Thank you, Mr. Chairman.
The Canadian Electricity Association is the national voice of the electricity industry in Canada. Our members represent the whole value chain of the industry, from the production of electricity to the distribution to clients.
The electricity system is complex. Electricity is the most extreme example of just-in-time delivery. There's no widespread storage system for electricity, so the moment when a customer flips on a switch or turns on a machine, the power must be available from a generation station sometimes hundreds or even 1,000 kilometres away and delivered through a transmission and distribution grid, all of which are constantly balancing supply and demand.
A safe, secure, reliable, sustainable and competitively priced supply of electricity has been one of the key competitive advantages we have had to support our economy and our prosperity.
Canadians expect this performance to continue into the future, but to do so will require significant investment in electricity infrastructure in the years to come, estimated by the International Energy Agency to be in the order of $190 billion by 2030.
To address the challenges related to demand and to the distribution of electricity, significant investment will have to be made in the construction and upgrading of our infrastructure as well as in the development and distribution of new fuels, new energy services and new technologies.
These initiatives must be taken at the time of regulatory uncertainty, environmental pressures, capital mobility and unprecedented labour shortages in our industry.
The theme of this year's consultation is “the tax system the country needs for a prosperous future”. Accordingly, in the brief we sent to the committee in August, we proposed a series of recommendations that we feel will enable the electricity sector to contribute to a prosperous future for Canada.
Our recommendation relating to the corporate income tax rate has been overtaken by events and we were pleased to note the announcement in the latest Economic Statement that the rate we be reduced to 15% by 2012.
We made specific recommendations with respect to the scientific research and experimental development tax incentive programs, and since the submission of the brief, CEA has taken part in the SR and ED consultations that were recently launched by the Department of Finance and the Canada Revenue Agency. We welcome the opportunity to work with the Government of Canada to improve tax incentives and to streamline the program's administration.
In our brief, we also discuss the tax treatment for smart meters and advanced metering infrastructure, or AMI. Smart meter technology and AMI are essentially information technology. They comprise telecom, electronics, and software, but they're currently treated as part of the distribution plant when calculating capital cost allowance rates. CEA believes that these rates should be reclassified at a 45% CCA rate from their current 8% rate to better reflect the high-technology nature of their components.
In addition, CEA asks the committee to consider the following recommendations. First, increase the CCA rates from 8% to 12% for investments in transmission and distribution infrastructure to encourage modernization of the grid systems. The United States has brought the depreciable life of transmission infrastructure greater than 69 kV down to 15 years, reflecting a 12% CCA rate equivalent. Electricity grid linkages between Canada and the U.S. support commerce and reliability. We must ensure that both our systems are modernizing at similar rates and must recognize that we seek funding from the same capital markets.
Furthermore, we recommend the re-enactment of Class 24 for air and Class 27 for water for the capital cost allowance, or CCA, for a period of five years in order to encourage electric utilities to implement pollution control technologies and emissions abatement in thermal power plants.
Finally, we are calling for renewed efforts to support information distribution as well as programs and offers relating to energy efficiency.
In summary, we believe that these recommendations will move us closer to a tax system for a prosperous future by helping to make electricity the critical enabler of the economy and of Canadians' expectations for an enhanced quality of life.
I want to thank you, Mr. Chairman as well as the members and the staff of the committee, for this opportunity.
I'd be pleased to answer any questions you may have.
Thank you.