Ms
Mushinski: It certainly declarified a lot of what I
thought I was reading.
Mr Peters:
I apologize for that. But if I can clarify, I will gladly.
Ms
Mushinski: When I was reading this, the bottom line to
me was that you already had the right to do what you'd been doing
in terms of the leasing arrangements with OPG, but clearly you
don't.
Mr Peters:
What I said is I have the right to do it, but the process
differs. The right is there. Because they are now crown
corporations, I can conduct value-for-money audits of any aspect
of the operation. What I'm pointing out to you is that the
process differs. With OEFC, I don't have to go to another auditor
because I am the auditor; with OPG, I have to go through the
auditor first because there is another auditor. But the end
result is the same.
Ms
Mushinski: I just have one more question. It gets back
to your value-for-money audit for the domed stadium and UTDC and
the comparison to what's being requested today. Could you, in 10
words or less, tell me how those two differ from what's being
requested or are similar to in terms of the value-for-money
aspect?
Mr Peters:
Let me focus for a moment on the similarities to help you out.
Certainly, a value-for-money audit is an audit to assess whether
there was due regard for economy and efficiency, primarily. That
would be the commonality of these audits. In value for money we
would principally look for the economy to the taxpayer of this
particular deal, as owner and shareholder. That would be the
commonality with the other arrangements, whether we looked at the
dome or whether we looked at the Workers' Compensation Board or
UTDC.
Ms
Mushinski: And obviously, that's the premise upon which
you conduct any audit anyway, in terms of ensuring that the
taxpayers' interest is protected.
Mr Peters:
That's true, in accordance with section 12 of the Audit Act.
Mrs Munro:
In the interests of moving along, I just wondered from the
discussion we've had whether it would be appropriate for this committee to defer
the motion to have an in camera session with the committee from
OPG. We've heard a little bit about their role and their position
in all of this. We've also talked a little bit about the
potential scope of an audit following Ms Martel's request. That
would be a suggestion that I would make to the committee.
The Chair:
Comments?
Ms Martel:
Having OPG before us would not get us to the assumptions that I
think the deal was based on because those assumptions were done
for OPG by other companies. They were also done by other
organizations for the government when the government came to its
decision to agree to the deal. I am specifically interested in
the work that was done by Salomon Smith Barney and the assumption
that they used to come to the conclusion that this deal was a
good one. Through this process they wouldn't be called. So we
wouldn't get an idea of what information they used to make a
determination that this in fact was a good deal for OPG.
In the same way, we know
the government got advice from SuperBuild, and SuperBuild got its
advice from its two financial advisors, Goldman Sachs and CIBC
World Markets. Again, we wouldn't be entitled to receive that or
a party to receiving information that came from those two
financial advisors when they presumably gave the government
provision to go ahead or recommended to the government to go
ahead with the deal. I fully expected OPG would come before this
committee and say that it's a good one; they signed it. That's
not what I'm trying to get at. I'm trying to find out whether or
not it's good for the taxpayers of the province. We could
certainly have OPG here, but I'm not sure we're going to hear
much more except what a great deal this is for taxpayers. It's
certainly not going to give me the information that I think is
necessary to determine if we really got value for money, because
that information is based on assumptions by parties who wouldn't
be before this committee and whose work wouldn't be before this
committee.
The Chair:
Continue on, Mrs Munro.
Mrs Munro:
I just want to comment on the concerns Ms Martel has raised. I'm
not suggesting that there is going to be from OPG-as an
alternative to your original motion. All I'm suggesting is that
we consider inviting them for the purpose of first of all hearing
what they have to say but, obviously, in an in camera session, to
be able to ask questions that would give us the grounds on which
to make specific the potential scope of the audit. This is not
designed to eliminate the step you have suggested. It is merely
designed to allow the members the opportunity to hear from OPG as
part of the process.
Mr
Hastings: I think this is a very effective strategy in
terms of really finding out. I think with scalpel-like questions
one can get, to some extent, to probe the depth of the
assumptions, the realism, the economic projection, the future
projections these three companies made regarding this
transaction. I think it's a significant opportunity whereby we
can probe.
It depends on how you
approach it, what sorts of questions one can ask. It might be
very surprising what could come out of looking at this as a first
step. Babies crawl before they walk. I think we need to look at
it.
In my estimation, one of
the most significant things we need to consider-I'm trying to
balance off as a member of this committee our obligations or
trying to ascertain the value-for-money proposition for taxpayers
balanced against the need for confidentiality. That is a very
vigorous exercise you have to go through on a creative basis. I
think we need to get these folks in here.
I'd like to know from the
committee, from Tonia, perhaps: do we have the capacity to call
supplementary or tertiary partners to a transaction like this? Or
can you only call the main partner who is responsible for signing
the deal with the other partner? You've been on maybe not this
committee but on other committees. Do we have that capacity to
call these three brokerages, for example?
Clerk of the
Committee (Ms Tonia Grannum): We could invite these
people, these groups, to come forward.
Mr
Hastings: They don't have to come?
Ms
Grannum: I think that's as strong as we can go.
Mr
Hastings: I think there's a good opportunity here, Mr
Chairman, that we need to scrutinize first. What we don't find
out of that, we look at the next. We go back and look at Ms
Martel's motion.
Mr Dave Levac
(Brant): Were you seeking a clarification, Mr
Chairman?
The Chair:
No.
1100
Mr Levac:
I was going to wait to hear the answer to the question Mr
Hastings posed because I believe that probably would have brought
us closer to the information that is being asked by the motion.
Not having the answer that I thought probably was available,
nothing could be better than a cleaner and a more succinct
opportunity to find out what's going on than the audit.
If the request for this
extra step is for information, we probably would get that
information from the audit, and I'm going to ask that question of
the auditor. In terms of information that's provided here at the
committee and your ability to get to the same questions, and
probably even deeper, would it be found it an audit that's being
requested of us?
Mr Peters:
Let me try to answer that question this way. There would be no
limitation on the information to which I have access, and there
may be some limitation to the information that can be provided to
the committee in a hearing. Even in a closed hearing you're still
members of Parliament; you are the public. That is the role of my
office, actually, to provide information to you that some
organizations may have reservations in providing directly to
elected members of the Legislature.
Mr Levac:
That being said, I would also take up Mrs Munro's concern, or
offer, I'll call it, because the spirit that I believe it was
given in was to take another step and not to interfere with or
not to remove the concept of the motion. In your opinion, would
there be any new or different information that could be gleaned
from taking this step
prior to an audit that you couldn't find out in the audit?
Mr Peters:
The area where it would be helpful for us is in setting the scope
of the audit and understanding better where this committee wishes
to go with this motion. It would help me to set the scope of the
audit more precisely and to influence the direction we're going
to take.
Mr Levac:
Thank you for that. As well, some of the members on the
government side have indicated a concern-I believe I've heard
them indicating a concern-that the motion as presented seemed to
be very supportable and that there was nothing much to it, but
with a little bit more prodding and poking they believed it was a
concern being raised about scope.
In your opinion as the
auditor, when a motion like this gets presented and you've had an
opportunity to take a look at this, is there anything in the
motion that you believe would either diminish the scope or allow
you the leeway, shall I say-or deferring to your expertise in
doing these kinds of audits, is there anything that could happen
that would prevent you from moving into an area that you believe
does have an impact on the motion itself?
Mr Peters:
No. There is nothing stopping me. If the motion is passed by the
committee, I could proceed right away. If we had a hearing, it
would help me to do my work. Let me put it that way.
The only word that I had
concern about was the word "guarantees": "to determine if the
deal guarantees value for money." I would prefer "provides value
for money," because whether a guarantee is actually there is a
very tough-
Mr Levac:
I think all of us would agree that there are no guarantees in
life. I don't know whether or not Ms Martel would be open to
having the word, with a friendly amendment, changed from
"guarantees" to "provides."
The Chair:
That's a friendly amendment. Is there any discussion, just on the
amendment?
Mr Levac:
Is everybody OK with that?
The Chair:
That is to change "to determine if the deal guarantees value for
money" to "provides value for money." No problem with that
amendment? OK.
Mr Levac:
That provides me with enough scope to suggest that whatever we
decide as a committee, it should be based on the fact that we are
looking at the motion to find the best possible information
available to the taxpayers regarding the particular deal.
Mr Richard Patten
(Ottawa Centre): I just wanted to comment on inviting
OPG in prior to an audit. I think normally what happens is, we
respond to the auditor's report, the comments and reaction to
recommendations therein. If we find that there are some areas
that are a little fuzzy or some areas in which we feel there
hasn't been an adequate response, then we usually invite the
ministry in or the party in to go through that.
It's my feeling that the
issue of confidentiality would be a factor. Where it would not be
a factor is in the instance where the auditor has full access to
things and is held professionally to honour the confidentiality
elements that we would not even be exposed to. So I don't think
we'd get at perhaps some of the information. It would probably be
in that area, in that domain, where we would get it. My feeling
is that we still have that option and I support the amendment to
provide value for money. I think we should move ahead with that
and keep that option open that Ms Munro suggested. But once we've
responded to "the third-party analysis," that being the auditor,
that work is done.
Mrs Leona
Dombrowsky (Hastings-Frontenac-Lennox and Addington):
It's helpful to understand that the auditor would find the
exercise that has been proposed by Ms Munro a helpful one in
terms of assisting him in understanding scope. I guess my
question would be, why would we need to defer this decision? If
there isn't a sense that we're going to get any information from
the presentation by the OPG people-clearly they're going to be
able to clarify issues but I don't think they would be in a
position to determine if the deal provides value for money. I
think that's understood. That clearly falls under the scope of
the auditor. I would only make the point that while I could
support, for the reason that Mr Peters has stated it would assist
him in determining the scope, I really don't see the need to
defer the motion we're considering today, but certainly add to
that that there would be an exercise where there would be a
meeting to hear from the OPG.
Mrs Munro:
If I might just respond to Ms Dombrowsky's comment, the intent is
simply as a procedural one that we are currently discussing Ms
Martel's motion. I'm just asking that we defer that motion in
order to do something else, that is, discuss; in this case invite
OPG here. I hope that clarifies for you the procedural aspect of
doing that.
Mrs
Dombrowsky: Not really.
Ms Martel:
Can I follow up from where Leona was going, because actually I'd
be happy to agree to that. As I said earlier, I don't think
having OPG in here is going to get to the financial assumptions
that this deal is based upon. We can certainly have them come and
the auditor can ask questions, and so can we, about how we can
scope some of this, but it doesn't change for me what is being
requested. Frankly, a meeting with them, for me, is probably not
going to get to what I'm asking for, which is, does this deal
provide value for money? The auditor is going to be the one who
will have to determine that for the committee.
So I'd be happy to have OPG
in as part of a process where this motion has been accepted, and
that is the first step of responding to the motion, actually
setting terms of reference or setting the criteria or setting the
scope, or however you want to describe it, of what the auditor
then looks at.
1110
If people are worried about
the confidentiality, and I'm assuming that's what the request is,
for us to go in camera, because we would normally not be in
camera when we have a presentation by ministries or interested
parties, then again, I
have to look at that and say that potential hearing itself is not
going to get us to where I think the committee would want to go,
which is to have a full and complete examination of all of the
assumptions that were made by at least three other parties to get
to this deal.
I would put on the floor
then the possibility that we accept the motion and, as a first
step to accepting the motion, have OPG before us so the auditor
can then develop his terms of reference to proceed.
Ms
Mushinski: I have a question of you, Mr Chairman. Was
the question asked last week and answered as to whether this deal
has actually closed, legally?
The Chair:
Whether this deal has actually closed? Yes, and the information
was provided. It was in the backgrounder to the-
Mr Patten:
I have a copy of the lease agreement.
The Chair:
Yes.
Ms
Mushinski: OK. I guess my question is, has this deal
legally been closed? Because there seems to be some disagreement
with that, especially-
The Chair:
The way I understand it is that the agreement with British Energy
has been signed, but it will not actually come into effect until
next year.
Ms
Mushinski: OK. I need some clarification of what that
means.
The Chair:
I understand that the deal is finalized, that there are a number
of conditions to it, such as, for example, from the nuclear
energy board.
Ms
Mushinski: Finalized but not in effect.
Mr Patten:
Their permits. They need two to operate.
Ms
Mushinski: So a value-for-money audit on a deal that's
not yet complete-
The Chair:
The deal is complete.
Ms
Mushinski: -is actually being requested.
The Chair:
Certain aspects of it haven't started yet.
Ms
Mushinski: OK, that's fine.
Mr Levac:
Just a procedural question with what Ms Martel has indicated to
us. Does that change the motion?
The Chair:
No. The way I understand it is that the motion will simply be
tabled until such time as we have an opportunity to meet with
them.
Mr Levac:
I just have to clarify what I'm hearing, because I believe that
the motion is still on the table, but as a part of the motion Ms
Munro's request is being asked.
My next question is if,
procedurally, that's doable. That's what I need to know.
Clerk of the
Committee: I understood that Ms Martel wanted to proceed
with the motion, put the motion to a vote and, as an aside, have
OPG come in. Is that-
Ms Martel:
Yes.
Clerk of the
Committee: So we're still debating the motion. We've
moved an amendment to the motion.
The Chair:
That amendment has been carried.
Clerk of the
Committee: Which was to change-
Mr Levac:
Just the word.
The Chair:
A friendly amendment.
Clerk of the
Committee: Yes, OK. So you have to vote.
Mr Levac:
Then I seek clarification from Ms Munro that if that satisfies
her desire to have that information presented before-it doesn't
quite satisfy, because her request was that it be tabled or
whatever-
Clerk of the
Committee: Deferred.
Mr Levac:
-deferred, and Ms Martel's counter was, let's go ahead with the
motion, with the understanding that we are going to proceed, as
part of that understanding, to hearing from the company.
Mrs Munro:
I understand it to be as you have explained, but I would just
indicate to you that I'm not prepared to support that. What I'm
asking for is that we have OPG first. That will allow us to
determine the potential scope of the audit. As the auditor has
indicated, I'm suggesting that we defer Ms Martel's motion.
The Chair:
OK, any further discussion?
Ms Martel:
I'm trying to figure out what OPG is going to tell us that's
going to make the government members decide whether to support
the motion. That is the crux of the issue for me. This is where I
would appreciate some response.
OPG is going to come in
here in a closed session. First of all, I have problems with that
because that is absolutely contrary to any other meeting we have
had when a ministry has come before us. I can only assume that
the government members are trying to do that because they think
OPG will share some confidential information with us. If that is
the case, then I would prefer that the auditor just go in and do
his work so the committee does not have that confidential
information before us. That would be my preference. But OPG will
come in and they will describe to us why they think it's a good
deal. They will not provide to this committee the assumptions
that were produced by at least three other firms to recommend the
approval of this. We are still only going to get that information
if the audit proceeds. I'd like to know from the government
members what they think we're going to get from OPG that will
either allow us to proceed with this audit, or might change our
minds?
The Chair:
Any comments?
Mrs Munro:
From the discussions we've had up to this point, it is clear
there are some complexities around this issue. You mention that
it's most unusual for us to go in camera, in terms of ministries,
but that's because it's always after the fact. The auditor's
report is a public document and, obviously, then the ministry's
response to it is public as well.
What we're considering is
something that is fairly unusual, given the history of doing
these kinds of requests to the auditor, and as you yourself have
pointed out, we are also are doing it on a rather unique
situation in terms of both the complexity and the monies that
we're talking about. So I think that it's reasonable for us to
want (a) to have it in camera and (b) to hear something from the
major player.
I understand your point
about the fact that you're not going to get the confidential
information that would have been shared between OPG and its advisers. I
don't believe that's the purpose of what our request is, because
that is obviously the auditor's responsibility, and we're not
trying to do his job. What we are trying to do is say that in
order to give him the direction that is inherent in your motion,
we need to have at the very least the opportunity to hear from
this group.
Mrs
Dombrowsky: Then, because you are speaking in very
positive terms about what the auditor will do when he addresses
this motion, would it be fair to propose that instead of
deferring the motion today we make it a part of the motion that
this audit will not be conducted until OPG has had an opportunity
to make a presentation to this committee?
Mrs Munro:
What I would propose in a motion is essentially the same thing as
you're suggesting, but what I have suggested is that we defer Ms
Martel's motion so we can discuss something else, which in effect
would be the appearance of OPG.
Mrs
Dombrowsky: For further clarification, I'm not
suggesting that Ms Martel's motion would be deferred; I'm
suggesting that it would be supported and perhaps we could work
on some wording on condition that the auditor would not proceed
with this until the committee has had the opportunity to hear
from OPG; but very clearly today we would leave the room with the
understanding that there was going to be an audit. It would not
take place until there had been this meeting that would perhaps
clarify for the auditor the scope. From the conversation and
debate we've had so far this morning, certainly members of the
government are speaking from a perspective that would presume
that the auditor is going to have a particular role here. I'm
simply saying, rather than defer it, why not confirm that in fact
it will happen, but set some conditions in place before that
would happen?
Mrs Munro:
At this time I'm not prepared to do that.
1120
Ms
Mushinski: I have some questions. I don't think we're
too far apart on this. I just have some concerns a little bit
with the timing. Ray, I believe in response to a question I had
last week with respect to the federal licence, you will just have
to prompt me on the actual-
Mr
McLellan: The issue on this was the date of the licence.
I called the commission up and asked them what the status of the
licensing is on the Bruce. They said to me that currently the
licensing for schedule 1 is operational-in other words, they're
in place-but that it would be necessary for a new licence to be
issued. I'm just looking for my note on that. An application had
been received on July 31, and it would take approximately until
Christmas for the approval of that. In other words, the process
had been set in motion for the review of that licence and the
expected date for approval is around the end of this year.
Mr Patten:
I have a copy of that, by the way.
Ms
Mushinski: My understanding is that the leasing of the
Bruce nuclear plant, which is still awaiting regulatory approval,
is required before the deal can materialize.
Mr
McLellan: If I can go back over that territory, I just
asked you a minute ago whether or not you were happy with the
explanation of the legal status of this agreement. What I would
propose, subject to what the Provincial Auditor and also the
Chair have said, is that I could ask to have that looked into. We
know from the material that's been handed out, the backgrounder
from Ontario Power Generation, of the announcement of the
agreement with British Energy in July 2000, but you may want an
elaboration on that. I think what you're saying to me is, let's
look at it vis-à-vis the licensing arrangements and whether
there are any contingency situations that have to be looked at.
In other words, are there any specific issues that could hold it
up?
Ms
Mushinski: That's precisely it. Not only that-to be
quite honest, I kind of like Shelley's motion-my concern is that
it may well be presupposing some of those legal aspects. I'm
prepared to amend the motion pending those confirmations, if only
because I'm just a little uneasy with approving something in
principle prior to getting confirmation of that.
My understanding is-and
this is why it would be nice to have OPG here-that there is some
difficulty with that. My concern is that if we as a committee are
going to suggest we proceed with a value-for-money audit, without
legal confirmation that this is a done deal in terms of all of
those aspects with respect to the federal government, maybe we
should be approving this in principle pending confirmation of
that. I'm not sure if at this stage I should be making that
motion or if you can get that information back to us within the
next week or so.
Mr
McLellan: I could undertake to have that started today,
to report back to you on exactly what the legal status of the
deal is.
Ms
Mushinski: That would be helpful.
Mr Patten:
I don't have the document with me, it's up in my office, but I
did ask the Canadian Nuclear Safety Commission for the outline of
the application and the categories. It all has to do with
staffing, health and safety, all those issues. There is no
financial analysis at all. That's not what the Canadian Nuclear
Safety Commission is about. It goes through changes from Bruce.
Some things stay the same. They have categories: is this a minor
change? Is this a significant change? If it's significant, they
identify what it is and what's going to happen etc. I'd be happy
to share that with the committee.
Ms
Mushinski: My community has just gone through a very
intense four days over the Adams mine, and I just want to make
sure that all the t's are crossed and the i's dotted. There are
still some outstanding matters that I would like to get some
legal advice on, Mr Chairman. If we could do that through Mr
McLellan, I'd appreciate that.
The Chair:
What specifically is the information you want from him, or are
you clear on that, Ray?
Ms
Mushinski: Specifically I need to know if this is a done
deal. My understanding is that the deal is not closed until the
federal Canadian Nuclear Safety Commission has completed their review of the leasing
deal of Bruce A. My understanding is that the leasing of the
Bruce nuclear plant to Bruce Power is not yet complete, is still
awaiting regulatory approval, and that without that regulatory
approval the deal will not materialize.
I've heard two versions
about whether or not this is a done deal. While I have no
difficulty in principle with the motion that's before us, I think
it is premature and that we need to have clarification on those
items before we proceed with a value-for-money audit. I'm
prepared to make a motion to that effect.
Ms Martel:
I just want to clarify, because originally I thought you said you
would agree in principle with some conditions. I was wondering
whether or not you would agree today to have the motion go
through.
Ms
Mushinski: I don't object in principle to the
motion.
The Chair:
Can we do it this way? Can we pass this motion but put a couple
of riders on it: that no work be commenced by the auditor on this
until we have received legal confirmation that in effect the deal
is complete, or whatever terminology you want to use, and until
the committee has had an opportunity to meet with OPG?
Ms
Mushinski: I'm prepared to say that this committee
directs that consideration of Ms Martel's motion be deferred
until such time as the OEB and the Canadian Nuclear Safety
Commission have completed their review of the leasing deal of
Bruce A and B nuclear facilities and the deal is completed.
The Chair:
I understand. So that's the predicament.
Ms
Mushinski: That's my motion.
The Chair:
On the one hand there is the notion that the motion should be
passed with these two conditions; on the other hand that the
motion should not be dealt with until the two conditions have
been satisfied.
Ms
Mushinski: I'm prepared to premise this by saying that
this committee does not object in principle to the auditor's
consideration of this agreement. That at least demonstrates the
good faith of the committee.
Mr Levac:
A question first and then maybe a comment. I'd like to ask the
auditor what you've heard in the last little while, talking about
whether or not there are certain conditions to be met. The one I
need clarification on is that there seems to be some type of
disagreement as to whether or not it is a legal deal. I'd rather
ask this question of the auditor: can you still audit this deal
whether or not the t's are crossed and the i's are dotted?
Mr Peters:
Yes, we can certainly take a look at this deal.
1130
Mr Levac:
That's pretty simple. Further to that, to make sure I have a
really simple understanding of this, is there anything that stops
you from doing your complete job whether or not certain aspects
of this agreement are actually completed?
Mr Peters:
There are two ways of dealing with it. The first way of dealing
with it is getting them out of the way right at the outset. The
other way is that I would have to report back that there were
certain scope limitations, there were certain things that I
couldn't do because of the status of the deal.
Mr Levac:
So if there is a certain question as to whether or not the deal
is complete, you may be prevented from doing certain audit jobs
within the entire audit. There are certain things that could stop
you from doing things.
Mr Peters:
It would certainly influence my conclusion. It may not influence
necessarily the work that I have to do but it would stop the
conclusion.
Mr Levac:
Thank you for that clarification. So what I believe I'm hearing
is that Ms Mushinski's request is a valid one in as much as it
does affect your ability to do your job-not necessarily to do
your job but to draw the proper conclusions on the complete
deal.
Mr Peters:
To draw conclusions based on the work, yes.
Mr Levac:
The second part is a comment. I'm hearing that the good faith is
there on the government's side but the actions are speaking
differently to the goodwill. There is an offer to incorporate
into a motion the entire concerns that are being raised by the
members on the other side. It's not being taken because they
still believe it needs to be deferred, but they still want to do
the audit.
My challenge to them is to
say very clearly with this clarification that both aspects that
are being raised by the members on the other side could be
incorporated into a motion that allows the audit to be done, but
not until (a) the legal question is answered as to whether or not
it's a done deal-which you have clarified for us, that says very
clearly that a complete, total audit needs to be done, and the
conclusions raised may be affected; I would support that-and (b)
having somebody here would help you with the scope of the audit
by having certain things mandated here.
The concern I'm raising
right now is a challenge to the members on the other side. We've
been provided with an opportunity to include in the motion all of
those aspects and get everything done at the same time. So
there's no need to show goodwill; it's to do it.
Ms Martel:
If the committee doesn't object in principle to the motion, then
I would ask the committee to support it today. The effect,
regrettably, of what Ms Mushinski has proposed would mean that
the auditor would not be able to do his work until some time in
the summer of 2001. According to all of the background documents
from both OPG and Bruce power, they don't anticipate having the
approval from the federal licence or the OEB until that time. I
find it hard to square that with the committee not objecting in
principle to being asked to then accept a delay to deal with this
motion until some time next summer.
Secondly, whether or not in
legal terms the agreement has been signed should not be an issue
that would hold this up one way or the other. I say that because
the auditor has already provided us with information that a
previous public accounts committee and a previous auditor did a
review of a deal that was not complete, and that was the Dome. So
there has been a past precedent already set in this committee that there was
unanimous agreement by committee members and then the auditor
went ahead and did his work on a deal that was not legally
complete. We have a precedent to rely on and the committee has
done that.
If the deal is complete
legally, we also have precedents from this committee where the
auditor has reviewed those as well. I raised with the committee
last week the case of the Andersen deal, for example, and
community and social services. That was a particular deal that
was done. It was reviewed by the auditor, and as a result of this
committee reviewing it extensively, not once but twice, COMSOC
was forced to essentially go back and redo or renegotiate the
terms and conditions of that deal because of what we had
found.
The point I'm trying to
make is, to hinge a decision on whether or not from a legal
standpoint this deal is done has no effect one way or the other
on the motion before us. Clearly, in both cases, before a deal
has been done and after a deal has been done, the auditor has
done value-for-money audits as a special assignment by this
committee.
The third point I want to
make is that I think it would be difficult to vote this motion
down by assuming we somehow need to wait for approvals that come
from the federal agency or the OEB. I tried to make it clear last
week, and I think the documents that were provided to us by Ray
over the course of last week clearly show that the financial
portions of this deal, which is what I am interested in and which
I hope the committee is interested in, are not part and parcel in
any way, shape or form of the licensing requirements, either from
the federal agency or from the OEB.
Ray got for us a copy of a
typical reactor operating licence, which is very valid because
it's one that was recently signed, in January this year, which
allowed OPG to continue its operation at Pickering nuclear
generating station B. I took the time to go through it last
night, and I'm sure everyone else did as well. Clearly, in
appendix B, any documents that had to be prepared by the
licensee, in this case OPG, and provided to the federal agency
were documents that dealt with staffing, health and safety
matters, security issues, nuclear emergency plans etc. There was
not one item that had to be provided as a term and condition of
the licence that was a financial item, so there is no reason for
the committee to assume or presume we can't deal with this matter
because the financial aspects are part and parcel of the licence
condition from the federal agency. That's just not true, and it's
been clearly demonstrated in the information that was provided to
us this week from the nuclear agency.
In the same way, this
morning we received information from Bruce Power by fax-at least
I did, and I'm assuming other members did. It was an announcement
that they have formed a partnership with Cameco with respect to
this deal. Their partnership doesn't affect the financial
arrangements of the deal. What they also did in the release was
give an update of what they have done. They clearly said they
have submitted their applications to the federal agency and to
the OEB.
Under the section "Why did
we apply for a licence?" it says, "The OEB licence is required by
all generators in Ontario. Once obtained, this licence will grant
approval for Bruce Power to not only generate electricity, but to
purchase and sell that electricity in the newly deregulated
Ontario marketplace.
"As a result of our filing,
the OEB has issued a notice of application to inform the public
that Bruce Power has applied for a generator licence," which they
have to do to buy and sell in the market.
Again, there is
no-"responsibility" is not the word I'm looking for. It is not
incumbent on Bruce Power to submit to OEB the details of the
financial arrangement between themselves and OPG as a condition
of their licence from the Ontario Energy Board. The licence they
get will be a licence to sell energy. None of the financial
aspects of the deal, which is what I am concerned with, have to
be filed with the OEB. To argue that we need to wait until they
receive their application from OEB is really a moot point. OEB is
not examining, reviewing or commenting on the financial
transaction that is part and parcel of the motion before me.
Having said all that, I say
to the government members that the motion Ms Mushinski would put
would effectively shelve this until next summer. I go back to the
point I raised-that I started with last week when I moved this
motion-with the Premier of this province, who said he was
prepared to have this deal reviewed. I didn't think he meant a
year from now. I thought he meant he was prepared to have all the
aspects looked at now to determine if taxpayers are getting value
for money.
1140
I think it's incumbent on
us-if we want to have OPG come in and help the auditor set the
terms of reference, fine. I've got no problems with that. But I
think we are all very clearly aware that for OPG is not going to
give us the information I have asked with respect to this motion.
I'm asking the government members, frankly, to do what their
Premier has said he is prepared to do, which is have a
legislative committee look at it. I ask that we agree to do that
now, not to defer it effectively till next year, because to
effectively defer it to next year really questions people's
determination as to whether they agree to it in principle. If you
agree in principle, do it now. There's no reason to delay it for
another 10 months.
The Chair:
Ray, you have comments?
Mr
McLellan: Following up on Ms Martel's point, I want to
repeat a point I made earlier with respect to the Canadian
Nuclear Safety Commission. The class 1 licensing regulations are
operational, in agreement with what you're saying. I didn't
circulate this document, because there was enough going around.
But if we're interested in it-and I did outline half an hour ago
that it deals with the construction, operation, decommissioning
and abandonment of the site, so it's an operational document and
not financial. If you do need it, I can circulate it.
The Chair:
Any further comments?
Mr McLellan: This dealt with the
memo I sent out this week with respect to the federal safety
standards. I think I indicated in that memo that it's a class 1
licence to be issued. The document that was provided to me from
the commission specifically says it's a licence that deals with
operations and not financial. In other words, this is from the
federal government, the safety commission; it's an operational
licence. It just deals with site requirements: the construction,
operation, decommissioning and abandonment of the site. In simple
terms, it's a management land use planning and environmental
licence.
The commission did say to
me that currently there are licences in effect for that site,
issued to Bruce-in other words, it's currently licensed-and the
application for this new company was received on July 31. I
indicated an hour ago that it would take four to five months for
the review. A group has been established to undertake that
review, and it's going on today. I think that finishes that
off.
Ms
Mushinski: I still have questions of Mr Peters. I know
this was asked last week, but we really need to go through it
again.
Mr Peters, if you were
asked today to proceed with a value-for-money audit of OPG and
this deal, what are your commitments to date, and how will that
affect those commitments in terms of your other duties and
responsibilities as the Provincial Auditor?
Mr Peters:
The audit work for my 2001 report is underway right now, and it
pretty well occupies my staff. I would probably have to engage
additional resources on one basis or another to do it, but I do
have room in my budget to do it.
Unfortunately, in the
current climate my salary levels are geared to those of the
public service and I'm not a very good competitor that way, so I
will probably have to engage people under contract. What I mean
by that is that I currently do not have the full staff complement
I would like to have, and that allows room in my budget to engage
specialists or whatever I have to do to carry out this work.
The Chair:
But there is room in your budget right now.
Mr Peters:
There is room in my budget right now to do that simply because
I'm understaffed.
Ms
Mushinski: But it would essentially take all your
existing resources.
Mr Peters:
No, the existing resources would carry on with what they were
doing, and I would staff this with money I have available because
I am understaffed.
Ms
Mushinski: I don't know if I have to withdraw my motion
to make an amendment. But I'm certainly prepared to move an
amendment to Ms Martel's motion that will read as follows-
The Chair:
Right now, what we have in front of us is the original motion as
amended by changing the word "guarantees" to "provides."
Ms
Mushinski: I will move that Ms Martel's motion be
amended to read as follows:
"The public accounts
committee directs that at such time as the OEB and the Canadian
Nuclear Safety Commission have completed their review of the
leasing deal of Bruce Nuclear A and B and the agreement is
completed, the Provincial Auditor examine all details of the
leasing agreement between Ontario Power Generation (OPG) and
Bruce Partnership for the Bruce A and B nuclear facilities to
determine if the deal offers value for money for Ontario
taxpayers, and to report to the public accounts committee with
his findings and recommendations as soon as possible."
The Chair:
That's the amendment. Is there discussion on the amendment?
Ms Martel:
I can't agree to that, because effectively it shelves the work
the auditor would do until at least next summer. Given that this
deal is worth some $3.1 billion, it is the biggest privatization
deal in the history of this province, I don't see any reason for
us to delay until next summer having a thorough review by a
competent auditor to see if it provides value for money for the
taxpayers of this province.
It seems to me-and I repeat
this again-that there is absolutely no reason for us to hinge a
review of this matter on licensing approvals from either the
federal agency or the OEB. We know, we have been told and we have
had confirmed for us that neither of these agencies is in fact
dealing with the financial aspects of this deal, and those are
the aspects of this deal that I am interested in, because those
are the aspects of this deal that directly impact on the
taxpayers of this province.
We have OPG, whose sole
shareholder is the province of Ontario, who is leasing an asset
that belongs to all of the public. The reason for my motion is to
determine whether or not this 25-year leasing agreement of a
major public asset is in the best interests of the taxpayers of
Ontario. I would think, given the magnitude of the deal, that all
members of this committee, including the government members,
would want to know now that we are getting value for money
through this $3.1-billion deal for a public asset, which the
public has paid for.
There is no good, logical,
sensible, reasonable reason for us to delay this work-none at
all. I will mention again that the Premier of this province, when
he was asked about this deal two days after it was signed, said
he would be happy to have this deal reviewed by a committee and
felt that all of the provisions of it would stand up to public
scrutiny. I am taking the Premier at his word. I believed him
when he said he was prepared to have this reviewed by a
legislative committee. This is the committee. The time and the
place is now, not 10 months from now when the thing will be so
far done that, despite the auditor's recommendations and
findings, we will be able to do nothing-nothing-about this
deal.
It seems to me that the
committee should have an interest in determining now if we've got
value for money, because if we don't, then this committee has an
obligation to reply to the House and make suggestions on how the
financial aspects of the deal could be amended and improved to
guarantee that the taxpayers of this province get value for money. Why we would want
to wait 10 months for that when the deal is solidly in place is
beyond me. It will be far too late at that point to try to fix
anything, if indeed something needs to be fixed.
I say to the government
members that I regret this is the approach they're taking,
because I think they know that this effectively ends a relevant,
timely investigation of what is the biggest-biggest-privatization
of a public asset in this province. I would have thought they and
the Premier would have wanted to have this investigated now to
guarantee that we were getting value for money, to ensure that we
were getting value for money and, if not, to give recommendations
now to ensure that we did.
Mr Levac:
I'm trying to come to grips with a couple of the things I've
heard today. It is confusing insomuch as the pieces of
information provided are so contradictory to each other. I'm
trying to come to grips with the concept that has been put
forward to us that there is concern about the deal being
completely finished-Ms Martel is giving us an indication that
we're talking about 2001-and that to proceed before that might be
a problem.
I need clarification again
from the auditor, maybe in the legal end of it, not necessarily
the auditing end of it. If I've got this right, you're saying to
me, Mr Peters, that if this deal were to be audited today, there
might be a different result if we waited until the deal was
completely done, with federal information that doesn't have an
effect on finances, if I've heard that right.
1150
Mr Peters:
Certainly the value-for-money aspect could be looked at
immediately. Some of the conclusions may be softer. Let me
illustrate.
Assume for a moment that
under the licensing arrangement it is now necessary for them to
add staff in order to meet, for example, safety provisions so
that they can have the licence, whatever it might be, but one of
the provisions the licence granter looks for is whether they're
properly staffed and can properly carry out their duties with
regard to safety. There may be some words that have to be used in
my conclusion that say "but subject to" whatever the additional
staffing costs might be, for example.
Mr Levac:
That helps me an awful lot because, under our first discussion, I
was under the impression that it may have something that would
change your view of the financial status of the deal versus the
language you would use as a cautionary note of some sort, saying
that it might change because the deal may require you to hire
more staff or subject to a deal. We're not talking about an
overall financial change that-I'm trying to use an example too. I
don't know this business, obviously. For instance, because we've
signed the deal, we are now going to have $1 billion added to
this deal or something out there. You're talking about cautionary
language you would use. Your language wouldn't be as strong or as
concise had you had the entire deal, but you would still be able
to identify the area we're talking about, which is value for the
dollar.
Mr Peters:
That's right.
Mr Levac:
Then I defer to the other question that was raised to me in
clarification of Ms Mushinski's concerns about the deal itself
not being complete. We're still not talking about a deal that, if
signed in the summer-we're not talking about any of the finances
that are going to be changed in terms of what has already been
agreed to.
Mr
McLellan: My understanding is that Ms Mushinski is
asking for clarification on the legal status of what has been
signed.
Mr Levac:
Understood.
Mr
McLellan: We can look into that and have legal counsel
look into that. The second component is to check on the status of
the licensing; in other words, to see exactly, contingent upon
the signing, what licensing is required and the status of those
various licensing agreements.
Mr Levac:
That's a fair clarification, but I guess what I'm putting on the
table is whether or not that has an impact on the finances in
order for the auditor to do his job, because there doesn't seem
to me now, in terms of what I've been hearing-go ahead.
Mr
McLellan: Sorry. Just going back to Ms Martel's point on
the federal safety standards on a class 1 reactor, based on the
documentation I've received, and I can circulate this to the
committee, it doesn't deal with financial issues.
Mr Patten:
It doesn't. You're right.
Mr
McLellan: It's dealing with land use, environmental and
administrative/operational matters. I was asked to look at that
last week, so I'm reporting back on that.
With respect to the energy
board items, I believe Mr Peters's office had looked into that
and he has reported on that.
The Chair:
We have less than three minutes left, folks. Ms Dombrowsky, Mr
Patten and Ms Munro.
Mrs
Dombrowsky: Can we change the order of Mr Patten and
me?
The Chair:
Mr Patten, quickly.
Mr Patten:
I have a breakdown which is a summary. It's a huge document on
the application which goes to the nuclear safety board, but in
two pages it gives you a picture of all of the elements they are
responsible for and look at. It goes through the fuel ware, the
electrical, the maintenance plan, maintenance backups etc. "Are
there changes?" "None." "To be reviewed." "Significant changes?"
"Yes," and there's a description of them. Just to reinforce,
there's nothing in here that is financial. I'd be happy to table
that with the committee to help assure the members on the other
side that indeed that's a different function.
Mrs
Dombrowsky: I agree with Ms Martel. I suggest that Ms
Mushinski has failed to demonstrate to me why it would be
important and necessary to wait until the reviews have been
completed in order to initiate the work of the Provincial
Auditor. In fact, I would suggest that it might be more
appropriate that the Provincial Auditor begin his work as soon as
possible. If it isn't a done deal, that might not be a bad idea
as well, because the auditor might uncover some issues that could
possibly be addressed
before the deal would be finalized. I would not be able to
support Ms Mushinski's amendment at this point in time.
Mrs Munro:
I was actually going to go back to something the auditor said,
but I also wanted to raise the issue that much of the discussion
has focused on the fact that these two groups that occupy part of
the process are not dealing with financial. If you accept that
logic, then waiting for them doesn't make any difference, in the
sense that what we are asking is for them to be completed, and
that is the process.
The other thing I wanted to
comment on was with regard to the auditor's comments. Last week
when you referred to the problem of doing something before the
process has been completed, you told Mr Levac about "softer
conclusions"; I think that was the term you were using. I
wondered if that related to the issue you raised last week about
the difficulty of doing something before it's completed in the
audit process that happens after; in other words, the advice that
you provide afterwards to legislators.
Mr Peters:
I'd like to deal with this in two questions. I think the
reference I made last time-and I hope I'm not referring to the
wrong thing, and correct me if I do-was to my office actually
being involved in deals before they are completed, from the point
of view that it would interfere with my independence. However,
from the perspective of deals of this nature, I would think that
our involvement would probably be of assistance because my client
is different; in other words, in the other situation it would be
the ministry asking us to be involved, not you. This time you are
the client, and I report to them, and so my independence is
safeguarded.
The Chair:
Any other questions? Are you ready for the vote, then, on the
amendment?
Ms Martel:
Can we have a recorded vote?
The Chair:
Recorded vote.
AYES
Hastings, Martiniuk, Munro,
Mushinski.
NAYS
Dombrowsky, Levac,
Martel.
The Chair:
That amendment is carried.
Are we ready to vote on the
motion, as amended? All those in favour of the motion, as
amended? Opposed? That's carried.
