Natural Resources Committee on April 25th, 2007

[Christian Ouellet, Bloc, Brome—Missisquoi, QC]

And to Toronto, it would be another 5%, and if it is Vancouver, you'd have nothing left ?

[Ed Martin]

I think that's why I was using the range of 3% to 7%, roughly speaking, because it does depend on the distances.

To be frank, when it comes to exact line losses from upper Churchill or lower Churchill into Montreal or into Toronto, I don't have those at my fingertips. But from the economics that my business people and engineers are providing, I know that the ranges, as I've mentioned, are built in properly to match the distances we're using to estimate.

To be honest, I don't have the exact distances and lines losses. I just know that we have incorporated what is right and reasonable.

[Christian Ouellet, Bloc, Brome—Missisquoi, QC]

You are considering a possible subsea line towards New Brunswick. Would there be as much line loss there as in an overhead line?

[Ed Martin]

The short answer is yes.

As to direct comparison, that's the answer I've been provided, because naturally I've asked the same thing. About four months ago I put together a small team of engineers. I asked them to provide me with the updated economics and technical considerations of a subsea line from Newfoundland and Labrador to New Brunswick. I wanted them to give me the feasibility of it, high-level. They came back and told me it was feasible, and gave me the research. In northeastern and northwestern Europe there's a predominance of these types of lines, as there is in Australia. Connecting Australia and Tasmania is a line called Basslink.

So I asked them if it looked reasonable in the preliminary, and when they said yes, I asked for some numbers on how much it cost. They numbers they provided me with came within a window such that, from a commercial engineering perspective, I wanted to pursue this further. I asked this team of engineers to go to Europe and investigate it further. They visited some of the key engineering firms as well as some of the big projects. NorNed is a good example, as I mentioned; it's connecting Norway and the Netherlands.

The team came back with some interesting results. The Europeans think differently from Canadians with respect to this. I find the Americans actually a lot more aggressive than we are as well. The Europeans are doing this all the time. They think long term. They think infrastructure investment. Their response was, “Here are the numbers, let me look at what you have, this looks interesting—we'll come over next month and let's start.”

All of that said, from what they brought back I have enough information that has continued to show that this is a viable alternative. So before I can answer your questions directly, I will tell you that, as I mentioned, we've hired three engineering firms. One of those, a large Norwegian firm with engineering expertise, is to come over and—

[Christian Ouellet, Bloc, Brome—Missisquoi, QC]

You can tell me that next week. I'd like to ask you one other question. I have very limited time. Earlier on you were referring to power exports towards jurisdictions like the United States, New Brunswick and Ontario, possibly. Do you not have an exclusive contract with Quebec?

[Ed Martin]

Upper Churchill, yes—exclusive contract with Quebec. Our intention, from Newfoundland and Labrador Hydro's perspective as a business entity, is no change.

Lower Churchill, no—entirely separate. Whatever we do there is separate from that entirely.

[Christian Ouellet, Bloc, Brome—Missisquoi, QC]

When it comes to energy efficiency in the transmission of electrical power, you're telling me that you get the best results from 735 kV wires. Would it not be more effective to diversify your sources through interconnection, so that power is used as close as possible to where you generate it, by using hydrogen, as you mentioned, or other means?

[Ed Martin]

Well, I guess we look at it in terms of power obviously just being the movement of electrons. So if we are moving power over long distances, depending on the type of system you have, it doesn't necessarily have to be the exact same electron starting here and ending up over there. We may end up selling power and going through a transmission route where some of our power—if we could ever identify it—may be pulled off earlier and replaced with power coming from other sources farther down the line.

So we don't really look at it in terms of—That's why with the line losses, we just don't start with our electrons and end up in Montreal or Toronto; there are a whole bunch of things that happen in between, and that is the premise of open access, to allow that to happen in an efficient manner so everybody wins.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Ouellet.

Ms. Bell.

[Catherine Bell, NDP, Vancouver Island North, BC]

Thank you.

Thank you both for your presentations.

Mr. Fedora, no one has asked you a question yet. I wish you'd had a handout; maybe you did and I didn't get it.

[Philip A. Fedora]

I distributed it. You'll get it later, I guess.

[Catherine Bell, NDP, Vancouver Island North, BC]

Okay, because there was a lot of information in your presentation and lots of figures.

One of the things I want to touch on is the reliability of electricity in the context of sustainability. For me, sustainable is good for the economy, community, and the environment. So when you talk about criteria for reliability, do they negate anything that would be seen as sustainable, such as wind and solar—because they're not always seen as reliable? I'm just wondering if you could comment on that.

[Philip A. Fedora]

I just want to say that when we talk about reliability, we're talking about the reliability of the bulk power system, so that no disturbances cascade into outages that could cause region-wide blackouts, not just local events. We're talking of the size of the northeast.

These criteria are planning and operating criteria put in place to protect the system for the benefit of all users, so you can have a robust marketplace and can sell power from point A to point B in a reliable system that remains operable under a variety of system conditions. The operators will follow these guidelines and procedures, as well as the planning aspects.

There's a lot of wind power being proposed for the future—a lot of projects in the United States and Canada—as well as demand-side programs. When we develop the criteria through our committees and experts, we are very careful to make sure these are technologically neutral, so that the requirements are purely for the reliability of the system. That's taken into account.

Normally when projects come before us, before they can be implemented, they need a signed purchase power agreement or they have to enter into something with their local utility. Within those agreements come the conditions they must adhere to, including mandatory NERC standards now, as well as any more strict criteria the region has. So this is done at a planning stage before the project's even interconnected. It goes into the design of the projects, whether it's wind, or hydro, or a nuclear unit, for that matter. It's taken into account. The reliability is in the best interest of everyone.

[Catherine Bell, NDP, Vancouver Island North, BC]

Thank you.

I want to touch on the east-west power corridor issue that we've been talking about for some time. I see on the little map you have in your package, there's a lot of back and forth, up and down, and a little bit of east and west between a few provinces. While I understand that each province developed their own power based on their own needs at the time, some of the provinces are using not so clean methods of power generation—such as coal. Nuclear, as far as I'm concerned, is not a sustainable form of power generation, although it is reliable and, I guess, cost-efficient.

So I'm just wondering, with respect to an east-west power grid, what it would take to make that a reality in Canada, politically and between the provinces. What effect would that have on our north-south sales or purchases?

[Ed Martin]

Times have changed. If you look at the very interconnections that are occurring north-south and east-west at this point, for the most part we're keeping the lights on, although there have been indications of problems. We're at a point where we need to address those one way or another, to meet Ontario's needs in particular. They have announced the closing of the coal generation...plus they have growing demand. Steps have to be taken to meet the demand and the issue that's going to occur 10 or 12 years hence. That's the nature of big projects.

I'd like to say that we feel we're doing our part in Newfoundland and Labrador with respect to the east-west grid. We have invested money in Hydro-Québec and used an open access transmission process, which Hydro-Québec has been very open in providing us. It's their process and they've opened the door to us. We've asked them what to do, they told us, and we've applied that. But we're spending money to fund those studies—Newfoundland and Labrador alone. So we're making our best effort.

From an east-west grid perspective, we're saying we have an issue that has to be dealt with and we're asking how we can improve that. How can we help that from a federal government perspective? I turn to our friends in the U.S., who I think have been ahead of us with respect to this kind of thing. If you look at the structure of our Canadian markets and where we're headed and compare it to the U.S., the U.S. government, through the Federal Energy Regulatory Commission, FERC, has taken a stand that they are going to be the holders of the open access rules, regulations, and appeal processes. I think that makes a lot of sense. I think the various state jurisdictions in the U.S. got to a point where they felt that, for open competition and the good of the consumer, if the federal government put an element of fairness across the country over this thing, that most importantly is going to drive this freer flow of energy across Canada. I suggest we are probably at a stage where we need to consider that.

With respect to the jurisdictions that are impacted, whether you're coming through Manitoba, Saskatchewan, Quebec or anywhere, one of the key bases of open access is to ensure you pay a fair tariff. The jurisdictions that currently own the transmission have invested good money in that transmission. They made good investments, strong investments, and there is value attached to that. From a federal perspective, an understanding that those jurisdictions have to be protected to get a fair return on the assets that will be utilized by others is critical.

You have to have something that works for everybody. That's the way we're looking at it with respect to our relationships with New Brunswick and the Province of Quebec. We see this as good for both of those jurisdictions. In a tariff situation, which we'll be paying, we understand the numbers. Any tariff that's being paid is cash that goes into the systems in New Brunswick and in Quebec. It provides extra revenue to those jurisdictions for transmission capacity that is not being currently used, which has the result of making their systems more effective, with lower cost to their consumers. There is a return built into that.

That's how we're working with these folks. We understand and we are prepared to pay a fair tariff to use those assets. But if you look at the structure and how this happens, I think the time has come for the federal government to make that work and make sure it is fair for everybody.

[The Chair, Conservative, Lee Richardson]

Thank you, Ms. Bell.

We will now hear from the Parliamentary Secretary to the Minister of Natural Resources, Monsieur Gourde.

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

Thank you very much, Mr. Chairman.

My question is for both witnesses. We are discussing the transmission of electrical power, a subject which I find very interesting. These nice big power plants, in Churchill Falls and James Bay, are, in my opinion, the foundation of our power supply. Moreover, they provide clean energy.

From Churchill Falls, are the easiest markets to reach down south or in Quebec? It may not be all that significant. What route does power take between Churchill Falls and Quebec? Is it mainly to supply eastern Quebec, to allow the James Bay plant to provide more power to Ontario? Unless it is all interconnected.

Thanks to Churchill Falls, additional electricity will enter into the system. Can you tell me whether the distribution grid has the capacity for integration? Could you also comment on the role of small hydroelectric plants and wind farms? Do they work with the system or could they cause a problem?

[Ed Martin]

In answer to the first part of that question, with respect to the availability of excess capacity in Quebec, we know there is some, but in actual fact that's the purpose of the open access transmission request and the system impact studies. We've asked them to study that and to identify exactly what the excess is. If we need more, then there will have to be an investment to build more infrastructure or upgrade infrastructure.

The way the tariff works is that up to a certain point, some increased infrastructure is allowed within the tariff, and after a certain point, the tariff would be increased by the amount that it would take to do the extra upgrades.

That's the purpose of the impact studies, and that's the information we're getting this year. We will be able to answer that question better when we get the information.

You mentioned small hydro and wind. I think if you look at it, once again, not only from Canada's perspective but from Newfoundland and Labrador's perspective, Newfoundland and Labrador have what we call an energy warehouse. The federal government has talked about an energy superpower for Canada, but we believe we have an energy warehouse.

This relates to small hydro in that if you look at our resources, look past the lower Churchill and the upper Churchill, add to that the extra potential for further hydro development in Newfoundland and Labrador, and add to that the wind potential, which is second to none. We've just displaced North Dakota as the best wind regime in North America, and we have the statistics to prove it. They were talking about a 40% capacity. In fact, we're at 43% to 45%. I don't think I have to tell that to anyone who has visited Newfoundland. We may not need scientific data to prove that, but we have it in any event.

If you look at small hydro and wind and the massive resource we have there, and an energy warehouse, that only goes to show why it is so important, from a transmission perspective, for Newfoundland and Labrador to be able to grow our economy and stand on our own two feet over the next 25 to 30 years. We have to get this transmission situation sorted out.

It's good for the country. It's good for the rest of the provinces, but also we have all this extra energy that's sitting there waiting to meet the growing demands of central Canada. So anything we do here is going to enable continued development for Newfoundland and Labrador.

We need a lot of power for ourselves, but to be frank, I can't envision a situation in which the amount of power we have available to export.... I don't know if we'll ever be able to consume the huge amount that we have. We're talking thousands and thousands of megawatts. We are going to look after our own needs first, no question, but I know, just from the numbers we're running, that we have the answer for a lot of this country, and it's sitting there waiting to be developed. Any transmission work we do is only going to enable the rest of that.

You also asked a question, I think, about enabling wind. Another competitive advantage we have in Canada—we have it in Newfoundland and Labrador, and other jurisdictions have it—is that if you marry hydro with wind, it's a true marriage made in heaven. When the wind is blowing, you just let it blow and use all that power, and you store your water in the reservoir. That's basically storing cash. And when the wind stops blowing, you have enough extra water to start running your turbines instantly, and you blow it down.

What you do, in essence, is take wind, which is intermittent, and you make it firm. You make it like a hydro project by marrying those two together. Any jurisdictions that have lots of hydro and good reservoirs are able to take this wind energy and make it really firm.

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

Thank you.

There is one thing that I have more or less understood. Labrador will be exporting energy. In fact, you will have more than enough to meet your needs. At the end of the day, you want to export some to maintain your project's and the province's economic viability.

To have access to part of the Quebec market, is it really necessary for the province of Quebec to partner with you or could you simply send your power from Labrador to Toronto or New York? Is that an issue at all?

[Ed Martin]

When we first step back and talk directly about Quebec, from Newfoundland and Labrador Hydro's perspective, we partner with Hydro-Québec every day, and we do it very effectively, and we have for 40 years. We have a tremendous working relationship. I have to say that. You look at the upper Churchill Falls, a 5,500-megawatt facility. We operate it. They're our customer, and daily there is constant interaction. And there are really very good, solid relationships there. That's number one.

Number two is that the same relationship has spilled over into our applications into Hydro-Québec TransÉnergie. Typically Hydro-Québec is very professional; so is Newfoundland and Labrador Hydro, and we're continuing to work at that. As far as partnering with Hydro-Québec or Quebec on anything, we do it all the time, and it works effectively for us.

But as far as the actual destination goes, we will go to the destination, in the final analysis, that provides us with our best returns. We've made that clear before. We see this as a Canadian opportunity and a tremendous investment for the country, and naturally our preference would be to do a fully Canadian project. But I think we've also been clear that in the final analysis, we have to do the best business deal, and that's what we're in the process of putting together, and that's where we'll go.

[Philip A. Fedora]

Could I add something to that?

The way the systems work, predominantly the northern provinces peak in the winter; their highest load level is experienced during the winter. Ad that's not the case in the United States, where the summer peaks are the highest.

So there's this load diversity between north and south, and that's why there is a lot of trade of electricity between Canada and the United States. Because you're normally in excess in the summer period in the northern places that aren't peaking. They do their maintenance and they still have excess power left over that can be sold to a market that is eagerly waiting for it, because that market is peaking, opposite to the north.

[Ed Martin]

I couldn't agree more. The only thing I could add is that what we're seeing is that there's been a turnaround in the Ontario marketplace only. Ontario has become a summer-peaking market over the past several years and it's continuing to grow that way, as we've seen with some of the issues they've had. So now we have a U.S. and an Ontario summer-peaking market.

[The Chair, Conservative, Lee Richardson]

We'll make another round, Mr. Harris, to get back to you, because we did want to hear from Mr. Tonks.

[Alan Tonks, Liberal, York South—Weston, ON]

Thank you very much, Mr. Chairman.

Thank you to both of you for being here. Not being resident of the area, and being in Toronto, I must admit we do have the problems that Mr. Martin just talked about in terms of the summer peaking for air conditioning; we had our experience with the ice storm issues; we have the issues related to the coal-fired plants; and there's a raging controversy, even though the premier seems to have been able to circumvent it for the moment, on nuclear.

Is it necessary, based on your production of electricity from Churchill Falls, for the lower Churchill to develop before any probability can be met with respect to the evolving dynamic of the Ontario energy requirements? Why can't you satisfy them now? Why can't an agreement be worked out? As I understand it—perhaps my premise is wrong—that lower development is related more to export and developing a new service area, if you will, which is the newly emerging needs of Ontario and New Brunswick.

[Ed Martin]

First, I'd like to make this point, and I think Mr. Russell will understand why. It's been crystal clear as well that Newfoundland and Labrador's needs are to be met first. We just think we have excess power. Labrador is going to be first on the list, and the island is going to be looked after as well. So it's the excess we're talking about.

As for the time constraints that we have right now, looking at our project plan, why are we picking 2009 to put shovels in the ground? Well, the environmental process is the critical path on that. So we looked at everything that we're doing now with respect to project planning, the engineering, the market access work, the discussions with the Innu Nation—all the work that's going on—and we added the environmental piece of that. The environmental process has to be completed, and we respect that fully. We want to do an extensive analysis. That's the piece that has to be completed. That's what's driving us to 2009.

Following 2009, assuming we get through that process, we think everything else will be in place so that we will be in a position to put shovels in the ground, commit the big dollars. At that point, our project planning shows us that it will be a six-year timeframe, which is not that long for a project of this magnitude. It's in 2015 that we'll be counting first power, but actually the first units would be on in 2014.

From our discussions with Ontario and the U.S. markets, I know many of these places have experience with these big projects and they're looking at those timeframes as well. And actually, if you look at the load curves we were talking about and you look at the potential shortfalls of power, both in New England and throughout Canada, you'll see we are actually marrying up quite nicely on that schedule as to when these things really have to be met.