ENERGY COMPETITION ACT, 1998 / LOI DE 1998 SUR LA CONCURRENCE DANS LE SECTEUR DE L'ÉNERGIE
CONTENTS
Monday 5 October 1998
Energy Competition Act, 1998, Bill 35, Mr Wilson / Loi de 1998 sur la concurrence dans le secteur de l'énergie, projet de loi 35, M. Wilson
STANDING COMMITTEE ON RESOURCES DEVELOPMENT
Chair / Présidente
Mrs Brenda Elliott (Guelph PC)
Vice-Chair / Vice-Président
Mr Peter L. Preston (Brant-Haldimand PC)
Mr David Christopherson (Hamilton Centre / -Centre ND)
Mr Ted Chudleigh (Halton North / -Nord PC)
Mr Sean G. Conway (Renfrew North / -Nord L)
Mrs Brenda Elliott (Guelph PC)
Mr Doug Galt (Northumberland PC)
Mr John Hastings (Etobicoke-Rexdale PC)
Mr Pat Hoy (Essex-Kent L)
Mr Bart Maves (Niagara Falls PC)
Mr Peter L. Preston (Brant-Haldimand PC)
Substitutions / Membres remplaçants
Mr John R. Baird (Nepean PC)
Mr Steve Gilchrist (Scarborough East / -Est PC)
Mrs Helen Johns (Huron PC)
Mr Wayne Lessard (Windsor-Riverside ND)
Also taking part / Autres participants et participantes
Ms Cynthia Brandon, counsel, Legal Services Branch,
Ministry of Energy, Science and Technology
Mr Steve Dorey, ADM and chief economist,
Ministry of Finance
Ms Malle Hanslep, solicitor, Legal Services Branch,
Ministry of Finance
Mr Bill McLean, senior policy analyst,
Taxation Policy Branch, Ministry of Finance
Hon Jim Wilson, Minister of Energy, Science and Technology
Clerk / Greffière
Ms Donna Bryce
Staff / Personnel
Mr Doug Beecroft, legislative counsel
The committee met at 1530 in committee room 1.
ENERGY COMPETITION ACT, 1998 / LOI DE 1998 SUR LA CONCURRENCE DANS LE SECTEUR DE L'ÉNERGIE
Consideration of Bill 35, An Act to create jobs and protect consumers by promoting low-cost energy through competition, to protect the environment, to provide for pensions and to make related amendments to certain Acts / Projet de loi 35, Loi visant à créer des emplois et à protéger les consommateurs en favorisant le bas prix de l'énergie au moyen de la concurrence, protégeant l'environnement, traitant de pensions et apportant des modifications connexes à certaines lois.
The Vice-Chair (Mr Peter L. Preston): It is 3:30. We were going to call the meeting to order, but we will not conduct any business for a five-minute period in order to allow the opposition parties to arrive. If they do not arrive in five minutes, we will continue with our business.
The committee recessed from 1530 to 1535.
The Vice-Chair: As the meeting was brought to order at 3:30 and we gave five minutes' leeway, it is now 3:35. We're continuing with clause-by-clause of Bill 35.
At the last meeting we left off with -- I'll call it amendment 24, a Liberal amendment that's already been read and somewhat discussed. Are there any further comments?
There being none -- this is the new section -- all in favour of the new section? All opposed? The amendment doesn't carry.
Mr Doug Galt (Northumberland): I beg your pardon?
The Vice-Chair: The amendment doesn't carry.
Mr Galt: Okay. Thank you.
The Vice-Chair: You weren't accusing me of making a mistake, were you?
Mr Galt: No, no. Far be it from me to accuse the Chair of a mistake. I just needed to understand.
The Vice-Chair: Government motion, number 26 as numbered in your book.
Mrs Helen Johns (Huron): I move that section 37 of the Electricity Act, 1998, as set out in schedule A to the bill, be struck out and the following substituted:
"Emergency plans
"37(1) The minister shall require the IMO to prepare and file with the minister such emergency plans as the minister considers necessary.
"Same
"(2) The minister may require a market participant to prepare and file with the minister such emergency plans as the minister considers necessary.
"Coordination of plans
"(3) The IMO shall assist in coordinating the preparation of plans under subsections (1) and (2).
"Implementation
"(4) The minister may direct the IMO or a market participant to implement an emergency plan filed under subsections (1) or (2), with such changes as the minister considers necessary.
"Nuclear generation facilities
"(5) Every generator that owns or operates a nuclear generation facility shall file with the minister a copy of any emergency plans relating to the facility that are filed with the Canadian Nuclear Safety Commission.
"Same
"(6) Until section 74 of the Nuclear Safety and Control Act (Canada) comes into force, the reference in subsection (5) to the Canadian Nuclear Safety Commission shall be deemed to be a reference to the Atomic Energy Control Board."
What's happening in this section is that we are removing the reference to nuclear power plants as a result of the Atomic Energy Control Board coming before us and their concerns that this was under their mandate and not the provincial government's.
The Vice-Chair: Other comments? Further debate?
All in favour? Opposed? Carried.
Shall section 37, as amended, carry? Carried.
Government motion, page 27.
Mrs Johns: I move that subsection 38(1) of the Electricity Act, 1998, as set out in schedule A to the bill, be struck out and the following substituted:
"Powers of entry
"(1) A transmitter or distributor may, at reasonable times, enter land on which its transmission or distribution system is located,
"(a) to inspect, maintain, repair, alter, remove, replace or disconnect wires or other facilities used to transmit or distribute electricity; or
"(b) to install, inspect, read, calibrate, maintain, repair, alter, remove or replace a meter."
This has to do with the right of access to public roads and highways. We heard a fair amount of this from the Municipal Electric Association and the utilities that came before us, and we're trying to make consistent clauses (a) and (b) of the proposed amendment.
The Vice-Chair: All in favour? Opposed? Carried.
Section 38, as amended: Shall it carry? All in favour? Opposed? Section 38 shall carry, as amended.
Government motion, number 28.
Mrs Johns: I move that the Electricity Act, 1998, as set out in schedule A to the bill, be amended by adding the following section:
"Public streets and highways
"38.1(1) A transmitter or distributor may, over, under or on any public street or highway, construct or install such structures, equipment and other facilities as it considers necessary for the purpose of its transmission or distribution system, including poles and lines.
"Inspection, etc.
"(2) The transmitter or distributor may inspect, maintain, repair, alter, remove or replace any structure, equipment or facilities constructed or installed under subsection (1) or a predecessor of subsection (1).
"Entry
"(3) The transmitter or distributor may enter the street or highway at any reasonable time to exercise the powers referred to in subsections (1) and (2).
"Employees, etc.
"(4) The powers of a transmitter or distributor under subsections (1), (2) and (3) may be exercised by an employee or agent of the transmitter or distributor, who may be accompanied by any other person under the direction of the employee or agent.
"No consent required
"(5) The exercise of powers under subsections (1), (2) and (3) does not require the consent of the owner of or any other person having an interest in the street or highway.
"Identification
"(6) A person exercising a power of entry under this section must on request display or produce proper identification.
"Notice, compensation, etc.
"(7) If a transmitter or distributor exercises a power of entry under this section, it shall,
"(a) provide reasonable notice of the entry to the owner or other person having authority over the street or highway;
"(b) in so far as is practicable, restore the street or highway to its original condition; and
"(c) provide compensation for any damages caused by the entry.
"No compensation
"(8) Subject to clause (7)(c), the transmitter or distributor is not required to pay any compensation in order to exercise its powers under subsections (1), (2) and (3), and the Expropriations Act does not apply in respect of anything done pursuant to those powers.
"Location
"(9) The location of any structures, equipment or facilities constructed or installed under subsection (1) shall be agreed on by the transmitter or distributor and the owner of the street or highway, and in case of disagreement shall be determined by the board.
"Application of subsection (9)
"(10) Subsection (9) does not apply if section 91 of the Ontario Energy Board Act, 1998 applies."
What we have here is, we're talking about road allowances. Again, this was requested by the Municipal Electric Association and the specific utilities who came before us in Ontario Hydro. We're trying to ensure that there are rights to be able to access roads and allowances without compensation.
The Vice-Chair: Shall section 38.1 carry? All in favour? Opposed? Section 38.1 is carried.
Number 30, a government motion.
Mrs Johns: I move that subsections 39(1) and (2) of the Electricity Act, 1998, as set out in schedule A to the bill, be struck out and the following substituted:
"Telecommunications services
"(1) If part of a transmission or distribution system is located on land with respect to which the transmitter or distributor has an easement or other right to use the land, the transmitter or distributor may,
"(a) use the land that is subject to the easement or other right for the purpose of providing telecommunications service; or
"(b) enter into agreements with other persons, including affiliates of the transmitter or distributor, authorizing them to use the land that is subject to the easement or other right for the purpose of providing telecommunications service.
"Same
"(2) Subject to subsection (2.1), subsection (1) applies despite any other act and despite any agreement or instrument to the contrary.
"Same
"(2.1) Clause (1)(a) is subject to section 70 of the Ontario Energy Board Act, 1998.
"No compensation
"(2.2) The transmitter or distributor is not required to pay any compensation for attaching wires or other telecommunications facilities to a transmission or distribution pole pursuant to clause (1)(a).
"Same
"(2.3) A person who is authorized to use land pursuant to an agreement entered into under clause (1)(b) is not required to pay any compensation, other than compensation provided for in the agreement, for attaching wires or other telecommunications facilities to a transmission or distribution pole pursuant to the agreement."
We heard a little bit in the committee about telecommunication issues. We're trying to ensure that there is a right to be able to use the poles for telecommunications.
The Vice-Chair: Further discussion? Shall this section carry? Carried.
Shall section 39, as amended, carry? Carried.
Number 32.
Mrs Johns: I move that section 40 of the Electricity Act, 1998, as set out in schedule A to the bill, be struck out and the following substituted:
"Easement over lands sold for taxes: transmitters and distributors
"40(1) Despite any other act, if land that was or is subject to easements, ways, rights of way or entry, licences or rights to maintain property thereon, owned by or belonging to a transmitter or distributor, has been or is sold for taxes, or in respect of which a tax arrears certificate has been or is registered, such easements, ways, rights of way or entry, licences, or rights to maintain property shall be deemed not to have been or be affected by the sale or registration.
"Same: generators
"(2) Despite any other act, if land that was or is subject to flooding rights owned by or belonging to a generator has been or is sold for taxes, or in respect of which a tax arrears certificate has been or is registered, such flooding rights shall be deemed not to have been or be affected by the sale or registration."
This amendment was put forward to ensure that the generator did not lose any flooding rights as a result of properties being sold for tax arrears.
The Vice-Chair: Further discussion?
Mr Wayne Lessard (Windsor-Riverside): I'd like to know what flooding rights generators have now and what the reason was for the change in the way the section's set out right now. It looks like it referred to flooding rights originally in section 40. Now it's being dealt with so that flooding rights are in a separate subsection. I wonder if we could get an answer to that.
Mrs Johns: You're quite right. In subsection 40(1) we took out flooding rights -- it was in the second line -- and then we put in subsection (2), which talks about flooding rights specifically.
Ontario Hydro raised this issue, as well as the MEUs. They both own generation facilities, and they were very concerned that as properties got sold, as a result of not having titles on the land -- they have always had flooding rights -- they would be lost. We wanted to ensure that they continued on if they had them at present.
Would you like more of a legal opinion on that?
Mr Lessard: I just wondered whether it gives generators any additional rights to the ones they may have had before.
Ms Cynthia Brandon: No, it doesn't. It only protects what they have now, or what they may acquire, but it relates to protecting that flooding right in the event of a tax sale of that property. The reason we had to split out flooding rights is because section 40 as drafted right now only refers to transmitters and distributors, and in further discussions we've realized that flooding rights really relate to generators and not transmitters and distributors, so it's been carved out and made a separate subsection for flooding rights.
The Vice-Chair: Further discussion? Shall the amendment carry? All in favour? Opposed? Carried.
Shall section 40, as amended, carry? Section 40, as amended, is carried.
Shall section 41 carry? There are no amendments to it. All in favour? Opposed? Section 41 is carried.
Shall section 42 carry? Opposed? It's carried.
1550
Government motion, page 33.
Mrs Johns: I move that subsections 43(1) and (2) of the Electricity Act, 1998, as set out in schedule A to the bill, be struck out and the following substituted:
"Unregistered rights
"(1) If, immediately before the repeal of section 48 of the Power Corporation Act under the Energy Competition Act, 1998, land was subject to a right referred to in subsection 48(2) or (3) of the Power Corporation Act, the land continues to be subject to the right until the right expires or until it is released by the holder of the right.
"Transfer of right
"(2) A right referred to in subsection (1) may be transferred to,
"(a) the generation corporation;
"(b) the services corporation;
"(c) a subsidiary of the services corporation that is authorized to transmit or distribute electricity;
"(d) a corporation established pursuant to section 130 that is authorized to transmit or distribute electricity; or
"(e) a subsidiary of a corporation established pursuant to section 130, if the subsidiary is authorized to transmit or distribute electricity."
What we're doing here is that we're narrowing who these easements can be passed to, so we've specifically listed them under (a) to (e).
The Vice-Chair: Further discussion? Shall the amendment carry? Opposed? Carried.
Shall the section, as amended, carry? Opposed? The section, as amended, carries.
Page 34.
Mrs Johns: I move that section 44 of the Electricity Act, 1998, as set out in schedule A to the bill, be amended by striking out "any property" in the fifth line and substituting "any wooden transmission or distribution pole."
We've put this motion forward because we feel that signs on poles can create a danger to people who might be working on the poles. It's really a safety issue that was brought forward by the MEA and Ontario Hydro. Of course, this might affect us all in campaign time.
Mr Lessard: This is a restriction, I guess, by making this amendment so that it only covers wooden transmission and distribution poles and not any property, so it actually narrows the way it's currently set out.
Mrs Johns: It does.
The Vice-Chair: Further discussion? Shall the amendment carry? Opposed? Carried.
Shall the section, as amended, carry? Section 44 carries, as amended.
Now we're on page 35, an NDP motion.
Mr Lessard: I move that section 45 of the Electricity Act, 1998, as set out in schedule A of the bill, be amended by adding the following subsections:
"Share ownership
"(4) No person other than Her Majesty in right of Ontario or an agent of Her Majesty in right of Ontario shall hold or acquire the voting securities of a designated corporation.
"Directors
"(5) The directors of a designated corporation shall be appointed by the Lieutenant Governor in Council."
The purpose of this section is to keep Genco and Servco public, and it provides that cabinet is required to appoint their directors. As I've indicated on previous occasions, I really feel as though it is this government's agenda that they intend on privatizing Ontario Hydro.
The reason I feel that way is because they've appointed Sir Graham Day to the board of directors of Ontario Hydro, a person who is well known for his privatization experience in Great Britain; also, the inclusion of the privatization section in the job description of the new president for Ontario Hydro, Ron Osborne. Notwithstanding the minister's assurances that privatization wasn't part of the government's agenda and wouldn't be looked at for at least five years, when I asked him about whether there was any restriction on privatization within the bill itself, he clearly indicated that there wasn't.
There isn't anything to stop the minister or the government, the day after this legislation is passed, from pursuing an agenda to privatize Ontario Hydro. That's where we think this is heading, and this section is being proposed to put some protection in the legislation to prohibit the privatization of Ontario Hydro.
Mrs Johns: The government has been quite clear that we are open to public-private partnerships initially. It's important for us all to remember that even the Power Workers' Union is talking about making some creative arrangements to get Bruce A back and ticking as quickly as possible. As a result of the Liberal leader being in Bruce the other day and promising that he was going to do as much as he could to get Bruce A back up and running, I think it's important for all of us to recognize that we may need expertise in that plant or we may need different skill sets than we have now, and this motion that the member has put forward would limit any kind of public-private partnership where there was an equity position being taken.
Mr Sean G. Conway (Renfrew North): This is an important amendment and I want to raise my concerns about it. We have a situation today where the provincial utility is, I think, virtually bankrupt. It faces some exciting possibilities, but it faces some absolutely impossible short and intermediate financial and related pressures.
I appreciate where the member, Mr Lessard, is coming from, and I believe there is quite an important role for the public sector in the electricity business as we move forward. Having said that, Ontario Hydro was never intended to be the monopoly that it became. I think it is incumbent on this Legislature, or any Legislature in the next few years, to redress the monopolistic imbalance that's developed over the last 45, 50 years.
I think the member for Huron makes a good point. If you just look at the nuclear division -- and remember; I think it is a fair thing to say that the single biggest aspect of the company today is the nuclear division. It's where most of the generation is to be found, it's where most of the debt is to be found, and it's where most of the trouble is to be found.
We face some very difficult choices in terms of what to do with that nuclear power division. None of the choices is easy, including presumably walking away from the whole damn mess at a cost of God knows how many billions of dollars, and that's certainly not my instinct. I suppose if the federal regulator tells us we can't do anything else or that the economics of the situation suggest we can't do anything else, then very reluctantly we would have to do so.
But we have a huge investment in those plants and we've got a very large problem in terms of trying to develop and maintain an operational culture that apparently we're going to need to run those plants with a much greater degree of efficiency than we've seen almost since the beginning.
The problem I have with the amendment, I say to my friend from Windsor, is that the way I read the amendment it would preclude the kind of partnership that I think we need, that we're probably going to want. I've got an idea of what those partnerships might look like, but I don't expect that Her Majesty in right of the government of Ontario is going to be solely able, in operational or in financial terms, to recover that multi-billion dollar nuclear power division on its own. I'd like some help on that, Mr Lessard.
1600
In addition, this takes me back as well to the problem I have with market power, which I think is a very serious problem in the current legislation, because what the government says it wants to do and what it's proposing in legislation are not the same thing. In some ways, I think they're contradictory. Let me explain that.
The government says it wants competition but it's keeping Genco together. Because Hydro understands the contradiction that position highlights, it is saying, "We will then back away from the Ontario market to the tune of 30% to 40% and we're going to go into the United States." If you look at the testimony advanced by Mr Osborne and others, they say in that connection, and not surprisingly, "We will swap, lease or otherwise dispose of assets." That's what you're going to have to do if you're going to move out of the Ontario market to the extent of 30% or 40% to try to deal with the problem of market power.
I see this amendment as creating some very real problems there. I can imagine what Mr Lessard is thinking, "Yes, and I wouldn't do it the way they're doing it," but I see some problems around the market power issue. I understand that the member is concerned, and I think he's quite legitimately concerned, about the experience other jurisdictions have had, that deregulation is essentially code for the great barbecue, the great potlatch of very valuable public assets that are put on the market and sold off at fire sale prices. You would not have to be very cynical to come to the conclusion, on the basis of experience outside of Ontario, that there is good, hard evidence to suggest that that is a tendency that these kinds of changes present.
But I can imagine, I say to my friend from Windsor, situations in the coming years where we might very well want to see the transfer of some assets, some of them not very large, from Ontario Hydro to local public utilities. I can imagine some circumstances where we might see the development of some local or regional partnerships that involve the asset base of either Genco or Servco that involve a partnership between two aspects of the public sector, one provincial in the name of Hydro, one local in the name of the Belleville PUC or Trent Valley PUC, if such a thing exists.
I've probably said enough, but the concern I have is that the amendment would foreclose or preclude the kind of partnerships that I think we're going to have to get, most especially in the nuclear power division, which is the great sort of sleeping -- not so sleeping -- dog that sits underneath all of this. I have a real problem with the amendment, because I think it would place an unfair burden on the kind of choices that whomever is responsible for Hydro is going to want to have to exercise the good judgment and the decision-making that's going to be required.
I repeat for the last time, these choices aren't going to be very pretty, and I don't want to minimize that, but I think there has to be some candid acknowledgement. Ms Johns made the point that a year ago the Power Workers' Union actually lobbied the committee and said they were interested perhaps in a partnership around the nuclear power division. I'm not so sure that I think that's a good idea, but I don't know that I'd want to just preclude it, as I think this particular amendment might do.
The Vice-Chair: Further discussion? Shall the amendment carry? All in favour? Opposed? The amendment's down.
Shall section 45 carry? Section 45 carries.
Shall sections 46 and 47 carry? Carried.
Page 36, a Liberal motion.
Mr Conway: I move that the Electricity Act, 1998, as set out in schedule A of the bill, be amended by adding the following section:
"Retirement of stranded debt
"47.1 Until the Minister of Finance determines under subsection 79(6) that the residual stranded debt has been retired, all revenues of the Generation Corporation, the Services Corporation and their subsidiaries that exceed operating costs shall be paid to the financial corporation towards retirement of that debt."
This amendment reflects the testimony of some of the deputants. Looking at my notes, I think it was the association --
The Vice-Chair: Mr Conway, that amendment is out of order. Pursuant to standing order 56, "Any bill, resolution, motion or address, the passage of which would impose a tax or specifically direct the allocation of public funds...shall" only "be proposed by a minister of the crown."
Page 37.
Mr Conway: OK. Donna, do we really have to read these things?
The Vice-Chair: Yes, they have to be read once. They're supposed to be read twice. You've never been adverse to talking, sir.
Mr Conway: I move that the --
Mr Lessard: Maybe we should find out if it's going to be out of order first.
Mr Conway: I don't think this one is.
The Vice-Chair: You're all right so far.
Mr Conway: I move that the Electricity Act, 1998, as set out in schedule A of the bill, be amended by adding the following sections:
"Hearing re single entity
"47.2(1) The board shall hold a public hearing to determine whether the ownership and operation of transmission systems and distribution systems through one or more subsidiaries of the Services Corporation has prevented or is likely to prevent some or all customers from gaining benefits that could be achieved.
"Time for hearing
"(2) The hearing shall begin after the first anniversary of the coming into force of section 45 but before its second anniversary, and shall be completed by March 30, 2002.
"Time for report
"(3) The board's report on the hearing, which may include any recommendations that the board considers appropriate, shall be made public within 60 days after the hearing is completed.
"Response
"(4) The government of Ontario and the Services Corporation shall each respond to the report and shall make their responses public within 60 days after the report is made public.
"Additional powers of board
"(5) On the completion of the hearing, the board may amend a licence or make an order in the same way as on the completion of a review under subsection 36(2) or (3).
"Further hearing, separation of transmission and distribution systems
"47.3(1) After the responses of the government of Ontario and the Services Corporation have been made public under subsection 47.2(4), the board may hold a further hearing to determine whether the Services Corporation should be required to separate the ownership and operation of transmission systems and distribution systems.
"(2) On the completion of the hearing, the board may make an order requiring the services corporation to separate the ownership and operation of transmission systems and distribution systems and may give all necessary directions in that connection."
This, for me, is again a very important issue. We had a number of presentations on this subject. This is the concern around the potential cross-subsidization within Servco of two aspects of the electricity business. There is quite a legitimate concern that has been identified that because Servco is going to be as large and as significant as it is, there should be a firewall established between the two parts of the business so that there is not only no potential but no opportunity for cross-subsidization.
I can't imagine, since one of the principles we've talked about throughout the piece -- and I think it's a principle that is fundamental to the effective working of this policy -- is that there would be a level playing field, that there would be no opportunity, particularly in something as large and as powerful as Servco, to cross-subsidize.
I have actually made this amendment a little softer than I would have liked, because really all the amendment asks for is that the energy board be required within a specific time frame to hold a public hearing on whether the operation of transmission and distributions functions as a single entity is leading to uncompetitive practices in the new marketplace. The amendment sets out a time frame in which that hearing is to take place, and if in the opinion of the board there is uncompetitive or other disagreeable behaviour, the board is empowered to take the necessary next steps.
1610
I think this is a very modest proposal that we would want to embrace if we believe we want a competitive marketplace that looks like a competitive marketplace and behaves like a competitive marketplace. It seems to me that in this particular connection it is just not acceptable that we would go into the new world order allowing the Services Corp to operate transmission and distribution functions within the same operation. I would have thought that the weight of the logic of treasury bench would have made this amendment a government amendment, or made it part of the bill. I really do think there has to be a greater separation of those two functions in the interest of a properly functioning marketplace. It goes back to what Macdonald recommended, among others. It's a fairly modest proposal because all I'm asking for is that within a time frame, not later than the year 2002, the OEB have a hearing to inquire into the potential for uncompetitive practices, and should they find those practices, to order a further disaggregation of Servco along the two different functions.
Mrs Johns: I want to comment on a couple of issues that were raised by the member opposite. I think, first of all, that the section does a little more than just make sure that the transmission company keeps separate and distinct accounting records. If that was the case he would have that in clause 69(2)(f), which requires the licensee to maintain specific accounting records. We were concerned about that ourselves and so what we did was put an amendment through in section 69 of the Ontario Energy Board Act, saying that the board could ensure we had compliance with codes of conduct that would be set out in a licence. We have tried to strengthen that to ensure that there are separate and distinct records and that there's no cross-subsidization. We even took into effect affiliates in our amendment to section 69 of the Ontario Energy Board Act.
What I still see as the problem with this, and this goes back to the abuse of market power that we talked about in the generation side at the end of the last day, is that the Ontario Energy Board has this ability at any time to go in and look at the transmission company to ascertain if they're dealing within their licence requirements, if they're dealing effectively or stifling competition or anything along that line. They have the ability to do that and they can do that at the direction of the Market Surveillance Panel. They can do it as a result of the minister or any party who comes out and raises some concerns about how the marketplace is working. So the Ontario Energy Board has its authority. It is certainly our intention for them to use that authority from the time the competitive marketplace starts, or these new companies come about, right through the future, not to have to have this tiering before 2002 but to be working at this all the time. It's very important for all of us that the market is competitive and that we're allowing competition in the marketplace in both generation, transmission and distribution.
Mr Conway: I again want to make a couple of points. The language of my amendment is fairly straightforward. It simply would require that the board hold a hearing to ascertain whether or not there are uncompetitive practices occurring because Servco is going to be home to both transmission and distribution. It just seems to me self-evident that if you really believe what the government says it believes, you would want to do this as a minimum. I was reading in the Globe and Mail on the weekend the Alberta story about market power. Five years out it appears to be a real mess, where they're looking at buying businesses out of the pool this winter because they've got a situation where they've now got too much demand for the supply available. I won't bore you with the details if you haven't read the Saturday piece. I'm sure it doesn't tell the whole story, but this is five years out and they're having these kinds of problems. They're going to have one hell of a rough winter.
It appears to be market power. The government is trying to mitigate the market power of three big players. It's not one, but three, and not in the first year, not in the second year, but in the third, fourth and fifth year. It's a pretty interesting story. I hope some of what the reporter highlighted in the paper does not come to pass. It certainly looks like business is going to be more than a little upset.
This market power issue is critical and it's central. I think the government is right when it says, "We have got to break the monopoly." You're absolutely right on that. That's why at second reading I supported this. But the more I hear and the more I see, the less convinced I am that the instruments we're choosing to give effect to the policy are going to do nearly enough to meet the objective that I think we all share. The problem we've got is there is a monopoly, a monopoly that was never intended to be a monopoly but became one, so we want to reasonably deal with that.
I think the member from Windsor makes a good point. I'm not throwing the baby out with the bathwater. I think public power is going to continue to be an important part of Ontario's future. I just don't think it should be the kind of public power we've seen, particularly in the post-war period.
Just think about some of that testimony we heard from people like the folks down in Sarnia and elsewhere about their concerns about Servco. In fact, at the hearings, when we had eight glorious days in August when the whole world was paying attention, I was struck by the number of people, after the hearings were over -- I won't embarrass them by naming them but they're pretty powerful people, well known and well regarded by the government -- who said to me: "You're not paying nearly enough attention to Servco. There's a lot more going on in Servco than I think you people understand."
I'm just a generalist, but a lot of those people were saying, "As a minimum, if you believe in a competitive marketplace, surely you want to create, and be seen to be creating, a separation between the two functions of Servco." I don't know what the argument against that would be, particularly if we're all interested in a competitive marketplace. There may be one. The minister's here and I'm delighted for it. I'd like to hear it, because where Hydro is concerned, you've got to be from Missouri. I just look at this and say, "They keep Genco together to do a variety of things." If Mr Lessard is excited now, he'll really be excited about three years from now, even more so if he's the minister.
Mr Galt: I think we'll all be very excited.
Mr John R. Baird (Nepean): There's that potential there?
Mr Conway: It doesn't matter which one of us is minister. This thing is going to be a bag of very tough choices.
Mr Steve Gilchrist (Scarborough East): I hadn't realized you were crossing the floor.
Mr Conway: That's the kind of arrogance I always like to hear, and I've heard a lot of it around here in 23 years. What is it they say? Pride goeth before a fall.
The Vice-Chair: Let's stay on the subject, gentlemen.
Mr Conway: Not only are we leaving Genco with a massive market power, but the government seems strangely reluctant to be seen to be creating some separation between the transmission and distribution functions of Servco. I'd like somebody to help me with that.
1620
Hon Jim Wilson (Minister of Energy, Science and Technology): Briefly, what we're trying to do is keep the backbone and spine of the Hydro system in this province in place, Mr Conway. To divide transmission and distribution in Servco just doesn't follow any sense, in my mind. It's the monopoly section of the services company. You want to keep it together and protect it for all Ontarians. That's what we're doing.
Mr Conway: I guess, Minister, I would have been more inclined to believe that prior to hearing Mr Osborne, but when I saw the predatory side in Mr Osborne here in early August -- my friend Les is animated. I want to hear from Les because he's obviously -- I'm just looking at some of the testimony. A number of the deputants dealt with this.
For me, one of the big surprises in this exercise was I thought, going into this, that what we were going to see in southern Ontario was a reduction of Ontario Hydro Retail. I think that was the view of most people. That was certainly the prevailing wisdom and seems to me to be reasonable. But we're not going to get that apparently, and we have lots of evidence in the hearings to suggest that we're not going to get that. If we're going to get an aggressive, expansive Servco, for that alone I want there to be some separation, just so there is no possibility that people are going to play games. They're certainly going to be in a favoured position to do that.
I've heard you speak into the microphone. Just do it directly. It would make it a lot easier.
The Vice-Chair: Further comment?
Mr Conway: Can somebody just respond to that?
Mrs Johns: I think you're aware, Mr Conway, that with the act the way it is, we're able to separate the retail and the distribution sides through clause (f) and other sections within the act. What we've done here is ensure that the Ontario Energy Board has more teeth, more ability to control any of that, and to ensure that the licensed codes of conduct are implemented and that Servco is meeting the requirements set out by the Ontario Energy Board.
I think what you're forgetting here, and what people forgot throughout these hearings, is that the Ontario Energy Board has become a much stronger entity. I think we heard that from the Ontario Energy Board, that they're going to be there to ensure that licensing infractions are looked after and carefully reviewed on a very timely basis.
Mr Conway: It was on August 19, 1998, at Mississauga that a certain Karl Wahl -- again, no evident enemy of this government -- testified as follows, reading from page 7 of his testimony: "Section 47 of the EA," the Electricity Act, "contemplates that Ontario Hydro Servco can, through its subsidiaries, include both retail and wires. Similarly, there is no requirement that Ontario Hydro Servco's transmission and distribution functions be placed in separate subsidiaries. This," he says, "is inconsistent with the expectation that MEUs will completely segregate these functions. Transparency is lost."
Mr Wahl knows this business a lot better than I do. I think he makes a good point. He wasn't the only one to make that point. Have we nothing to say to Mr Wahl? Is he completely off the beam here?
Hon Mr Wilson: I'm not going to dignify that line of questioning. Mr Wahl is on the Market Design Committee. He well knows the government's position on this.
Mr Conway: I just picked that one. There are others. This is a very common complaint about this particular provision and it seems to me not an unreasonable one. The argument the government has advanced, and I think it's not a bad argument, is the importance of transparency, the importance of a level playing field, the importance of disaggregation, particularly for MEUs. Those are arguments that I think are important, and yet when we look at Servco, it's getting a different treatment. It's a very big player going into this.
Hon Mr Wilson: Servco, Mr Conway, gets treated the same as the local MEUs in terms of distribution separation from retail competitive businesses. There's absolutely not two rules here. Your amendment, with all due respect, doesn't make sense. Perhaps it's a misinterpretation of what some of these witnesses said.
Mr Conway: My amendment is very straightforward. The amendment simply says that I want the energy board to have a hearing two years into the competitive marketplace. That's why the amendment is so tame. It simply says that there be a requirement that the regulator have a hearing to decide whether or not, in the early going, there is any behaviour on the generation company that would give some concern about anti-competitive practices. With all due respect, I say to my friend the minister, that is a pretty straightforward, fairly tame amendment. I think your charge may be more aptly put to some of my other amendments. I think this one this one, seriously, is a --
Hon Mr Wilson: I've tried my very best to entertain as many of your amendments as possible; it's just that they have to be consistent with the consensus that has been reached in this province. The parliamentary assistant, Mrs Johns, has already made it clear that the Ontario Energy Board can have a hearing at any time. We don't need to set dates on two years down the road. Certainly it's in the interest of customers, to ensure there is no cross-subsidization, that the Ontario Energy Board should be free at any time to have a hearing, 24 hours a day, 365 days a year. That's what this bill allows, should they so desire.
Mr Lessard: When we started out on this, when the bill was first introduced, one thing we were all consistent with respect to was that we were interested in having competition in the energy market in Ontario. We're also interested in having lower price and I know that the minister said that on more than one occasion and in fact put that in the title of the bill. We've had this debate about having that sort of protection in the objects of the bill; however, the government members don't seem to be inclined to be interested in putting that in the bill, for whatever reason.
I understand the minister's expression of willingness to consider seriously the amendments, not only by my friend Mr Conway but by the NDP as well. However, we've been at this, starting the third day now, and not one of our amendments has been considered seriously as yet and I don't expect that is going to change before we're finished.
I think the amendment that's been put forward by Mr Conway is a very reasonable one. It really deals with the consistent criticism we heard with respect to this bill, and that was the fear that we weren't going to end up with a competitive market after this legislation was passed. This requires that the Ontario Energy Board have a hearing to consider that. I think that's a reasonable request so there is some review later on down the road to address those concerns. I think it would give everybody a lot of comfort if the Ontario Energy Board were charged to address the concerns we heard consistently that this wasn't going to lead to a competitive energy market.
It ensures there is some transparency. We heard from the MEUs. They were critical about there being different rules for Servco than for them. They were concerned about market power for Servco as well. I think the member makes a good point about that, in order to have some transparency, to have some comfort for the people who raise those concerns. Mr Conway and I were here to hear every one of those people as they made their presentations. Many of them had a great deal of expertise and experience when they made those points, and I think that to ignore them, we do that at our peril.
The Vice-Chair: Further comments?
Shall sections 47.2 and 47.3 carry? Opposed?
Mr Gilchrist: Sorry. Section or amendment?
The Vice-Chair: These are new sections, 47.2 and 47.3. They're new sections and we will either adopt them or drop them in their entirety. Opposed?
On to page 39, a government motion.
1630
Mrs Johns: These are finance amendments that are happening now. As we have already agreed, I'll be reading the motions and the parliamentary assistant to finance will be talking about them.
The Vice-Chair: Section 48: Shall sections 48, 49 and 50 carry? Carried.
Now we're at subsection 51(3).
Mrs Johns: I move that subsection 51(3) of the Electricity Act, 1998, as set out in schedule A to the bill, be amended by inserting "Despite subsection 2(3) but subject to the regulations" at the beginning.
The Vice-Chair: Comments?
Mr Baird: This amendment would simply give the regulatory power to change the name "Ontario Hydro" in a good number of other acts, a good number of private acts, for example, which contain the name "Ontario Hydro."
The Vice-Chair: Other comments?
Shall the amendment carry? Carried.
Shall section 51, as amended, carry? Carried.
Mrs Johns: I move that subsection 52(1) of the Electricity Act, 1998, as set out in schedule A to the bill, be amended by striking out "and" at the end of clause (c) and by adding the following clauses:
"(c.1) exercising and performing powers and duties under part VII;
"(c.2) effecting financings, including establishing trusts, corporations, partnerships or other entities for that purpose; and."
The Vice-Chair: Comments?
Mr Baird: This would do two things: One, it would allow Finco as the successor to Ontario Hydro for an interim period to act as the pension plan organizer for the two successor companies until those pension plans can be transferred to the new corporate entities; as well, it would authorize securitization if the new board saw fit to choose that financial instrument.
The Vice-Chair: Further comments?
Shall the amendment carry? Carried.
Shall section 51, as amended, carry? Carried.
Where did they get that one, section 52? All right.
Shall section 52, as amended, carry? Carried.
This is my first time with clause-by-clause. I can run any kind of a meeting, but this stuff is --
Mr Conway: You're doing very well, Mr Chair.
The Vice-Chair: Thank you very much, sir. I appreciate that. Next?
Mrs Johns: I move that the Electricity Act, 1998, as set out in schedule A to the bill, be amended by adding the following section:
"Property interests belonging to the crown
"53.1(1) Any interest of the Financial Corporation in real property that is not transferred under part X belongs to Her Majesty in right of Ontario.
"Financial Corporation may administer and dispose
"(2) The Financial Corporation may administer, deal with and dispose of any interest referred to in subsection (1) as the agent of Her Majesty in right of Ontario and section 58 applies to any revenues received by the Financial Corporation in that capacity.
"Rights under s. 43
"(3) For the purpose of this section, an interest in real property includes a right referred to in subsection 43(1)."
The Vice-Chair: We're going to go back to section 53. While I was being congratulated, you jumped in and took a step ahead.
Mrs Johns: I'm sorry.
The Vice-Chair: That's fine.
Shall section 53 carry? Carried.
Debate on 53.1?
Mr Baird: This simply clarifies that Finco is an agent of the crown.
The Vice-Chair: Further comment?
Shall the new section 53.1 carry? Carried.
Page 42, a government motion.
Mrs Johns: I move that section 54 of the Electricity Act, 1998, as set out in schedule A to the bill, be amended by adding the following subsection:
"Former directors cease to hold office
"(7) A person who was a member of the board of directors immediately before subsection (2) comes into force ceases to be a member of the board of directors when subsection (2) comes into force, but nothing in this subsection prevents the person from being reappointed."
The Vice-Chair: Comments?
Mr Baird: This just clarifies that Finco, as a successor company to Ontario Hydro, is going to be dealing with a rather small part of the operation that is currently done by Ontario Hydro and that the old members of the board would not continue on the new board, which is a very small mandate compared to the existing board.
The Vice-Chair: Further comment?
Shall the amendment carry? Carried.
Shall section 54, as amended, carry? Carried.
Sections 55 to 58: Shall they carry? Carried.
Mr Conway: On that, again I want to make a note. My impression is that this is a much more important aspect in this policy than the committee has understood. I don't think we've spent any time at all in the eight days hearing very much about Finco. I just, for the record, want to say that I suspect within a few years' time that oversight will probably be noted, because my impression is that this is a much more important proposition than the Legislature understands. Next?
The Vice-Chair: Noted, thank you.
Page 44.
Hon Mr Wilson: I move that section 59 of the Electricity Act, 1998, as set out in schedule A to the bill, be struck out and the following substituted:
"Special purpose account
"59(1) If the Lieutenant Governor in Council authorizes Her Majesty in right of Ontario to assume obligations under clause 112(1)(a), the Minister of Finance shall establish a special purpose account in the consolidated revenue fund for the purposes of this section.
"Dividends
"(2) Dividends paid to Her Majesty in right of Ontario in respect of shares of the Generation Corporation and the Services Corporation shall be paid into the account, less any amount that the Minister of Finance considers is required to pay obligations assumed by Her Majesty under clause 112(1)(a).
"Payment to Financial Corporation
"(3) Money paid into the account shall be paid out, at such times as the Minister of Finance may direct, to the Financial Corporation.
"Closure of account
"(4) Before this part is repealed under section 81, the special purpose account shall be closed and any money remaining in the special purpose account shall be paid out to the Financial Corporation."
The Vice-Chair: Comments?
Mr Baird: This amendment, in some direction, maybe goes back to both what Mr Lessard said earlier and Mr Conway's amendment, which was deemed out of order, in that it does address the concerns Mr Conway made in his amendment to 47.1 with respect to dedicating, albeit not as broad as Mr Conway suggested but perhaps a little bit more focused with respect to the dividends, that the dividends shall go to Finco to pay off the stranded debt, which is something that was brought up by a good number of presenters and it was a degree of taxpayer protection in this legislation which was some of what Mr Conway brought up in his earlier amendment.
The Vice-Chair: Further comments?
Mr Conway: I appreciate that. Let's come back to that, then. What is the scope of this amendment? I come back to page 36, my amendment which was ruled out of order. That amendment essentially would have directed that as long as there was a residual stranded debt to be retired, all of the revenues net of operating expenses of Genco and Servco would have been paid to Finco towards the retirement of that residual stranded debt.
The member for Nepean says that this amendment addresses that concern. It is not as wide in scope as my amendment which was ruled out of order. Just to be clear, what is the difference in terms of the scope of this amendment versus the one I offered which was ruled out of order? In other words, what's allowed to Finco in this amendment that was not allowed in the one that was struck down because it was out of order?
Mr Baird: I guess the difference would be between net income and dividends. If money would be leaving the company, would be leaving Genco, for example, in the form of a dividend, the government felt, as did a number, if not all, of the members of the committee and a number of presenters, that money should be dedicated by law towards paying off the stranded debt rather than going into the black hole of the consolidated revenue fund, to someone who might not want to pay off stranded debt with it. Your amendment was more broad, dealing with net income.
We all support the idea of competition, but the competition will require Genco and Servco to operate in a commercial environment, and they wouldn't be commercial companies if by legislation we would be making decisions on their boards in terms of what they do with net income. We are saying that if the money is coming out of the corporation in the form of a dividend, it would have to go to Finco to pay off that stranded debt, which goes a long way towards dealing with the concern you expressed in 47, in terms of your proposed amendment. It certainly was something I advocated quite strongly on as a degree of taxpayer protection. Perhaps it's self-evident and wouldn't be required, but why not wear a belt and suspenders on this one?
1640
The Vice-Chair: Further comment? Shall the amendment carry? Carried.
Shall section 59, as amended, carry? Carried.
Section 59.1.
Hon Mr Wilson: I move that the Electricity Act, 1998, as set out in schedule A to the bill, be amended by adding the following section:
"Corporations to hold shares
"59.1(1) The Lieutenant Governor in Council may cause corporations to be incorporated under the Business Corporations Act for the purpose of acquiring and holding shares in the Generation Corporation and the Services Corporation.
"Same
"(2) Shares in a corporation incorporated pursuant to subsection (1) may be acquired and held in the name of Her Majesty in right of Ontario by a member of the executive council designated by the Lieutenant Governor in Council.
"Crown agent
"(3) A corporation incorporated pursuant to subsection (1) is an agent of Her Majesty for all purposes.
"Dividends paid to crown agent
"(4) If an agent of Her Majesty in right of Ontario is paid dividends in respect of shares of the Generation Corporation or the Services Corporation, the agent shall pay the dividends to the Financial Corporation, less any amount that it considers is required to pay obligations it has assumed under clause 112(1)(a)."
The Vice-Chair: Comment?
Mr Baird: This is a complementary amendment to the last one, dealing with the debt-equity swap and the issue of dividends to Finco.
The Vice-Chair: Further comment?
Shall section 59.1 carry? Carried.
Shall section 60 carry? Carried.
Government motion, subsection 61(4).
Mrs Johns: I move that paragraph 1 of subsection 61(4) of the Electricity Act, 1998, as set out in schedule A to the bill, be struck out and the following substituted:
"1. Throughout the specified period, the Financial Corporation may issue, reissue, renew or replace securities issued under the order during the period if the maximum aggregate principal amount of the securities issued under the order and outstanding from time to time does not at any time exceed the maximum principal amount specified in the order."
The Vice-Chair: Comment?
Mr Baird: This is just a minor wording change; a few words were left out. What we wanted to do with respect to the short-term borrowing authority of Finco was simply to mirror the province's own short-term borrowing authority that's in the Financial Administration Act.
The Vice-Chair: Further comment?
Shall the amendment carry? Carried.
Amendment to subsection 61(5).
Mrs Johns: I move that subsection 61(5) of the Electricity Act, 1998, as set out in schedule A to the bill, be amended by striking out "by way of loan" in the fifth line.
The Vice-Chair: Comment?
Mr Baird: This amendment was required to clarify that Finco's borrowing under this section, which includes revolving and borrowing from the bank, is a little bit too restrictive and should be broadened. There are other instruments in terms of borrowing, whether it's a bank overdraft, and this just allows it to be less restrictive.
The Vice-Chair: Further comment?
Shall the amendment carry? Carried.
Shall section 61, as amended, carry? Carried.
Subsection 62(1).
Mrs Johns: I move that subsection 62(1) of the Electricity Act, 1998, as set out in schedule A to the bill, be struck out and the following substituted:
"Province may purchase securities, etc.
"(1) The Lieutenant Governor in Council may by order authorize the Minister of Finance to purchase securities of or make loans to the Financial Corporation at such times and on such terms and conditions as the minister may determine, subject to,
"(a) the maximum principal amount specified by the Lieutenant Governor in Council that may be purchased or advanced or that may be outstanding at any time; and
"(b) any other terms and conditions that are specified by the Lieutenant Governor in Council."
The Vice-Chair: Comments?
Mr Baird: This would simply allow the province to become involved as the maturity of the existing Ontario Hydro debt comes up. It would allow some cash-flow operations through the province, but there would be no net new financing from the CRF. It's just basically a cash-flow issue.
Mr Lessard: I'd like to know how this is supposed to operate in principle. I understand Mr Baird's comment, but what restrictions are there on that statement you made, that there wouldn't be any new funding? I don't see that in this section. Through this change, it could authorize the Minister of Finance to purchase securities up to a maximum amount. That's set wherever the government of the day happens to set it.
Failure of sound system.
Mr Baird: -- could assist Finco in terms of the repayment of those bonds.
The Vice-Chair: Pardon me. We were having trouble with the mikes. We're not having trouble with the mikes now. Carry on, John.
Mr Baird: Basically this would permit Finco to fund timely repayments of existing Ontario Hydro debt remaining with Finco, just strictly cash flow. Perhaps I could look to the officials. If the province wanted to lend Finco an excess of money, the province is the sole shareholder of Finco, so I suppose --
Ms Malle Hanslep: The change permits an order in council to authorize the borrowing up to a maximum amount, and it just clarifies that it can be a maximum amount that can be outstanding at any time, and it's to fund short-term timing mismatches in borrowing. It's not really changing the amount that can be put in; it's clarifying that it could be a revolving amount.
The Vice-Chair: Further comment?
Shall the amendment carry? Carried.
Shall section 62, as amended, carried? Carried.
Shall section 63 carry? Carried.
Government motion, subsection 64(1).
Mrs Johns: I move that subsection 64(1) of the Electricity Act, 1998, as set out in schedule A to the bill, be struck out and the following substituted:
"Guarantee and indemnity
"(1) The Lieutenant Governor in Council may by order authorize the Minister of Finance, on behalf of Ontario, to agree to guarantee or indemnify,
"(a) any debts, obligations, securities or undertakings of the Financial Corporation or a subsidiary of the Financial Corporation; or
"(b) any debts, obligations, costs or undertakings of any other person arising in connection with a guarantee or indemnity given under clause (a)."
The Vice-Chair: Comments?
Mr Baird: This deals with the refinancing of their existing debt. This section was contained in most contracts and is just with respect to the liability to pay costs.
Mr Lessard: I have a question. I'm wondering if this is a back door to guaranteeing Genco and Servco debt. I'm not really clear as to why that change is being made, whether it's adding further debt or causing the government to guarantee some debt that wasn't guaranteed before.
Mr Baird: It deals just with Finco and an affiliate of Finco, not with Servo or Genco.
Mr Lessard: The section says, "agree to guarantee or indemnify any debts...of any other person."
Mrs Johns: Arising in (a), which is Finco and a subsidiary of Financial Corp.
Mr Baird: It's not an unreasonable question.
The Vice-Chair: Further comment?
Shall the amendment carry? Carried.
Shall section 64, as amended, carry? Carried.
Shall sections 65, 66 and 67 carry? Carried.
Section 67.1.
Mrs Johns: I move that the Electricity Act, 1998, as set out in schedule A to the bill, be amended by adding the following section:
"Entities established for effecting financing
"67.1 In addition to the restriction in subsection 67(1) on establishing subsidiaries, the Financial Corporation may establish a trust, partnership or other entity in Ontario or elsewhere for the purpose of effecting a financing only with the approval of the Minister of Finance."
The Vice-Chair: Comments?
Mr Baird: This is a complementary amendment to the second finance amendment we dealt with at subsection 52(1), basically requiring the authorization of the minister before entering into a securitization.
1650
Mr Conway: I'd like to have that explained. I want to hear a bit more about that, maybe from Steve.
Mr Steve Dorey: You may know the experience in some other jurisdictions, particularly California and some of the US jurisdictions, has involved taking stranded debt recovery and turning those into financial instruments that get the government the cash up front and allow that to be collected over a period of time. That securitization is simply a financial instrument to make the collection more efficient.
Mr Conway: There's been some very heated controversy in the United States about that whole securitization question, as I recall. I think of the Connecticut debate this spring. There were a lot of consumer groups that were very interested in how that was going to be done and what it was going to mean to their residential bills.
Mr Dorey: Yes, I think principally the controversy has been over whether the ratepayer should pick up the full stranding or whether that should be shared with the private owner of the utility. In the Ontario context, that's not really an issue because taxpayers and ratepayers by and large are the same people.
The Vice-Chair: Further discussion? Shall section 67.1 carry? Carried.
Shall sections 68, 69, 70 and 71 carry?
Mrs Johns: I have an amendment to section 71.
The Vice-Chair: You're correct. Just to section 70. Carried.
Subsection 71(1).
Mrs Johns: I move that subsection 71(1), (2) and (3) of the Electricity Act, 1998, as set out in schedule A to the bill, be struck out and the following substituted:
"Liability
"(1) No action or other civil proceeding shall be commenced against a director, officer, employee or agent of the Financial Corporation or a subsidiary of the Financial Corporation, or of an agency of the crown specified in a directive referred to in subsection 68(3), for any act done in good faith in the exercise or performance or the intended exercise or performance of a power or duty under this act, the regulations or the bylaws of the corporation or subsidiary, or for any neglect or default in the exercise or performance in good faith of such a power or duty.
"Declaration under subsection 67(2)
"(1.1) Subsection (1) does not apply to any act, neglect or default in respect of a contract, security or instrument with respect to which a subsidiary of the Financial Corp has made a declaration in accordance with subsection 67(2).
"Actions against crown
"(2) No action or other civil proceeding shall be commenced against the crown for any act, neglect or default by a person referred to in subsection (1) or for any act, neglect or default of the Financial Corporation, a subsidiary of the Financial Corporation or an agency of the crown specified in a directive referred to in subsection 68(3).
"Same
"(3) Subsections (1) and (2) do not relieve the Financial Corporation, a subsidiary of the Financial Corporation or an agency of the crown specified in a directive referred to in subsection 68(3) of any liability to which it would otherwise be subject in respect of a cause of action arising from any act, neglect or default referred to in subsection (1)."
Mr Baird: It basically extends the crown employees' indemnity that exists for Finco to the subsidiaries to public servants who are acting in good faith, so you would sue the corporation or the province and not the individual or crown employee.
It's found in a good number of statutes. This amendment simply extends it to the subsidiary corporations as well.
The Vice-Chair: Further comment? Shall the amendment carry? Carried. Shall section 71, as amended, carry? Carried.
Shall sections 72, 73, 74, 75, 76 and 77 carry? Carried.
Subsection 78(2).
Mrs Johns: I move that subsection 78(2) of the Electricity Act, 1998, as set out in schedule A to the bill, be amended by striking out "used exclusively for executive and administrative purposes" in the fourth and fifth lines and substituting "used exclusively for executive, administrative or commercial purposes."
Mr Baird: Let's use the example of a building that's now with Ontario Hydro. If it were to stay with Finco, they would continue to have to pay the existing payments in lieu to the local municipality. So, should there be the odd piece of property, a building, for example, which stays with Finco and not with Genco or Servco, they're required to pay the existing PILs to the local municipality.
The Vice-Chair: Further comment?
Mr Lessard: The change, as I see it, to this section adds the word "commercial" to the purposes that may be undertaken. I'm wondering what sorts of commercial purposes may be anticipated. Why is that word being added in there? What commercial undertakings might Finco be involved in?
Mr Baird: The existing wording says "executive and administrative." We're simply trying to clarify that they continue to be treated like other commercial properties.
Mr Dorey: I think the intent is to cover warehouses, actually, which are neither administrative nor executive.
Mr Lessard: Finco warehouses?
Mr Bill McLean: The transition period between when the offices of Ontario Hydro are rolled into the Ontario Hydro Financial Corp -- there's a period of time between that time and when they're finally rolled over to Genco and Servco. Section 78 ensures that municipalities will continue to receive their current payments in lieu of taxes that you saw under the old Power Corporation Act. Ontario Hydro used to pay property tax payments in lieu on their commercial warehouses. Now that they're going to be a competitive private corporation, the statute is being tightened up to ensure Hydro continues to pay it on their warehouses.
The Vice-Chair: Would any of the staff, please, when you're speaking, give your names so that Hansard can have a record.
Any further comment? Shall the amendment carry? Carried.
Subsection 78(3).
Mrs Johns: I move that subsection 78(3) of the Electricity Act, 1998, as set out in schedule A to the bill, be struck out and the following substituted:
"Same
"(3) In addition to the amounts payable under subsection (2), the Financial Corporation shall pay in each year to any municipality in which are situated generating station buildings or structures or transformer station buildings or structures owned by the Financial Corporation, an amount equal to the taxes for municipal and school purposes that would be payable if the buildings or structures were taxable and the assessed value were determined on the basis of $86.11 for each square metre of inside ground-floor area of the actual building or structure housing the generating, transforming and auxiliary equipment and machinery."
Mr Baird: Some may argue that transformer stations are not buildings. This would simply seek to capture what is now captured, by adding "or structures" for transformer stations.
The Vice-Chair: Other comment?
Mr Lessard: Just what exactly is the change that's being made in this section? I just haven't had a chance to compare it.
Mrs Johns: "Or structures" in line four and in the second-last line.
Mr Lessard: So it's just adding structures.
Mr Baird: Some could argue that, for example, a transformer station is not a building. We wanted to capture what was already captured so we're just adding to it to cover transformer stations.
Mr Lessard: My other question is with respect to that amount, $86.11, for each square metre of inside ground-floor area. Is there somebody who could explain to me how that amount was determined? It just seems like a figure, and in all the briefings we've got there's been no explanation for it. I'm curious as to why there's a specific amount in this section and where the number came from.
Mr McLean: I'm Bill McLean from the Ministry of Finance.
The existing Power Corporation Act today, for the past 30 years, in fact, has had a way of treating the values of Ontario Hydro properties: generating stations and transformer stations. This has been a method upon which Hydro has made its grants in lieu of property taxes to municipalities. The current Power Corporation Act states that every square metre of generating and transformer stations is worth $86.11. When you take the municipal tax rate in each municipality, you apply the municipal rate to the amount, $86.11, on the number of square feet and you get the amount of grants in lieu of taxes that Hydro pays to the individual municipality.
Bill 35 replicates that treatment. It doesn't change that treatment. It continues the $86.11 assessment for Hydro properties to ensure that municipalities receive no less municipal revenue than they have had in the past.
1700
The Vice-Chair: Further comment? Shall the amendment carry? Carried.
Subsection 78(14).
Mrs Johns: I move that subsection 78(14) of the Electricity Act, 1998, as set out in schedule A to the bill, be amended by inserting "or structures" after "buildings" in the fifth line.
Mr Baird: This is a complementary amendment to the previous one, just by adding "or structures" for the same reason.
The Vice-Chair: Other comments? Shall the amendment carry? Carried.
Shall section 78, as amended, carry? Carried.
Subsection 79(5.1) and (5.2), a Liberal motion.
Mr Conway: I move that section 79 of the Electricity Act, 1998, as set out in schedule A of the bill, be amended by adding the following subsections:
"Identification of charge
"(5.1) All bills to consumers shall show charges made under subsection (5) separately and identify them clearly.
"Purpose of competition transition charge
"(5.2) Payments that the Financial Corporation receives under subsections (4) and (5) shall be used only to reduce the stranded debt."
The second part would probably be out of order.
The Vice-Chair: That makes the amendment out of order.
Mr Conway: Is there any way that I can simply introduce the first, (5.1)? There is a way, actually.
The Vice-Chair: Are you waiting for an answer to that or did you get one?
Mr Conway: I know the answer. I'd like unanimous consent to reintroduce the amendment by simply reading (5.1). Agreed? Not agreed. All right. The government denied consent, so that's fine.
The Vice-Chair: Fine. They already said no.
Mr Conway: I want to speak to the section.
The Vice-Chair: We're still on section 79; yes.
Mr Conway: Section 79 is quite an impressive piece of work if one looks at it. It's in this section that we see the definitions for such things as "residual stranded debt." We observe the very powerful authority being given to the Minister of Finance in subsection 79(2). Following that, we see in subsection 79(7) -- I always like to highlight this when I see it in legislation -- "The determination of the Minister of Finance that the residual stranded debt has been retired is final and conclusive and shall not be stayed, varied or set aside by any court."
The Legislature is being asked here in section 79 to give to the Minister of Finance extremely sweeping powers that have everything to do with defining some extremely important matters, to deciding schedules, timetables. Then, to make very sure that the imperial authority of the minister is not going to be attacked, we have the cut-off to any court in regard to appealing the decision.
I must say that I am troubled by that, not because I don't want the Minister of Finance to have power -- I think it's a given that the Minister of Finance should have power -- but one of the concerns a number of people have had is the conflict of interest in which any Minister of Finance is going to find himself in respect of this particular policy. Remember what we're talking about here. We're talking about the residual stranded debt, which I think even Mr Dorey has acknowledged in some of the paper here is going to be a multi-billion dollar figure. How it is determined, how it is apportioned, what happens to the revenue streams built to retire it after it's retired, these are going to be very important decisions, particularly for the residential and farm electricity consumers.
One of the deputants, the consumers' association, made a point that in this area there should be as much transparency as possible so that the broad customer base would have a clear, ongoing understanding of what was being decided, in what particular manner and to what effect. I just want to make the point, since the amendment has not proceeded, that I think transparency is important and that the committee would do well to find a way to ensure that the customers, particularly the broad residential and farm base of customers, have some clear, ongoing mechanism to see on their bills what they're paying, what kinds of special charges are being applied and what they mean to individual ratepayers.
I'm always troubled when I see ministers requesting the Legislature to save them from any attacks of the courts. That should be, in my view, deemed as an extraordinary power. I generally don't like it, and when I see it -- it appears at least in one other place in this legislation -- I have to ask myself the question: So we're not going to have anybody review this? The minister is going to make that determination, and once he has determined that the debt is retired, that determination "is final and conclusive and shall not be stayed, varied or set aside by any court."
My concern here is that this is another one of those cases where the umpire is not neutral. This is an umpire with a very real pecuniary interest in that decision; and not to be repetitive, but I never like the game where the umpire has a keen, deep and pecuniary interest in a call, in a judgment, because I think that's not healthy.
Mrs Johns: I'd just like to comment on a couple of things the member opposite has said. I think it's important to recognize that we're talking about the Financial Corp here, and of course it's a crown agency -- I think that was set out very clearly in one of the amendments the government made prior to this -- so it's subject to the auditor and it's subject to review of the financial statements. It's important to recognize that there are options here that are important.
The second thing to recognize is that when you're talking about transparent billing, many of us will choose to use different distributors, transmitters, people to provide our power, and we can demand that from those people as we decide how we're going to choose our electricity in the future. Part of the competitive market, of course, is that some people will want more information than others and they will search for people who will give them that information.
I was up at North Bay Hydro the other day. They're starting right now to look at specific machines that will tell exactly the time of day when power is being used and they're going to be able to tell the price at that point. So people are going to meet consumer needs without our legislating that. They're going to meet those needs because it's going to be demanded by the consumer.
1710
Mr Lessard: Once again the parliamentary assistant is prepared to place all of her faith in the marketplace. I don't share the statement of faith that the market is going to take care of all consumers' needs, especially the needs of small farm and residential consumers who aren't going to have that clout in the marketplace to be able to benefit from low-cost rates that are promised by this government; promised in the title of the bill, in any event, but not in the objects of the bill.
My comments about this section are based on the fact that I think this section is really critical to determining whether the plan that this government has with respect to competitive energy, lower-cost energy and the new marketplace for electricity is going to work because it defines what is residual stranded debt if you find what is stranded debt, and we've heard from a number of presenters that the determination of that amount of stranded debt is really critical to the success or failure of the future Ontario Hydro.
I asked a number of people the question, what happens if the stranded debt amount is guessed to be too high or too low, and the answers were about as varied as the number of people whose opinions I asked, which leads me to believe that we're heading into some very uncharted waters. I think this legislation is really a framework. It's a mere skeleton of this government's policy; it doesn't have a lot of details in it. As we've said on numerous occasions in debates with respect to this bill, "The devil is really in the details," and one of the most critical details is the residual stranded debt and the stranded debt.
Subsection (2) says that the determination of that amount is going to be done by the Minister of Finance in accordance with the regulations, regulations that I certainly haven't seen. I don't know whether my friends in the Liberal caucus have seen them, but it would provide us with some comfort if we had some idea of how the stranded debt is going to be determined, what those regulations set out and how it's going to be determined.
One of the other concerns I have is how these competition transition charges are going to be imposed. We had comments from people who presented before the committee that it only applies in subsection (4) to people who generate electricity in Ontario, and people who generate electricity in Ontario were concerned that this didn't apply to people who generate electricity outside of the province.
We've heard as well from the parliamentary assistant that even though there is the option of applying the charge to power generated in Ontario, hence power consumed in Ontario, that this wouldn't be expected to be a double charge, that you wouldn't be able to pay twice. But there isn't any protection in this section to prohibit that possibility from arising.
Mrs Johns: Can I just say that in our clause 80(1)(k) amendment we think we've solved that problem.
Mr Lessard: I'm not quite finished, but I look forward to seeing that section.
Mrs Johns: It's the next one; you'll see it.
Mr Lessard: But I guess the final comment I have with respect to this section is the one that's raised by Mr Conway, and that is the fact that it really puts the minister in a position where when he makes this call with respect to whether residual stranded debt has been retired, he puts himself in a position that is above the law. That's something that does cause me some concern.
Let me continue and say --
The Vice-Chair: We don't have to use up any particular amount of time, Mr Lessard.
Mr Lessard: That concern just leads me to the question, why? Why is that section in there like that putting the minister in that position?
Mr Conway: I want to come back to a point that Ms Johns made about what individual consumers are likely to do, and I think she's absolutely right. The only problem I have is that on several occasions in the last two or three days when we have come up to a point that I thought was fundamental, the government seems very reluctant. They say they're for promotion of lower-cost electricity but they will not put it in the purpose clause of the bill.
We've had the consumers' association ask us, on behalf of the largest group of consumers in the province, why not amend this legislation in the interests of transparency to allow the broad base of customers, the largest group of customers, to see how these special charges impact on their bills? That seems like a very good idea because I thought we were for transparency.
I was chuckling when you were saying you were at North Bay Hydro. I presume Mr Wills was there. I was just rereading his testimony the other day, and he certainly doesn't think that we're going to be delivering the goods to the customer base that he serves. Reading from his testimony of August 13, I think in Sudbury, he says, "Ontario Hydro has made it clear that it believes competition in electricity is in the northeastern US markets, not in Ontario." Roughly translated, what this statement really means is that Ontario Hydro can compete in the export market as long as the working stiffs back home can be suckered into paying the bill. That's from North Bay Hydro. I don't know whether he has talked to the local member or not; that's harsher language than I've even used.
But my point here is that I thought we were for transparency. It seems to me that, particularly during that period of time when we are writing down that stranded debt, whatever it is, that in the interests of good consumer education and good consumer awareness and good consumer protection, we would want to show people what these special charges mean to their bill.
Just as a final point, I want to remind people of something I said during the earlier part of the process. The member for Huron reminds me that we're talking here about the Financial Corp. Of course, we are; I can read and 79(7) is pretty clear. It's a very important point. "The determination of the Minister of Finance that the residual stranded debt has been retired is final and conclusive and shall not be stayed, varied or set aside by any court." That is a pretty powerful sanction given to the Minister of Finance.
Let me just remind you again about a very important issue, an absolutely core issue, ie, what the Minister of Finance is in part empowered to do under this legislation, Bill 35. Among the powers of the Minister of Finance in Bill 35, I'm just going to enumerate a half-dozen:
The minister shall appoint the Finco board of directors, including the chair and the vice-chair; the Minister of Finance may declare any Finco, Financial Corp, bylaw to be void unless he approves it; the Minister of Finance may issue binding directives to the Financial Corp; the Minister of Finance will define the size of the stranded debt that Ontario Hydro will leave behind; as I've already indicated in section 79, the Minister of Finance will decide when that stranded debt is deemed to have been retired; the Minister of Finance will determine the amount of payments that the successor companies, Genco and Servco and the MEUs, will make to the Financial Corp.
Those are pretty sweeping executive powers. There's part of me that thinks this is a Conservative government that's doing this for reasons it undoubtedly believes in. This is a massive accretion of executive power to the Minister of Finance. Thanks to subsection 79(7), you're cutting off any appeal from the exercise of some of that power to any court. Power to the people? Wow. Power to the Minister of Finance.
Since I'm a bit of a centralizer there's a part of me that understands this. I just have a problem thinking about where it's coming from. But then Thomas Jefferson believed in limited government and signed the Louisiana Purchase, so I suppose it's not the first time that people say one thing and do something precisely otherwise.
1720
Mr Baird: Your last comment reminds me, and the previous comment with respect to transparency, I just dim my eyes and see Michael Wilson and Brian Mulroney talking of the need for a transparent sales tax. I regret I don't have my little chart showing that we're already paying the existing debt through our hydro bill. That's obviously not transparent. I suppose one could argue that we should provide greater transparency. I suppose taking that argument to its extreme we could even classify what the sales tax -- to be clear, of the eight cents of sales tax you bring in, four of those cents are going to pay the interest on the NDP debt or two cents are going to pay off Bill Davis's debt or one cent is going to pay off David Peterson's debt. We haven't been quite so transparent on that part.
Going to 79(7), just a question for my colleague Mr Conway: Maybe he could give me an example so I could better follow his argument as to what would be a reason why someone -- the key part of 79(7) is "has been retired," so once the minister has said the debt has been retired, maybe you could just help illuminate this for me. What reason would there be why someone would want to, after it has been retired or is declared to have been retired?
Mr Conway: The point I made before is that if you look at the process here, we've got a situation where there is going to be a calculation around what the commercial companies can carry in terms of debt-equity ratios, what they will take away with them and what will be left behind. It's what's left behind that, first of all, will be determined under this proposition by the Minister of Finance. How large is that going to be? That's the residual stranded debt.
The difference between the point you were making a moment ago and this current situation is that there's a real equity issue here. One of the questions that I want to satisfy myself with is, will all classes of customers be positioned after valuation day to pay their fair share of whatever debt is left behind? That gives me very real --
Mrs Johns: But what you're concerned about isn't going to solve that, because it's after the debt's retired.
Mr Conway: Yes, it's after the debt is retired but, remember, there's valuation, then there's this debt. The way that debt is going to be written down is presumably by the application of that bundle of special charges. We don't know what that is yet, but we know that there is a menu of five or six items, including the CTC. It will be the application of that menu -- correct me if I'm wrong -- that will write down the debt. Correct?
Mr Dorey: That's absolutely correct.
Mr Conway: I'm a residential customer, and if they've been paying any attention to this hearing, they will have heard the big boys and girls in here saying what they don't want. There are certain items on that menu that are a lot more distasteful to some people than others. What I want to know is, first, to the greatest extent possible, will there be truth, fairness and equity, or reasonable fairness and equity, in the writedown of whatever debt there is? To know that, I need to know, first of all, how the menu is applied.
Mr Baird: This is after that, though.
Mr Conway: It's after, I suppose. I'm talking about from valuation day until the end of debt.
Mr Baird: But this is after the end of debt, and (7) is the specific one you raised. I'm just trying to think of an example.
Mr Conway: The determination of the Minister of Finance that the residual stranded debt is then retired is final. He decides when the residual stranded debt is finished.
Mr Baird: But this is after that. This is "has been retired," so this is after he's done that.
Mr Conway: I just look at that and say, "The Minister of Finance" -- what does the language say? It's (6) and (7). "When the Minister of Finance determines that the residual stranded debt has been retired," he shall publish the notice, and that determination is final and non-appealable.
My point is, first, I think this is so clear that I'm concerned that it's not clear to others. The minister makes that determination. Remember, under the terms and provisions of the so-called level playing field for taxation -- even Mr Dorey has acknowledged this -- once that's done, certain other things start to happen. There's a revenue stream that's available to the Minister of Finance.
In that sense, let's say I'm the Minister of Finance. I make that determination. It's not as if when the determination's made, that's the end of it and there's no implication on my world. There's a very substantial implication on my world. I will now be in receipt of substantial new revenues, so I've got a real interest. I'm not without an interest in this decision. I raise that because that will potentially, and I think it's more than just a potential, have a very real impact on -- well, say it.
I'm not going to belabour the point, except it's a very central one as far as I'm concerned. The Minister of Finance has very substantial powers here. He makes a critical determination and it's non-appealable. Once the determination is made that the residual stranded debt is retired, the Ontario treasury will find itself in receipt of substantial new revenues, of what amount we don't know, but Mr Dorey himself, in his testimony back in August -- everybody's looking at me.
Mr Baird: I don't mean to belabour this point but if the minister, after he has said the debt is paid off -- I appreciate your argument that he could say it's paid off earlier, so he could get potentially additional revenue from PILs, not from the end of the CTC. But there are the bondholders, who are not going to go away. It's not like he could just make it disappear by saying it's gone. If Finco still has obligations, they're not going to go away by the end of a determination, so for him or her to make a premature one, I just don't see the rationale.
Mr Conway: Maybe we can deal with this in my amendment to 81. It might be a more appropriate place. Any time I see that kind of language, and when I see it in the case of a referee with such a stake in the game, I just think it bears some observation.
I come back to the point that the member for Nepean made. I expect that not everybody is going to be treated fairly in this. The lobbying that has already gone on, and that will continue to go on, to influence the treatment of different categories of ratepayers is going to be fierce.
This is quite apart from your government, but five or six years ago some of the big players went to Ontario Hydro and said, "Listen, you either cut us a special deal or we're jumping the fence," and, trust me, deals were made. That's the power of politics that the chairman was talking about the other day in terms of volume discounts and whatever. Don't think for a moment that game's not going to go on when it comes to the other side of this equation, what certain people are willing to pay and not pay in terms of their share of the stranded debt.
There is, to me, a very real question as to what the financial architecture is going to look like around the application of the various instruments to retire that debt. That's the point I was getting at. I certainly don't expect everybody to get equally treated. Quite frankly, if the history of these things is any example, there will be enormous pressure to dump a disproportionate share of this burden on to the backs of the two or three million residential customers. That's where it'll go. That's where the market dynamic will put it because you don't need to put a very large charge on so large a group to get the yield.
1730
The Vice-Chair: Further comments?
Shall section 79 carry? Carried.
Mrs Johns: I move that clause 80(1)(k) of the Electricity Act, 1998, as set out in schedule A to the bill, be struck out and the following substituted:
"(k) exempting persons or classes of persons from subsection 79(4) or (5), subject to such conditions or restrictions as may be specified in the regulations, including exempting a generator from subsection 79(4) in respect of electricity sold by the generator to a retailer or consumer."
The Vice-Chair: Comments?
Mr Baird: On the issue of double taxation, we heard a number of concerns from various presenters from around the province, and this basically provides a mechanism to prevent double taxation for those who might self-generate and use for themselves and then sell to company B, for example.
The Vice-Chair: Further comments?
Shall the amendment carry? Carried.
Shall section 80, as amended, carry? Carried.
New section: 80.1.
Mr Conway: I move that the Electricity Act, 1998, as set out in schedule A of the bill, be amended by adding the following section:
"Public consultation
"80.1 Despite anything in sections 79 and 80, the determinations of the Minister of Finance referred to in section 79 and the regulations referred to in section 80 shall be made in accordance with detailed rules to ensure public consultation as established by the board."
This again is offered to provide some openness and some transparency around the setting of the stranded debt. Because of the conflict of interest that I mentioned earlier, and thinking about the testimony of people like the city of Mississauga hydro commission, the independent power producers -- IPPSO -- two deputants who made the point, it seems to me a pretty basic point that if there ever was a set of calculations that should be open to a public scrutiny, public review, this would be a place where you would want that to occur.
I didn't check my note on this, but Jim Dinning spoke to us in Sarnia. Did he ever submit any language? I think he offered on this particular subject to do so. Dinning is now in the employ of TransAlta, but I thought he suggested that he was going to offer some language around this. TransAlta was another group that definitely had some views about this.
Again, this amendment essentially reflects that kind of testimony from people like Hydro Mississauga and IPPSO and TransAlta that there ought to be some mechanism for an open process by means of which this calculation is developed and the application of special charges may be clearly understood by everyone involved. Again, in the interest of transparency, it struck me as a very sensible thing that we would want to do.
The Vice-Chair: Further comments?
Mr Baird: I think section 80 provides for regulations in terms of detailing specifically how any CTC would be made if it was so required -- obviously there is a tremendous belief among many that it would be -- and specifically on how it would be charged. Ontario Hydro, Finco, would table an annual report which would set out the details of any CTC and as well the residual stranded debt that would provide for a terrific amount of scrutiny and public review through the existing process.
The Vice-Chair: Mr Lessard.
Mr Lessard: I'll defer to Mr Conway.
Mr Conway: Again, a very critical point. If you look at section 80, what does it say? Cabinet "may make regulations respecting the calculation of the fees referred to in subsection 66(1) and respecting the manner in which, and the time at which, they are to be paid"; cabinet "may make regulations prescribing provisions of the Business Corporations Act...that apply, with necessary modifications, to the Financial Corporation"; cabinet "may make regulations prescribing other amounts for the purpose" -- again, a very sweeping set of regulatory powers around a very important subject that is going to have potentially a very real impact on people's rates.
I'm not at all interested in an after-the-fact calculation two or three years down the road in something that's going to be this intricate. As Mr Lessard said, and so did a lot of the presenters, this stuff is really complicated. Trust me, there's an army of people at work out there now, and a lot of these people, including a number of people in the business community, want to know. They want to know there is going to be a fair and open process going in as to how these calculations are going to be made and how special charges are going to be applied. I'm not kidding. I've used the analogy before: Who among us would walk into a bank or a trust company and negotiate a mortgage on the basis of the information we've got here? We're being asked to sign a mortgage without knowing the interest rate, without knowing the amortization period. You wouldn't do it in your own private lives. The Legislature certainly should not do it in this case.
This is another example of where the government has got to be seen to be as good as its rhetoric. Simply saying, "Bill 80 gives us sweeping regulatory powers to do as we damn well choose and we'll debate it after the fact, 18 months from now," is not good enough, particularly since it is the stated position of the government that you want to provide rate benefits for all classes of customers. I don't see why you would not be interested in acceding to the requests of the deputants to whom I've made reference and many others who have looked at this debate and said, "The whole determination of the stranded debt, how they choose the various special payments, how they get applied, is a process we would like to see opened up, and we want to see it beforehand, not after the fact."
The committee heard some pretty strong testimony on that. It seems to me that, given again how enormous are the powers given particularly to the Minister of Finance, how significant are the implications to the electricity bills of millions of Ontario consumers, how conflicted the Minister of Finance is in this whole situation -- he's not a neutral party; he has a very real interest -- I would like to think that one of the ways we might want to reasonably constrain his interest, his personal administrative interest, would be to open it up and let the community see just how these calculations are being made and how they are going to in effect come to bear on particularly the electricity bills of residential and farm customers.
Mr Lessard: Once again, I just want to reiterate the importance of the determination of the amount of the stranded debt on the success or failure of the government's intentions and policy direction in Bill 35.
I think what Mr Conway is trying to do is introduce some transparency into a system that requires that transparency. These aren't ideas that Conway and Lessard have come up with off the top of their heads. This is stuff that came from a number of presenters who said that having a transparent process determining the amount of the stranded debt is critical, in addition to having the right amount of the stranded debt.
1740
One of the ideas I had considered was that perhaps the whole determination of the stranded debt should be something that would be subject to the purview of the Ontario Energy Board. In fact, I put that question to the eminent current chair of the energy board, Mr Laughren, and he wasn't really that keen on the idea so I didn't pursue it much further after that. I think it is important that there be some public input, some public involvement, some public scrutiny, as to the determination of the stranded debt.
As Mr Conway has said, and I'm sure everybody on this committee understands, this is an incredibly complicated area. When we started out on these hearings, I thought with each passing day that the more I heard, the less that I knew about what was happening in Bill 35, and it hasn't become a whole lot clearer based on the government's explanations going into clause-by-clause.
The impacts of Bill 35 on rates are going to be enormous. That's the reason we've been arguing so strenuously that the government put some indication in the objects of the bill or the purpose section of the bill that their intention is to have low-cost energy for all consumers, as indicated in the title. For whatever reason, the government is not interested in putting that in the objects of the bill, and for whatever reason, they are probably not going to support this amendment. I don't know why. It is an attempt to ensure there is some public consultation with respect to issues that are of critical importance to the success or failure of this change in government policy.
Why the government wouldn't be interested in public consultation is something I'd be interested in hearing from government members. I think everyone in government recognizes that you don't always remain there forever, either. The rules that are being put in place now are rules that will continue to be in existence long after Bill 35 has been debated and no longer is in the public spotlight, but the impact on rates is going to be felt by consumers for a good long time into the future, and whatever extra time may be required to ensure there is real public consultation is something we owe to people well into the future, to ensure that we take the time to be involved in that.
The Vice-Chair: Further comments?
Mr Baird: With respect to comments by my colleague from Renfrew North, just two points, and I don't want to belabour them so I'll be brief. His example of going to a bank and obtaining a mortgage and you would ask the details, that would be to obtain new debt. What we're talking about here is existing debt, which is a point that I've hammered home. I regret that I didn't have my little chart with me --
Mr Lessard: What is that debt? What is it?
Mr Baird: The chart's back at the office. So we're talking about existing debt.
The second point with respect to my colleague's suspicion of the LGIC's authority to set up regulations: Even he, in his proposed amendment, leaves the detailed rules to ensure public consultation up to the LGIC, but under 79(2) and (3) it's clear in terms of the minister's ability to make a determination on the residual stranded debt and then (3) his ability to set a determination and the reporting requirements that would be prescribed by regulations. So even he leaves it up, as does subsection 79(3), to the LGIC to establish and make public reporting requirements.
It leaves a considerable amount of ability for scrutiny and for public review. This whole exercise has been one that's been characterized by significant stakeholder and public consultation. The section we've already adopted, that he makes reference to in his amendment, sets out some reporting requirements. I don't see how detailed rules which are yet undefined would mask what 79(3) already proposes to do.
Mr Conway: Let me just respond. Again, the government is not going to get off the hook this easily. The government is advertising one thing and doing something quite differently. You say you're for competition, but what you're doing ignores the strongest advice you have gotten from two expert panels, so on a fundamental tenet of this policy you have ignored clearly the advice of two very significant panels that you yourself struck. Let me say that again.
On the question of what this says, it's very clear what 80.1 says: "detailed rules to ensure public consultation as established by the board." And this business about the debt. You don't know what the current situation is; none of us knows. Why? Among other things, you have no idea what that situation at Ontario Hydro Nuclear is. You haven't got a clue; nor do I. So don't give me this baloney about future debt. We're sitting here just blithely ignoring a central question that we have no answers for. This -- give me a break.
I've got some sympathy for these people. I've got a lot of sympathy for finance, for the baloney they've had to put up with for the last number of years. There is a part of me that wishes that in the fight that's going on now finance gains an upper hand over Hydro. I have no late intelligence to me who is winning and who is losing. There is also a part of me that sort of says, "What am I being asked to do?" It's easier for me to say this than some of you, but this is so typical: sweeping executive regulatory power with the bromide: "Trust us. Just trust us, it will be all fine."
One of the reasons I want some transparency around this is the point I made in the discussion around Ontario Hydro Nuclear. If there had been some greater transparency about some of the baloney that had been going there -- it's not the word I want to use; there are some other, much more delicious ones -- and it's not a laughing matter. The pubic and the ratepayers have been really hosed by these people, and hosed to the tune of billions of dollars, because there was no transparency. As new members, you have a right to be upset about this. You, I would have thought, would want an opportunity to say, "Not on our watch are they going to get away with the same old tricks." They're getting away with the same old tricks. It's business as usual. Before I kind of go down, I want to go down with a bit of a fight because I cannot believe that Hydro's getting away with this. "Trust us."
Mr Gilchrist: The ratio --
Mr Conway: Listen, the normal routine around is that by the time any of this stuff comes to roost 80% of us will be gone. There will be a new bunch of hand-wringers here in 2003 saying, "How did they ever let this happen?" One of the protections that I see, particularly on the basis of some of the evidence we heard, was force some of this into the light of day.
I think you are right in terms of empowering the energy board. For the first time we are going to get a more meaningful, more independent regulation of this sector. I think that's a good thing. That's why I don't like the directive power, because that's going to open the door to politics as usual. There's going to be some government, there's going to be some minister getting closer to an election -- can you imagine poor old Ralphie? I don't know what the Alberta election cycle is. Where are they? They're in the early part of the mandate. Can you imagine the politicians in a place like Alberta -- if what the Globe reported on Saturday, if 30% of that was a likely possibility -- what would be going on in terms of trying to set yourself up for something other than a decapitation as you faced the electorate?
One of the things that in principle is good about this policy is the notion that there is going to be some independent regulation in the name of the consumer. This is complicated stuff; it's going to have an impact on their rates. Why would we not want to put some transparency in the name of the consumer, empowering the consumer? If this language is unattractive or inadequate, then let's scrap it and come up with some of our own, come up with something that's better.
1750
But again I simply make the point that this is about determining some absolutely critical questions that will involve billions of dollars and every ratepayer in the province. There is going to be into the future what there has been in the last few months and couple of years. There will be fierce lobbying under the waterline to position oneself as favourably as you can. The lobbying that's been going on, it's probably no secret, is pretty focused around certain selected interests at the present time. I worry, as I think all of us hopefully do, about the average citizen out there who's just tuning into this, who has no real idea of how this is all going to work out but is hoping there is somebody out there paying some attention to their interests as a consumer. That's why this amendment is there.
Remember the Market Design Committee's advice to the government in the second report. They made the case, I think very wisely so, that because this is going to be a dynamic marketplace, it's going to be very complicated and you're going to want clarity beforehand, going in. You want to know what the rules are beforehand. They much preferred the beforehand rule-setting, as opposed to the after-the-fact stuff. I think they're right on that.
I would have hoped that there was some consensus in the name of the broad consuming base of residential and farm customers that if there was ever a place we wanted to afford them some meaningful protection, it would be on this. If the committee chooses otherwise, so be it, but it certainly would disappoint me, to say the very least.
The Vice-Chair: Further comment? Shall section 80.1 carry? Defeated.
Section 81.
Mrs Johns: I move that subsections 81(3) and (4) of the Electricity Act, 1998, as set out in schedule A to the bill, be amended by,
(a) striking out "retired" in the last line of subsection (3) and substituting "retired or defeased"; and
(b) striking out "retired" in the fourth line of subsection (4) and substituting "retired or defeased."
The Vice-Chair: Comments?
Mr Conway: Is there a lawyer in the house here?
The Vice-Chair: Yes.
Mr Conway: There is clearly a meaning to the word "defeased" in commercial law. Does somebody want to give it to me?
Mr Baird: When inflows equal outflows.
Mr Conway: I want to hear it from a lawyer. I'm sorry, I don't mean to be rude. Macdonald, in his report, kept talking about defeasement and I was quite interested to know as precisely as I can what that means.
Ms Hanslep: Basically it means that, for example, a corporation may have an asset that provides itself with inflows. Again, "its debts are defeased" means that its inflows equals its outflows. It's used in accounting. Something can be defeased and therefore it can be removed from the balance sheet because there is an inflow that will equal it.
Mr Conway: I just want to check the language of this. You're striking out "retired" and substituting "retired or defeased." So how is it that defeasement is not retirement?
Ms Hanslep: I guess "retirement" is actually paid off, whereas in "defeased" the liability is still there but there is an inflow that equals the liability so there's no net liability.
Mr Conway: This gets more interesting then.
Mr Baird: Basically it adds "defeased" as one of the two conditions with which Finco can be wound up by proclamation. Your question's not invalid.
Mr Conway: As I say, this Financial Corp is much bigger news than the dopey old Legislature understands, so when I see these kinds of refinements, I'm just kind of interested to know. So defeasement is essentially having on the books assets to offset any liabilities?
Ms Hanslep: Yes, cash flow.
Mr Baird: No, income.
Ms Hanslep: Income, yes.
Mr Conway: You're telling us more here than we understand, but anyway.
Mr Baird: And it's "may," not necessarily "would."
Mr Conway: I can just hear it in a couple of years' time, "Oh, you didn't understand that possibility under the peace, order and good government sections?"
The Vice-Chair: Further comment? Shall the amendment carry? Carried. Shall section 81, as amended, carry? Carried.
Section 82.
Mr Conway: I'm finished. Are we sitting till midnight?
The Vice-Chair: No, we're sitting until the time we started, which was five minutes later by that clock. We've got another four minutes.
Mrs Johns: I move that the definition of "adjusted gross revenue" in section 82 of the Electricity Act, 1998, as set out in schedule A to the bill, be struck out.
Mr Baird: As a result of the hearings we're getting rid of the adjusted gross revenue, so we don't need this section any more.
Mr Conway: That I commend the government for. I think that's a good amendment and should be supported.
The Vice-Chair: Further comments?
Mr Lessard: Mr Chair, I don't have a further comment but I just have a point of order that I want to raise before we break.
Mr Baird: Could we vote on this and then have your point of order?
The Vice-Chair: Shall the amendment carry? Carried. Shall section 82, as amended, carry? Carried.
Mr Lessard: Mr Chair, last week we got the schedules for committee hearings this week and it indicated that we were going to be sitting today and on Wednesday and Thursday as well. That's something we had some discussions about last Monday. I'm not sure whether we had some tentative agreement with respect to that, but I'm suggesting that instead of meeting on Thursday, we meet next week some time. Since Monday is a holiday, that would make it next Wednesday. I've spoken to Mr Conway about that and he's indicated he doesn't have any objection to that. I'm just asking for the committee's consent to meet next week.
The Vice-Chair: We did have a tentative agreement for the 8th.
Mr Lessard: It's a problem for me. That's the reason I'm asking for that.
Mrs Johns: I think we have to have a discussion about that here. We have a lot of people who are running with this committee both in the Ministry of Finance and the Ministry of Energy and we would have to have a chat about that. Is there some specific time that's a problem for you on that day that we could work around? For example, is it in the morning or the afternoon?
Mr Lessard: The afternoon.
Mr Conway: It's a straight party vote here, an absolutely straight, down-the-line party vote. It's like the Roman Curia talking to the Southern Baptist Convention.
Laughter.
Mr Conway: Well, it is. So let's not accord this thing any kind of real parliamentary respectability. Maybe we can meet here -- it's just a case of talking to the wall.
Mr Baird: Mr Conway, a key vote. Maybe there could be something worked out if it's possible.
Mrs Johns: We can certainly try. It's my understanding that the time problem you have is after 4:30, when the motions are all put. Is that correct?
Mr Lessard: Actually, it could be earlier than that.
Mr Conway: We know that the government is not going to effect any amendments. That's a given, so --
Mrs Johns: I don't know why you're saying that. We tried to move to competitive pricing. There are certainly some where we've had the same amendments.
Mr Conway: I don't want to tease the bears.
Mrs Johns: I don't understand why you're trying to say that, Mr Conway. We've listened intently. We're consciously moving forward here. In finance, the adjusted gross revenue was something you wanted.
Mr Baird: The last amendment --
The Vice-Chair: Hold it, please. We're not debating anything that is in the book. That's what we're here for. We're at the moment talking about when we're going to meet next.
Mr Lessard: It's a simple request. If it's not agreeable, I won't be here. It probably won't make any difference, as Mr Conway has pointed out, in any event, because the government isn't prepared to accept any of our amendments.
Mrs Johns: I will certainly try and work that out. I will try and get the time necessary for Mr Lessard. My office will be in touch with his and we'll see where the problems arise.
The Vice-Chair: Sounds good. We're adjourning till Wednesday.
The committee adjourned at 1800.