Natural Resources Committee on June 5th, 2012

[The Chair, Conservative, Leon Benoit]

Good morning, everyone.

We're here today to continue our study of resource development in Northern Canada. We have three witnesses here today, starting with the Canadian Electricity Association's vice-president of policy development, Francis Bradley. I want to apologize to someone else from your company for having to reschedule the meeting. These things happen around here, probably more than they should, but that's the way it is.

Secondly, from Qulliq Energy Corporation, we have Peter Mackey, president and chief executive officer. We also have by video conference from Fort McMurray, Alberta, Melissa Blake, the mayor of the Regional Municipality of Wood Buffalo.

Welcome to all of you. Thank you very much for taking the time to come today. We're looking forward to your presentations and then to answering questions directed from all parties here at the table.

So let's get right to it, in the order that you're listed on the agenda, with presentations of seven minutes.

First will be Francis Bradley from the Canadian Electricity Association.

[Francis Bradley, Vice-President, Policy Development, Canadian Electricity Association]

Thank you, Mr. Chair and members of the committee for having invited me here today to discuss the opportunities and challenges of resource development in northern Canada.

My remarks today will focus on the integral role of electricity as a critical enabler of this development.

Every day, the members of the Canadian Electricity Association, or CEA, produce, transport and distribute electricity to industrial, commercial, residential and institutional clients throughout Canada. The energy we produce, transport and sell is essential for our activities at home, at work and for the entire economy.

I want to mention, for the purposes of your study, that the Northwest Territories Power Corporation and Yukon Energy are active members of the association.

When it's their turn to host CEA meetings, it's always a highlight for our members and my colleagues who are fortunate to travel to Canada's north and experience first-hand one of the most breathtaking and amazing places in the world.

Today, I'll focus on resource development in the north, but in the context of challenges faced by Canada's electricity system at large.

I think it's also important to note that these challenges north of 60 are not dissimilar from those faced by CEA members who operate in northern, and sometimes remote, regions of geographically vast provinces where significant resource development is under way, particularly in the mining sector, which I know the committee has already been examining.

Canada's electricity is a fundamental pillar of our economy.

We often talk about natural resources as being at the heart of the Canadian economy, but we rarely talk about the crucial role of electricity. Canada's bulk power system is the largest and most complex interconnected system in North America. It's safe, sturdy and very reliable. Our competitive rates, which are lower than those of most other countries in the world, continue to be one of the dominant aspects of our system and ensure a formidable competitive advantage for Canadian companies.

This advantage is a product of the foresight of our parents' and grandparents' generations who built the electricity infrastructure that has served us so well for decades.

In that sense, electricity policy in Canada has been a de facto industrial strategy for many years.

So what is the electricity profile of Canada's north? If you refer to the transmission map on the first page of the materials that we circulated, you'll notice immediately that Canada's north is isolated from the North American high voltage grid. Most of the north relies on self-contained grids.

The graph on the next page provides an overview of the different types of electricity generation currently used in the north. The vast majority of generation in Yukon and a significant portion in the Northwest Territories comes from hydro. Nunavut almost exclusively uses diesel generation.

A bit of solar and wind energy is currently produced in the three territories, but it is a very small part of the electricity picture in the north, so little that Statistics Canada did not include it in the data used to produce this graph. Nevertheless, there is a little bit.

Reliance on diesel in the north has significant consequences on price, reliability and the environment. It is also a huge energy challenge for the north, in particular for remote communities. The three territorial governments have expressed a commitment to increasing the use of renewable resources like wind, solar and tidal energy.

However, while they are important, these generation sources are not well suited to support major resource development projects that require larger, more dependable capacity.

To power major resource development projects in the north, a new and expanded electricity infrastructure will be required. As the map I provided illustrates, connecting to the continental grid to access the supply would require the construction of major transmission infrastructure.

New baseload generation capacity in the north, a hydro project for example, would constitute a major electricity infrastructure project that would also require new transmission capacity to service multiple communities and projects.

In both cases, we are talking about big projects. Any discussion on major expansion of electricity infrastructure in the north must also include a discussion on similar challenges in the rest of the country.

According to a recent report by the Conference Board of Canada, 347.5 billion dollars would have to be invested between 2011 and 2030 to meet electricity needs and ensure Canada's energy future.

This is a priority for our association and for Canada's electricity sector.

The barriers to this infrastructure renewal are magnified for projects in the north, particularly in terms of cost and, most importantly, social licence. I'm referring primarily to the many aboriginal communities in the north whose acceptance and participation in projects are absolutely essential.

The primary impediment to electricity infrastructure renewal in Canada is increasing legislative and regulatory complexity. There are two components.

First of all, there are the neverending and often duplicative regulatory processes for new projects.

Second of all, there are the inefficient and disparate regulatory requirements for the facilities in place.

In the documents that were distributed, there is also a chart, created by the Major Projects Management Office, which provides an interesting visual representation of the regulatory processes that can apply to new energy projects.

For new electricity projects, the excessively complex federal approval process often leads to pointless delays. That is due to the lack of coordination among federal departments and the frequent requirements to provide information that was already provided during similar provincial processes.

This process duplication results in no additional environmental protection. I'll note that since its creation in 2007, the major projects management office has made progress in reducing inefficiency and delays between the federal entities involved in project approvals. However, there is a limit to improvements that can be made within the existing framework. Real change requires a legislative and regulatory overhaul.

CEA members have developed extensive proposals to improve many of these processes while ensuring that environmental protection is paramount. CEA members seek regulatory predictability, consistency of application, and, in every instance, positive environmental outcomes.

I would like to discuss two other major challenges that concern increasing the capacity for electricity in the north to allow further development of resources, including funding, and the risks posed by projects, specifically those associated with mining projects.

A proposed mine that will require the construction of new electricity infrastructure to operate provides a good example of a key risk element associated with project life. Most mines have a life cycle of approximately 15 years. Electricity infrastructure on the other hand often operates for 40 years or more.

So who will be responsible for a stranded electricity asset when it's no longer needed for a mine? One possibility is the development of micro or mini grids linking multiple smaller generation facilities, hydro for example. When these grids are no longer required to provide electricity for a mine, they could tie into larger grids and supply renewable electricity to communities currently using carbon-intensive sources like diesel. This is just one example.

We are talking about the type of options that have to take into consideration communities, electrical utilities and governments when comes the time to determine the benefits of each of the resource projects. For the purposes of the study you have undertaken, an important issue to consider is the following: what role does the federal government play in order to encourage and facilitate resource development in the north?

Even if the members of the CEA are not asking for federal funding for the renewal of electrical infrastructures, but rather regulatory reform as I just described it, in the case of electrical production projects in the north, let us not forget that several of these projects are in remote regions and are simply not profitable.

The federal government had recently invested in these types of projects. Upgrades to the Mayo B hydro generation facility and further developments to the Carmacks-Stewart transmission line are two recent examples.

On closing, for any project aimed at increasing resource development in the north, we must first recognize the need to proceed with a major expansion of electrical infrastructures. We must begin by eliminating obstacles that currently exist across the whole country, with respect to renewing electrical infrastructure, before going forward with any new major project. Recent government proposals for regulatory reform are a step forward, but certain concerns remain.

Finally, increased resource development in the north requires experience and leadership to bring parties to the table, particularly affected communities and aboriginal peoples. Provincial governments, regulators, and licensing authorities, who have responsibility for electricity system planning and administration, must also be part of any long-term vision for resource development in Canada's north.

Merci. I look forward to your questions. Thank you.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Mr. Bradley, for your presentation.

We go now to Mr. Mackey, president and chief executive officer of Qulliq Energy Corporation.

Go ahead, please, sir, with your presentation.

[Peter Mackey, President and Chief Executive Officer, Qulliq Energy Corporation]

Thank you, committee members and Mr. Chair. I'm pleased to be here today to speak with the House of Commons Standing Committee on Natural Resources. I thank you for the invitation.

My opening comments today will give you some background on Qulliq Energy Corporation as well as our involvement in energy resource development in Nunavut.

On April 1, 2012, Qulliq Energy Corporation celebrated 11 years as Nunavut's own electrical utility. Qulliq Energy is responsible for supplying the electricity needs to the 25 communities in Nunavut. Nunavut is the only jurisdiction in Canada where 100% of the power being generated comes from fossil fuel generators. Unlike our southern neighbours, none of our communities are connected to a grid system. Each community is a stand-alone grid. QEC operates in an inhospitable environment for a utility company, with the added pressure of providing service to an area that is one-fifth of the land mass of Canada, across three different time zones.

Electricity generation in the north has traditionally relied on diesel generation, given its record of long service. However, with the increasing costs of fossil fuels, diesel generation in the long term will not be economical or sustainable. Currently the Government of Nunavut pays approximately 80% of Nunavut's energy costs, either directly or indirectly. Energy costs are subsidized in Nunavut through subsidy programs but also through underinvestment in the replacement of our existing capacity, much of which is at or near the end of its life cycle.

The costs of fossil fuels combined with the infrastructure replacement requirements result in Nunavut having the highest rates for power in all of Canada. Current residential energy costs average about 75 cents per kilowatt and range from 52 cents per kilowatt in Iqaluit to over $1 per kilowatt in Kugaaruk. These rates are only sufficient to maintain but not replace the existing infrastructure.

QEC is limited in the resources that are available to generate power, due to the risks associated with living and working in the north. Safe, efficient, and reliable power is a must when the temperature is minus 40 and the wind is blowing. The need for diesel generators in the north will not go away for many years, due to the requirement of having reliable backup systems and a consistent supply of power.

With Nunavut having high power rates, this effectively lowers the bar on the business case for renewable energy. However, at the same time, the cost of renewable energy infrastructure is raised due to the distance involved and the environmental conditions in which the infrastructure needs to be installed. The core business of QEC is to provide safe, reliable, and efficient electricity through responsive and respectful interaction with all stakeholders. Given the limited financial resources of QEC and the Government of Nunavut, which is our only shareholder, QEC cannot afford to be a research and development company. This does not mean that QEC is anti-alternative energy. However, with limited resources, the focus of the corporation must be on the core business. Funding for alternative energy initiatives would need to fall outside of core funding requirements of upgrading and replacing existing infrastructure.

QEC has applied to various federal programs for different alternative energy projects with various degrees of success. Our most recent successful efforts include 50% of the funding required to develop a smart grid for the City of Iqaluit. This project will move the distribution infrastructure to be in line with grid systems in the south and improve the service to our customers. The one project where QEC has been unsuccessful in obtaining funding is the development of hydroelectric power. Hydro is a proven technology in northern climates and is the best hope for reducing Nunavut's dependency on fossil fuels quickly, sustainably, and affordably. There are numerous power plants across the circumpolar world and in the Northwest Territories, the Yukon, Alaska, and Greenland.

Iqaluit is the largest community in Nunavut, with a population of just under 7,000 people. A hydroelectric development has been studied for the past few years and is now at the completion of the pre-feasibility stage. Funding in the estimated amount of $8 million is required to complete the feasibility and engineering studies. This project would provide the City of Iqaluit with clean, renewable energy for the next 100 years and reduce diesel fuel consumption for electrical generation alone by 14 million litres per year, at the current rate of consumption. The capital cost of this project is currently estimated at $300 million to $500 million for development.

The borrowing ability of QEC is tied to the Government of Nunavut, as all of QEC's debt is considered part of the Government of Nunavut's debt cap. The Government of Nunavut's debt cap was recently increased from $200 million to $400 million. This still places a hydroelectric project beyond the scope of financial possibility for the Government of Nunavut and QEC.

Alternative financing arrangements have been researched, but without a completed feasibility study, no plans can be made to bring the project to fruition.

A daily occurrence in the northern news is the talk about various mining developments. Nunavut holds vast deposits of minerals that require large amounts of power to develop. QEC has been in discussion with various mining proponents to explore synergistic opportunities for the development of diesel and hydroelectric power for these projects.

The characteristics of development lead time, regulatory conditions, and project lifespan all play a part in how a resource project can be linked to renewable or alternative power. Renewable energy, such as hydroelectric power, typically has a 50-year-plus lifespan, but only after an eight- to twelve-year development program, which includes all geology, economic, socio-economic, and environmental assessments in the building of the project.

Mines, on the other hand, have much shorter development programs and usually have shorter lifespans. The Meadowbank mine, operated by Agnico-Eagle, had an original lifespan from 2010 to 2019. Only recently did we learn from the news that the lifespan has been shortened, with a new end date of 2017.

The economics of mining require that the companies that own and operate the mines must be sensitive to changing conditions. These changing conditions complicate the synergistic opportunities that could be gained with energy resource development. Stable conditions and contracts are what are required for an energy resource development. Geographical location is also a fact to consider.

Most of the resource developments are occurring in locations that are not in close proximity to the communities within Nunavut. This is further complicated by the locations of potential hydroelectric sites not being in proximity to communities or resource development projects. In the majority of the sites the need for distribution infrastructure, either to a mine site or a community, must be factored into the development.

Energy infrastructure in the north, similar to that in most other provinces and territories in Canada, is at or near the end of its designed service life. The situation in Nunavut is that we have 17 out of 25 power plants that are at or near the end of their designed lives. To add to the stress on the power plants, economic and population growth are putting a strain on the existing systems, and a plan is required to address the upgrading and the replacement of infrastructure that provides an essential service to the residents and businesses of Nunavut.

Since the creation of the company until 2010-11, the capital plans only addressed the increasing capacity or generation needed to meet the growing demand, but did nothing to replace infrastructure. The total capital plans per year were in the $10 million to $13 million range. The cost to construct a single medium-sized diesel power plant in Nunavut is $12 million to $15 million. With 17 of the 25 power plants at the end of their lives, a cash infusion to support a replacement program is required.

Nunavut's utility ratepayers alone cannot pay for the cost of new infrastructure. The current capital plan for QEC is estimated at $25 million per year for the next 10 years. For the most part, this replaces and upgrades generation infrastructure only. Additional funding is required to replace and upgrade distribution plant infrastructure. Most community distribution systems have been added to, and/or portions have been replaced on an ad hoc basis because of limited funds. Many of the distribution systems are as old as the generating plant within the community and need to be addressed in a fashion similar to the power plants. It will require $2 million to $3 million per year for a period of 10 to 15 years to address this distribution issue.

In summary, energy resource development in the north should be accompanied by a stable and healthy power infrastructure as well as a predictable regulatory environment. QEC works hard at staying in touch with the stakeholders for resource development to ensure the maximum advantage for any new opportunities that are presented. The ties to our stakeholders as well as to industry provide for a flow of information to facilitate QEC's being a prime stakeholder in resource development.

QEC's focus is very much on the current infrastructure legacy, and plans must be in place to ensure many years of safe, reliable, and economical viable power is provided to Nunavummiut. The greatest challenge we have is operating with limited funds in the face of a growing population, a growing economy, and an aging infrastructure.

Mr. Chair, I would like to thank you and the committee members for the invitation to appear. I look forward to answering any questions you may have.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Mackey, for your presentation.

For the third and final presentation today, we have Her Worship, Mayor Melissa Blake from the Regional Municipality of Wood Buffalo.

Go ahead with your presentation, please, Mayor.

[Melissa Blake, Mayor, Regional Municipality of Wood Buffalo]

Thank you.

Good morning, honourable members. Thank you for inviting me to address your committee on natural resources regarding development in the north.

Alberta has the third largest reserve of oil in the world, and the vast majority of that is found within my municipality. My region is large. It's larger than the entire province of Nova Scotia and it is spread over some 66,000 square kilometres of northeastern Alberta. Within my municipality, there are nine rural hamlets and one larger urban area known as Fort McMurray.

According to our 2010 municipal census, our total population is 104,000, and growing rapidly. This number is much higher than what the federal census indicates, which is a cause for concern because services and funding are provided on the basis of population. While our census concerns warrant discussion, I am omitting them now in the interest of time.

Because the oil sands are really in my backyard, so to speak, there is an immense amount of growth that's here. Our population has doubled in the last 10 years and is expected to double again in the next 20 years.

One of my main concerns is creating a high quality, liveable community for all residents, regardless of whether or not they are working in the oil sands. My experience has shown that the government and industry are very eager to capitalize on the energy resource, but the systems needed to support the people who carry out that work and the region in which it is carried out is often overlooked. It is a constant struggle for us to keep pace with oil sands development. We face a shortage of land for residential, commercial, industrial, and really all growth. Our infrastructure is aging and inadequate and our residents are lacking in amenities and services.

As more and more people come to Wood Buffalo, more schools will be needed, more health centres and more recreational opportunities. A civic centre, proper transportation networks, especially including the twinning of Highway 63 to prevent a tragedy like we experienced at the end of April, as well as infrastructure upgrades and expanded government services are needed too.

One government service of particular concern relates to immigration and temporary workers. While we appreciate the recent budget announcements for expedited processing for temporary workers, it would be an immense asset if we not only had customs at our airport but also if there were immigration officials directly in Fort McMurray for visa processing and other related issues. This is not only of benefit to our labour force, but it helps with our goal to create a welcoming and inclusive community.

We are not a nine-to-five community. Many of our people work long hours over a variety of shifts, and taking time off to travel to Edmonton or Calgary for such services can be very difficult. This concern is of particular importance as labour demands increase in Wood Buffalo. If we are to progress to the point that is expected in oil sands production, upwards of several million barrels per day, then the community that supports that work cannot be neglected.

We are not a temporary makeshift town. We are a community with hard-working and ambitious people from across Canada and around the world who deserve a higher quality of life. We have a long history as a key transit point to the north, and people have made their livelihoods here for many generations. To properly invest in the oil sands means our community must also be invested in.

To that end, the Province of Alberta has committed some $2.4 billion in infrastructure building and upgrades in my community, and I'm hopeful we will see something similar from the federal level.

But while other major cities have had decades of significant funding to help build their communities, we are building ours now and paying almost 100% ourselves, without any kind of assistance. For example, our airport is being rebuilt to meet the demands of our community. Last year we led the nation in airport growth, at just under 7%. In the first four months of this year we continue to lead that growth with 9%.

Opened in 1986 and designed to carry some 250,000 passengers a year, we estimate that this year we'll have over 820,000 people using our little terminal. While the municipality is contributing to the project, the airport authority is still looking for a funding commitment from both the provincial and federal governments. And I should point out that given the federal government's longstanding involvement and commitment to airport construction, this is a project that is ripe for assistance. Our airport is an essential project, connecting us not only to the rest of Canada and the crucial labour supply, but to the rest of the world.

It's also an illustration of the important fact that for the energy sector to advance and grow in the manner that is predicted, the infrastructure has to be in place to support it. This means oil sands development may actually be constrained by a lack of development or investment in my community.

While on the topic of airports, I would also like to mention the recent letter that we received from Transport Canada indicating that federal funding for the operations of Fort Chipewyan Airport is now being discontinued. Fort Chipewyan is the oldest settlement in Alberta, located about 250 to 300 kilometres north of Fort McMurray, and the only way to access it from December to March is a winter road. That airport is the exclusive transportation hub for the community of nearly 1,300 residents. I am very disappointed by this decision, as it will strain residents and businesses. I ask the federal government to reconsider their decision.

I am hopeful that as more money is invested in the oil sands a similar investment can be made in my municipality. Given my previous points of the link between project and community development, it's not so much a wish as a necessity.

The final issue of concern that I'd like to address is the perception of my reality. It's an ongoing challenge for us to deal with the many misrepresentations we experience as a community. I recently read a letter to the editor in a Florida newspaper in which the author, a self-identified Canadian, wrote that the air quality in For McMurray was so bad that most parents didn't let their children play outside. I'm the mother of two boys, eight- and three-years-old, and I can assure you that this is a preposterous statement. Our environment is monitored continually by the Wood Buffalo Environmental Association, an organization independent of government and industry. On average, the air quality in our communities is found to be better than that of most major cities.

However, I anticipate as oil sands growth increases, environmental criticisms and false exaggerations like the preceding example will only increase. I'm hopeful that this can be offset by an increased commitment by government and industry to independent, open, and transparent monitoring and enforcement.

As we did for many green initiatives, we supported the January 2012 announcement of the joint federal-provincial oil sands monitoring program, and we go further in proposing that an institute be established right here in Fort McMurray to fulfill this commitment. An independent monitoring institute or facility would further show the federal and provincial governments' commitment to the environment and offer us a unique opportunity to diversify our economic base into a knowledge base.

In conclusion, the issues of the livability, labour, funding, and perception of our area are just a few of the concerns that we have about energy development in our part of northern Alberta. While I'm speaking on behalf of my region, energy development here has a widespread effect on our entire country. Depending on which expert group you talk to, the oil sands are currently estimated to provide 6% to 10% of Canada's gross domestic product. That is only going to grow.

The Canadian Energy Research Institute reports that in the next 20 years, investments, operations, and expenses in the oil sands will contribute some $2.1 trillion to Canadian GDP. Over the next 25 years the oil sands will provide some 905,000 jobs, including full- and part-time jobs, direct, indirect, and induced. It is estimated that for every $1 million in capital invested or spent in operations, 5.6 jobs are created across Canada.

Energy in northern Alberta is a benefit not just for Alberta but for the whole of Canada, through jobs, materials, services, and construction. For businesses and entrepreneurs, this is a real Canadian opportunity from coast to coast.

This Canadian opportunity has the chance to be a part of a new vision for our country, a new national dream reminiscent of Sir John. A. Macdonald's railway that brought our nation together geographically and politically. So as you consider the concerns of energy development in Canada's north, I ask what is our new vision? Who will be the new Sir John A.?

Thank you.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Mayor, for your presentation.

We go now to questions and comments, starting with seven-minute rounds.

Mr. Daniel, you have up to seven minutes. Go ahead please.

[Joe Daniel, Conservative, Don Valley East, ON]

Thank you very much, Chair, and thank you, witnesses, for being here.

Mayor Melissa Blake, clearly this development is good for Canada, as you have stated. In your experience, how has your community reacted in terms of employment and resource development for the indigenous people of Alberta in particular?

[Melissa Blake]

We are a region that's vast in size, but we have five first nations included within our boundaries. The reserves are affected differently, based on their proximity to the oil industry. If you look to the one closest to the heart of the oil sands development, Fort McKay, they have transitioned from probably more of a traditional living to one that embraces the economic opportunities.

They have had strong mentorship for at least 20 years coming from the industry itself, going from more than just employing aboriginal people to making them strong entrepreneurs. So they're benefiting from, if I recall correctly, almost a billion dollars a year being spent on contracts and services throughout aboriginal businesses.

We have a very strong Northeastern Alberta Aboriginal Business Association, which represents different first nation and Métis groups involved in a lot of construction, janitorial, and fleet maintenance work. Aboriginal companies are providing a variety of services.

If you get farther away from the oil sands, it has been a little bit more challenging. If you go to Chipewyan Prairie Dene First Nation down towards the south in Janvier and Conklin, those areas are just coming under the influence of more development, with the SAGD, a steam-assisted gravity drainage type of initiative. They're going to see something different perhaps for business opportunities from what the guys in the mining operating areas actually do. I don't think they've had the same length of time to develop and figure things out, but there's a very strong business orientation coming out communities like Conklin. Janvier is finding its way.

In the Anzac area, I recently had a meeting with the Fort McMurray First Nation. In the years since I was elected in 1998, I never had communications from them. But they've got a new chief and they've got some very new direction that really does seem to be embracing the opportunity for economic advancement of the people in that first nation.

[Joe Daniel, Conservative, Don Valley East, ON]

Thank you.

Your Worship, these aren't just traditional trades-type jobs? They're actually permeating right through the organizations and being entrepreneurs themselves? Is that correct?

[Melissa Blake]

Every opportunity is available, from your social service workers, which seems to have an appeal.... You've got just such a variety of opportunity, but, again, when the companies empower aboriginal people to create companies that bring on more of the folks from their own areas, I think it benefits everyone for sure.

[Joe Daniel, Conservative, Don Valley East, ON]

Thank you.

May I ask Mr. Bradley a quick couple of questions now.

Certainly the map that you've shown shows us the grid for the 245 kV grid, but it gives the impression that there's no electricity distribution in Canada. Do you have the 55 kV distribution map, and how far north does that go in supporting some of the development up there?

[Francis Bradley]

Yes, you're quite right. We wouldn't be able to fit the map on the wall here if we wanted to go down and show you what North America looks like from a distribution standpoint. So this is indeed just the high voltage.

I mentioned earlier the Carmacks-Stewart transmission line. That doesn't show up on this map because it's 138 kV.

We can certainly provide more detail in terms of some of that information, but the key message here is that when you get into the service territories of companies like my colleagues' here at the table, they are not connected to either the eastern interconnection or the western interconnection. So the connection is, indeed, not made at all.

[Joe Daniel, Conservative, Don Valley East, ON]

Is there any reason why?

[Francis Bradley]

Yes. Principally, it's a question of geography and economics. You're talking about some pretty harsh environments that you have to cover and the cost of building significant transmission is enormous. It's more a matter of having an economic case to be able to build such long transmission.

[Joe Daniel, Conservative, Don Valley East, ON]

As a regular Joe, when I look at my electricity bill, I have a huge amount in there for transmission costs. Where is that money going?

[Francis Bradley]

Depending upon—

[Joe Daniel, Conservative, Don Valley East, ON]

In other words, is it not going into developing some of these longer transmission lines in areas that are less—

[Francis Bradley]

As an individual, the bill that you're paying is for the transmission system that delivers the kilowatt to your home. You as a resident of Don Valley are not paying—

[Joe Daniel, Conservative, Don Valley East, ON]

Yes, but that already exists. Right?

[Francis Bradley]

You are not paying for a transmission system in Nunavut when you're in Don Valley. What you're paying for is the maintenance and upgrade of the current transmission system.

For example, in the case of Ontario, the transmission system that you're paying for increasingly is expanding to bring in new sources of renewables as Ontario moves away from coal, for example, and brings in other renewable sources of energy. Those sources are not in the middle of the backyards of people in Toronto; they're often in more remote locations. So that's what you as a customer are paying for in your transmission charge.

[Joe Daniel, Conservative, Don Valley East, ON]

Right, because I think it's quite a lot of money when you take into account each household.

[Francis Bradley]

It's significantly less than the actual cost of the electricity itself. Your delivery charge is less than what it costs to actually produce the electricity for the commodity.

[Joe Daniel, Conservative, Don Valley East, ON]

Going to Mr. Mackey, clearly in remote areas there's a sense that we should actually try to do more renewable resources. You've talked a little bit about the cost of putting those into place to support your infrastructure there.

Can you talk a little bit more about that.

[Peter Mackey]

I certainly can. Thank you for the question.

Just to put things in perspective, I've been working with Northwest Territories Power Corp., Nunavut Power Corp., and now Qulliq Energy for 17 years. I came out of hydro before that, spending some six or seven years with hydro. During my tenure with those three companies—they're all in the same location—we attempted to install wind on several occasions, largely through funding we received outside of the core funding for the corporation.

We installed windmills in Kugluktuk. In order to install them, we had to ship up a crane to do the install, because you don't have the resources available in the community to do that. That increases the capital cost for the infrastructure you're putting in. We installed them in an area with a good wind regime. The community didn't like how close they were to a cemetery, so we moved them again. They preferred them in a valley. We put them in a valley where we didn't get a lot of wind. The end result of that over the life of the operations was that we deferred about $35,000 worth of fuel costs.

We've installed them in two or three other locations. We've been successful in keeping a windmill operating throughout its life in only one location. It's infrastructure life was about 10 years in the environment we were in, keeping in mind that it's an older technology. During that timeframe, the displacement of fuel costs didn't cover the capital outlay cost, let alone the operating cost.