Thank you, Mr. Chairman. I would also like to thank the distinguished members of this committee.
I will be making my remarks in English, but I would be please to answer questions in either official language.
The Canadian Electricity Association is the national voice of the electricity sector in Canada. Our members represent the full value chain, from production through to delivery to the customer.
The electricity supply and delivery system has historically been reliable, secure, and cost-effective. It has been one of the key competitive advantages underpinning the Canadian economy. Canadians expect this performance to continue into the future, but its doing so will require significant capital investment.
Meeting demand and delivery challenges requires significant investment to construct new and upgrade existing electricity infrastructure and to develop and deploy new fuels, energy services, and technologies. This must be accomplished at a time of substantial regulatory uncertainty, increasing environmental pressures, mobile capital flows, and human resource challenges that are unparalleled in our history.
The theme of this year's consultation is Canada's place in a competitive world. Accordingly, CEA is pleased to propose the following measures, grouped in the four broad categories requested by the committee.
Under health and skills, CEA has two recommendations. First, the federal government should move to reactivate class 24 and class 27, which were phased out in 1998, or provide the equivalent CA in tax credits. Alternatively, all of the end-of-stack generation technologies to control or reduce pollutants such as NOx, SOx, particulate matter, mercury, and carbon dioxode, could be placed in class 43.1.
Given your more stringent environmental regulations, the electricity industry needs fiscal tools to provide incentive to accelerate expensive improvements to its coal-fired plants.
Second, recognizing the significant human resource challenges facing the electricity sector, CEA believes that governments and industry must increase efforts to address issues such as recruiting and retraining workers, facilitating school-to-work transitions, and developing sector and career awareness strategies. Attracting skilled workers to Canada is also key to addressing the electricity sector's human resource needs.
Within the broader competitiveness agenda, CEA offers three specific recommendations.
First, amend subsection 162(2) of the Excise Tax Act to finally declare wind a natural resource and accelerate the development of this potentially significant renewable resource. There is a need to eliminate the administrative burden of GST collections and remittances to place wind energy on an equal footing with other declared natural resources.
Second, lower corporate tax rates to 19% immediately, to continue to provide increased economic stimulus to attracting economic development in Canada. CEA supports lower corporate tax rates over the longer term, as the bulk of new electricity supply will have to come from private, taxable partners.
Third, establish a federal energy grant program that will ensure the federal government remains a strategic funding partner to energy conservation, which remains a critical pillar of Canada's self-sufficiency in both electricity and natural gas.
Under infrastructure, CEA has three recommended measures that would invite mobile capital directly into the electricity industry to recapitalize its aging infrastructure, while signalling that Canada overall is open for investment.
First, the federal government should remove the inequity of distinguishing between old and new equipment, which is a unique holdover of the tax treatment for the electricity industry, as illustrated by the industry's supplied tax studies over the years. This move alone would significantly jump-start the change-out of capital stock by signalling the inherently shorter useful life of an existing asset base.
Second, the federal government should reclassify new technology of smart meters and advanced metering infrastructure to reflect the true nature of their components. A CCA rate of 45% for electronic software and communication technologies, combined with a 12% hardware rate, would be realistic and equitable.
Third, the federal government must continue to elevate CCA rates for new transmission and distribution build-out, to 12%, and for new nuclear power supply to 12%. Both measures would remove a tax inequity with the United States.
Finally, under the innovation platform, CEA has two recommendations. First, amend subsection 127(8) of the Income Tax Act to allow active partners in LLPs to utilize SR&EDs and provide new solutions to electricity technology challenges.
Second, permit SR&EDs to be refundable and extendable to all performers, while allowing the unused portions of the tax credit to offset other levies, such as CPP or EI. This would result in greater industrial innovation.
With that, thank you, Mr. Chairman. I look forward to your questions.