Natural Resources Committee on April 29th, 2010

[The Vice-Chair, Liberal, Alan Tonks]

Members of the committee, we have time for just two minutes each. We will go to Mr. Bains, and then we will come over to Mr. Harris.

[Navdeep Bains, Liberal, Mississauga—Brampton South, ON]

Thank you very much, Chair.

Just following up on the comments made with respect to better management, I have a question for Mr. Elsey, who gave a detailed analysis of the costs of the program and was fairly detailed with the numbers. We heard from departmental officials not too long ago that, to date, they have spent about $340 million on grants paid out, and that they basically have $300 million left in the program for dispensing this year to homeowners. But the total cost of the program, as you alluded to, is $745 million.

What do you attribute that difference to? Is it attributable to administrative costs, or the way the program is managed?

[Ken Elsey]

No, I think it's really a result of consumer uptake. They probably looked at their conversion rate at 40% to 42%, and I suspect it's going to go much higher than that. So as we approach the deadline, you will see consumers ramping up and making a last-ditch effort to make those improvements and to get the second audit done, so they can collect their rebate.

[Navdeep Bains, Liberal, Mississauga—Brampton South, ON]

I should clarify my question.

[Ken Elsey]

It's simply that the consumer will be driven to do more, knowing the program has come to an end.

[Navdeep Bains, Liberal, Mississauga—Brampton South, ON]

Maybe I should have clarified the way I asked the question, because the departmental officials indicated that they have allocated $640 million worth of programming, and yet the cost of the program is $745 million. So what is that $100 million difference attributable to?

[Ken Elsey]

My take is that they've underestimated the conversion rate on the uptake of the rebate program. If you look at the numbers right now, of the 800,000 audits that have been done, only 236,000 have actually taken time to do the second audit. That's the issue. I think it's going to approach closer to the 800,000.

[The Vice-Chair, Liberal, Alan Tonks]

Thank you.

Thank you, Mr. Elsey.

Mr. Harris.

[Dick Harris, Conservative, Cariboo—Prince George, BC]

Thank you, Mr. Chair.

Mr. Fiume, I just have a quick question for you.

I know there are a lot of different circumstances involved—the types of houses, their sizes, and the types of retrofits, etc.—but programs aside, has all of this been put into a computer somewhere and come back with the average payback to a homeowner for an investment in energy efficient upgrades?

[Victor Fiume]

There is a program called HOT2000, which does those calculations when you input them. The difficulty is that every house is different.

[Dick Harris, Conservative, Cariboo—Prince George, BC]

I realize that, yes.

[Victor Fiume]

So you would have to model each home independently. I can tell you that on an Energy Star home, which costs about $4,000 or $5,000 more than the average house, the savings are about 30% compared with a conventional home built under the building code. So it's in the area of probably $600 or $700 or $800 a year on an average home. That's in the new home market.

We do have rules of thumb for windows, furnaces, and those kinds of things. I think part of the job of the auditors is to ensure that the dollars are being placed where the greatest level of energy efficiency is being realized for the dollars spent. I think that's an important component.

[Dick Harris, Conservative, Cariboo—Prince George, BC]

Good. Thanks very much.

Mr. Elsey, I just wanted to thank you for bringing up the point about the kilowatt cost of energy between Europe and Canada. That point added some rationality to the huge investments that we're seeing in Europe, as opposed to Canada. The demand is smacking them right in the face given the cost of energy, and we've not quite been hit by that yet, although we probably are drawing some lessons from other countries.

[Ken Elsey]

As soon as carbon has a price attached to it, then I think you'll see some dramatic changes here as well.

[Dick Harris, Conservative, Cariboo—Prince George, BC]

Thank you, gentlemen. It's been a great session.

[The Vice-Chair, Liberal, Alan Tonks]

Thank you, Mr. Harris.

On that note, this brings the panel to a close. We have another panel coming in.

Thank you very much to our panellists. We appreciate your input today. It's been very helpful.

We'll just take a short break and then we'll set up for the next panel.

[The Vice-Chair, Liberal, Alan Tonks]

Good morning to our witnesses. On behalf of the committee, I'd like to welcome you and thank you for coming here today to provide us with your input.

This panel is continuing our theme, pursuant to our Standing Orders, and studying the ecoENERGY programs.

We welcome as an individual, Sheldon Busey, the president of Shell Busey's HouseSmart Referral Network. Mr. Busey, welcome.

From the Corporation des propriétaires immobiliers du Québec, we have Mr. Hans Brouillette, public affairs and communications director. Welcome.

We also have Pascal Dubois, president of Legault-Dubois.

By video conference from Toronto, representing the North American Insulation Manufacturers Association, we have Mr. Stephen Koch, the executive director.

Just for the information of our guests, we have about seven minutes for presentations and then we go to our question period, as you saw in the last round.

We will also queue you into that question period, Mr. Koch, after you've made your presentation.

Mr. Busey, would you like to lead off?

[Sheldon E. Busey, President, Shell Busey's HouseSmart Referral Network, As an Individual]

Thank you very much, Mr. Chairman.

First of all, I go by “Shell”, if anybody would like to address me. Hearing “Sheldon”...it's the first time I've heard it since my mum was very upset with me one time.

[Voices]

Oh, oh!

[Sheldon E. Busey]

The last name is pronounced “Buzzy”, spelled b-u-s, as in bus.

Certainly, representing the western Canada program--I hear it termed as “echo” here, and in the west we call it “eco”, so in any event, we're echoing the west--the program really has been very dear to my heart, and I say that sincerely, because being a radio talk show host on home improvement for the last 28 years now in western Canada, it's something that has been very important, not only the program as it exists federally, but also the way it dovetails with provincial programs. Being involved in Winnipeg, in the Manitoba market, in the two major cities in Saskatchewan, Saskatoon and Regina, and also in Alberta, Edmonton and Calgary, and on into British Columbia, the entire province, the eco-program has been one that has been really consumed by the industry as an energy upgrade for the home.

The important factor of the eco-program, as I see it, is information and education. That's where I hang my hat. There has been a tremendous bowing to a program based on whoever is delivering it. What I mean by that is how the homeowner, the consumer, is receiving it, either at the retail level, at the radio level, at the newspaper level, at the flyer level, or information through the different distribution industries, people like B.C. Hydro, and all the rest. But for the homeowner, the importance is that we have to get the owner more involved in understanding what it is they're to expect out of the ecoENERGY program; that is, the energy analysis. That's where I really am concerned, and that's why having our representative, Russ Hiebert, invite me here, gives me the opportunity to state my case; that is, the homeowner understanding the process, understanding the process of what is the energy analysis. What does it really mean to me when I do get the energy analysis. What is the energy analysis adviser to do when they do come to my home, other than put up a frame on the door, a great big fan, and say, at the end, this is where your home rates?

We always say, good, better, best, why worry about the rest? And the rest is, where do we go, good, better, best: first, second, third, fourth, fifth? Do they take the items that are the most economical, the ones that are going to give them the largest grant or rebate, or is it something that's going to be great for them, their family, their quality of life?

That's the understanding I like to have, the opportunity to educate the consumer. That's about air quality. We talk about mould. My goodness, I absolutely hate that term, mould. The reason why, as I always say on my radio program, is there are 22,000 types of mould in our society, but there are only about two if you're affected by them that will really hurt you. I like to call it algae, because algae is really a spore that grows from moisture, light, and heat. It's one of those items that if you allow it to grow...If you do your energy upgrades to your home the wrong way, you're going to end up with lots of this algae. You can end up with it in the attic, in the roof cavity, in behind closets, draperies, and all the rest of it. All of a sudden, the homeowner puts his hands up saying, “Where do I go from here, Shell? I've done the upgrades, I've had a new furnace put in, I've had this done...”, and the next thing they know, they've got things they've never had before. I get homeowners saying, “Shell, I need my old windows back. I never had any condensation on the old ones; now I get it on the new ones.” The reason why is you tightened your house up. It's the education, showing the good, the better, the best.

What is it they're going to get back when they do the program? I always say, and in fact it's one of my sayings, how to the what, to the where, to the why, to the when, to the who to? We've got all those things, plus we've got the who to. So if we can get the homeowner to do a sequence of upgrades based upon a sequence, first, second, third, fourth, then we can have the energy savings we're looking forward to, rather than this being a buck in a pocket. Because a buck in the pocket for the consumer, if they don't spend the buck the right way...all I can tell you, ladies and gentlemen, is it's just going to be a buck in the pocket and maybe a holiday somewhere warm when it comes to going away at the time they should be doing upgrades to their homes.

I just want to make reference to the home renovation tax credit. I know this has nothing to do with it, but when I heard that word, I was the first one who thought we were going to give a tax credit based on energy upgrades, but it was on everything. And I really don't feel that everything is really the best thing when it comes to what we're trying to achieve in the industry of home upgrades. Why not give the home renovation tax credit based on upgrades of homes, giving quality and education on how their house works?

I would like to see an education video. Why not have something that can be Canada-wide for Canadians, showing what can be done to the average home, be it 30, 40, 50, 60, 70, or 100 years old. What are they looking forward to?

I am involved in the industry myself. We do have a home improvement division, and that home improvement division is educating, and education is so important to homeowners.

So value in the retrofit...18 months. I heard that mentioned earlier. Eighteen months is not enough time to decide if they are going to be quality upgrades or not. I think what we really have to do--and I'm the first one to pull my chains in behind me to be behind a program like the ecoENERGY program. Let's at least give some marks to those who do the best. Don't worry about the good and the better. The best is what we want, and if it means ventilation, let's do it. If it means windows, let's do it. If it means draft-proofing, let's do it. I ask the question: what is draft-proofing? I know, but I can tell you right now, nine out of ten people on the street don't know. And yet if you don't do it before you do your insulation--and I heard the word “insulation” mentioned here earlier. Insulation has no value at all unless you have draft-proofing in a home, because otherwise you're sending all that moisture right up into the area where the mould starts.

So, folks, the Energy Star programs, the energy analysis programs, the ecoENERGY programs, all these programs...let's live within our means and let's educate Canadians as to what they're going to get out of it.

Thank you.

[The Vice-Chair, Liberal, Alan Tonks]

Thank you, Mr. Busey.

We'll go now to Mr. Brouillette.

[Hans Brouillette, Director, Public Affairs and Communications, Corporation des propriétaires immobiliers du Québec]

Good morning and thank you.

My name is Hans Brouillette. I am the director of public affairs and communications at CORPIQ, the largest association of landlords in Quebec. I am joined by Pascal Dubois, an energy efficiency advisor. He and his team work with owners wanting to take advantage of energy efficiency programs.

A brief will be submitted to the committee today for translation. Unfortunately, we were not able to get it done sooner because of time constraints.

Clearly, in CORPIQ's view, what we are doing today is important. We want to preserve our built heritage of rental housing units for future generations. We also want to preserve the environment through energy efficiency, as well as the well-being of families who rent in Quebec, and there are many.

CORPIQ, the largest landlord association for the past 30 years, brings together 12,000 rental property owners. We target 40,000 property owners, as well as non-members, through our publications. These owners are representative of the entire community of rental property owners in Quebec, which is made up of many small owners of small buildings and a few large owners of hundreds of units. CORPIQ is a non-profit association that provides services to landlords.

The makeup of Quebec's housing stock is very different from that of other provinces. First, it should be noted that 40% of those living in rental units in Quebec—in fact, 40% of the population, 40% of families—are tenants. That is much higher than anywhere else in the country. Landlords, the people we target or try to target in Quebec, number 277,000—so many small owners with few rental units. In fact, nine out of ten landlords own between one and five units. So we are really targeting people who are often working or retired but who do not live mainly off of rental income.

The condition of Quebec's housing stock is very worrisome. According to the 2006 census, 35% of housing units in Quebec needed renovations. According to the 2001 census, five years earlier, that figure was 30%. So it is clear that there is a growing need for renovations when it comes to rental housing units. According to the census, in 9% of cases, buildings are in need of major renovations, which provide an excellent opportunity to improve the building's energy efficiency.

CORPIQ believes that the situation is even worse than the census numbers would indicate. The census data comes from questionnaires targeting tenants. CORPIQ conducted a survey of landlords, who have a lot more information on the condition of the unit, because they know what shape the foundation is in, the heating system, the roof and so forth—information that the tenant does not have. According to our figures, 32% of units in Quebec are in need of major renovations, so one in three units.

There are major challenges to renovation, and they are unique to Quebec. You will understand why. Basically, the first challenge is Quebec's excessive rent control policy, which discourages investment in renovations. We know there are five provinces that have rent control. Quebec's measures are the most restrictive. Obviously, that discourages landlords from undertaking renovations. I will explain.

When a landlord does major renovations, he can cover the expense by transferring the cost to the tenant in the form of a rent increase. There is a problem though: over the past 30 years—since the Régie du bâtiment du Québec was created, in fact—every year, the government has cut the amount that landlords can transfer. The amount that can be transferred has decreased by 77%. Before, landlords could spend $1,000 on renovations and ask the tenant to pay an extra $10 or $11 a month. Today, 15 to 20 years later, landlords are allowed to ask the tenant for just $2.42 for every $1,000 spent on renovations. Obviously, that discourages landlords from spending money on renovations.

There is a second challenge. Quebec has a lot of small buildings. There are many small buildings with few rental housing units.

So it is harder for landlords to cover the cost of renovating buildings with three or four units, versus those with 50 or even 100 units.

The third challenge stems from the fact that investors or those who are called upon to invest in renovations are not the ones benefiting from the energy savings. Many landlords who may want to invest in improving energy efficiency say to themselves that the tenants are the ones who will really save, the ones who will benefit. Most rental housing units in Quebec have leases or rental agreements stipulating that heat is not included in the rent. Since the tenant pays for heat, the tenant is the one who will benefit from energy efficiency upgrades.

As for renovation grants and tax credits, there is a real disparity in how rental buildings are treated versus single-family homes. That is a problem for us. Significant energy savings can be achieved by rental buildings, but unfortunately they are not treated the same. Energy efficiency evaluations for buildings are more expensive than for rental buildings. I will give you another example of this disparity, the Home Renovation Tax Credit announced by the government in 2009. According to a survey we did, 77% of rental property owners who knew about the credit said they were not at all interested because it did not benefit them at all.

In light of these issues, CORPIQ has the following recommendations. The first is that the committee recommend the long-term renewal of the ecoENERGY retrofit program. The second is that the committee recommend the enhancement of the ecoENERGY retrofit program in order to improve incentives, specifically for residential rental buildings, which are numerous and which house 1,300,000 families renting in Quebec.

[The Vice-Chair, Liberal, Alan Tonks]

Thank you, Mr. Brouillette.

We'll now go to Mr. Koch.

Mr. Koch, you may take seven minutes for your presentation.

[Stephen Koch, Executive Director, North American Insulation Manufacturers Association]

Thank you.

Mr. Chairman, honourable committee members, and guests, thank you for the opportunity to speak with you today.

NAIMA Canada is an industry association that represents the majority of fibreglass, rock, and slag insulation manufacturers in Canada. It is a sister organization to the 75-year-old North American Insulation Manufacturers Association, based in Alexandria, Virginia.

Our association was established in 2004 with a mandate to actively develop technical standards and to interact with governments and partners to promote the energy efficiency and environmental benefits of its members' products. Our Canadian membership consists of CertainTeed Corporation, Fibrex Insulations, Johns Manville, Knauf Insulation, Owens Corning Canada, and Roxul Inc., which represent thousands of manufacturing, sales, distribution, and installer jobs in every province.

The recent decision to eliminate the federal portion of the ecoENERGY program is very disappointing. The act of cutting the program and how it was done are both worrisome, at best. The decision was made with no attempt to discuss the impact of this decision with industry stakeholders. I mean not just manufacturers, like NAIMA members, but also the private companies that are delivering energy audits and the non-profits that are doing the same.

I would point you to a Facebook page called “Keep the ecoENERGY Retrofit – Homes Program Alive”, which sprang up in response to these cuts. On the site you can read about the very real impact this has had on small and independent business people whose sole source of employment is energy audits. Many had been in business for only a short time, after investing heavily in the required equipment and training.

The provincial partners that supported this program by matching the ecoENERGY funds were also caught off guard. This has resulted in widespread confusion, layoffs, and many individuals walking away from audit and retrofit jobs.

The early withdrawal of the ecoENERGY program works against the federal government's stated objective of reducing greenhouse gases. But greenhouse gas reduction is only one of the benefits this program has brought to Canadians. Energy efficiency measures provided a direct and ongoing benefit to Canadian homeowners' pocketbooks while supporting the creation of jobs for contractors, building supply retailers, and manufacturers, such as our membership.

Modelling programs and real-life experiences have seen reductions in homeowner operating costs of $500 to $800 a year through investments of as little as $4,500 through this program. Energy efficiency renovations allow the homeowner to see immediate and sustained payback. More disposable income in the hands of the consumer can only fuel the economy.

In the interest of time, NAIMA has limited suggestions to four key areas, which we believe can generate significant benefits.

First, offer energy efficiency low-interest loans. These loans would be guaranteed by the government. They would provide homeowners with the upfront financial resources to tackle many of the issues not addressed by ecoENERGY programs. For example, in many instances, when considering the envelope of a house, the cost of opening a wall to insulate to higher R values is not reasonable or feasible with a $500 incentive. A loan program could assist homeowners in completing some truly substantive and needed energy efficiency repairs and upgrades, without the burden of rising interest rates. It's worth considering.

Second, programs focused on increasing energy efficiency in one of the most neglected areas of housing--social housing, low-income housing, and housing in some first nations communities--are needed now. Estimates vary, but there are almost 800,000 units across this country in these categories, most of them in need of major energy efficiency upgrades. Since the heating and cooling costs of these units are directly or indirectly paid for by some level of government, any federal investment in reducing these costs will positively contribute to the bottom line of government.

Third, we must recognize that new homes will continue to add to the Canadian market homes that require energy efficient upgrades. Our building code processes fail to ensure energy efficiency when homes are built. Five of Canada's provinces do not have energy efficiency in their building codes, and one province has not updated its energy efficiency code since the 1960s. This is a huge deficit that will continue to burden future generations.

Finally, Canada must use the process and data resulting from the ecoENERGY programs to educate homeowners about what it costs to operate their homes. The decision about home pricing is only one part of the equation when it comes to affordability. Just as important is the part of the equation that includes operating costs. It's not only the cost of the mortgage that can cripple a household budget. In 2007 we saw groups begin to discuss a new term, “energy poverty”. This term was used for the situation where families were going without proper food and heating because their income could not stretch to meet rising mortgage rates and food.

NAIMA Canada also supports mandatory home energy audits. We believe this is, first and foremost, a critical consumer protection initiative. Potential homebuyers need to have access to verify full and open disclosure on the energy performance of a home, not just the fuzzy energy bill estimates provided by real estate agents. Such an initiative would see a responsible homeowner benefit from lower bills when they occupy a house and also see a premium price or a quicker sale when they decide to sell. Mandatory labelling of houses for buyers provides important consumer information that is currently not being offered.

Recent studies and polls indicate a strong willingness by consumers across all regions of Canada to expect or demand energy efficiency in homes. According to the 16th annual RBC homeowner study, almost all Canadians, 95%, said that low energy consumption is an important consideration when buying a home.

It is clear that improving energy efficiency not only helps us meet our commitments but also has an immediate, positive impact on us and our families. The reinstatement of the ecoENERGY program will have the added benefit of continuing to educate Canadian consumers about the benefits of energy efficiency, while supporting jobs in the manufacturing, sales, and installation of energy-related products.

Our industry benefits from the ecoENERGY program by selling more insulation, but jobs are created, homeowners save on energy bills, and society benefits from the reduced greenhouse gas emissions. Clearly, NAIMA Canada is committed to energy conservation and will continue to work with all interested parties. We now eagerly await the outcome of your deliberations.

Thank you.

[The Vice-Chair, Liberal, Alan Tonks]

Thank you, Mr. Koch. You're right on time. That's greatly appreciated.

To all our witnesses, thank you for doing that. It allows us a little more time for questioning.

We'll go to Mr. Bains for his seven minutes, for the opposition.