COMMITTEE BUSINESS

CONTENTS

Thursday 12 October 2000

Committee business

STANDING COMMITTEE ON PUBLIC ACCOUNTS

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.

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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.

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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.

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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."

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

It being 12 o'clock, we stand adjourned.

The committee adjourned at 1159.