Natural Resources Committee on Feb. 14th, 2013

[Ryan Leef, Conservative, Yukon, YT]

How much interest in information sharing are you seeing from neighbouring municipalities? How much information sharing are you providing whenever you find yourself in the position to provide to them more about what the prospects look like for Lower Mainland municipalities to pick up on this concept?

[Vincent Lalonde]

Basically there's a lot of interest in this region. We get together, the solid waste managers such as Rob get together and talk at a regional forum. There were other smaller municipalities that took steps that we've taken which we've learned from them. Now in turn there are other larger municipalities such as Vancouver, which I believe is now going to go to a two-week garbage pickup.

I would say there's a lot of sharing of information. Everyone looks at what everyone else is doing and tries to build on the successes.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Leef.

We go now to Mr. Nicholls, who will be followed by Mr. Hsu.

Go ahead, Mr. Nicholls.

[Jamie Nicholls, NDP, Vaudreuil—Soulanges, QC]

Thank you, Mr. Chair.

Mr. Bradley are you familiar with the work of Pierre-Olivier Pineau? He's a professor at HEC Montréal.

[Francis Bradley]

No.

[Jamie Nicholls, NDP, Vaudreuil—Soulanges, QC]

He wrote a report on integrating Canada's electricity sectors.

What is your take on that? What do you think of integrating the various electricity markets across the country?

[Francis Bradley]

It's certainly a fascinating proposition. There are opportunities in certain regions.

In certain regions, depending upon what the mix is and what the current interconnection is, there might be the possibility of looking at greater integration on a region-by-region basis. Of course, the biggest barrier will be the eternal Canadian barrier and that is electricity markets. The electricity industry generally falls under the jurisdiction of the provincial governments. It's not something that

someone from a national association

would be providing you an opinion on.

[Jamie Nicholls, NDP, Vaudreuil—Soulanges, QC]

Professor Pineau makes a compelling point, saying that the agreement on health could serve as a model. Health comes under provincial jurisdiction, but a national agreement governs fees and standards. Applying a similar model could prove very effective in bypassing the usual jurisdictional squabbles.

Is that a good idea, in your view? Professor Pineau mentions a wide range of benefits, and the idea appears to have not just economic merit, but also environmental appeal.

Do you agree that it would be a good way to go if we could get past the jurisdictional issues?

[Francis Bradley]

Not having read the report, I couldn't provide you my opinion on the views he's expressing. While they are separate jurisdictions and distinct jurisdictions with respect to electricity, we do have a lot of collaboration, at least on the industry side. There's a fair amount of trade that occurs already among the provinces themselves, and of course north-south. Our association is a manifestation of the active collaboration currently within the industry. But in terms of being able to provide you a view on this particular report, not having read it, I wouldn't be able to.

[Jamie Nicholls, NDP, Vaudreuil—Soulanges, QC]

It just seems to me it's sort of like the analogy of going to Mars. Why invest all this money to go to another planet when we have to fix the problems here? In the energy sector it seems the same way. Why put all our investments toward export of our product when we should be fixing the problems we have internally in the country? That's why I brought up integration.

To talk about perhaps some of the lost opportunities, you mentioned before that there were initiatives that had started, but because of political problems, roadblocks sort of got in the way. Could you elaborate on things in the past where integration has been tried but hasn't worked?

[Francis Bradley]

I would like to pick up on one of your comments with respect to exports before getting into this issue.

Generally, with the electricity exported from Canada into the United States—and there's also a fair amount of electricity that is imported from the United States into Canada—the facilities in Canada are principally for Canadians. When there's excess electricity available, it is exported to the United States.

In fact, we're lucky that those markets exist because, one, we can do something with our surplus power; two, it results in a more stable electricity system in North America because we have those exchanges on both sides of the border; and three, every time there's surplus of hydro power that is exported to the United States, it displaces thermal generation in the U.S. We are living in a shared airshed, so there are significant, very positive results because of the electricity trade between Canada and the U.S.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Nicholls.

We will go now to Mr. O'Toole, for up to five minutes. Welcome to our committee.

[Erin O'Toole, Conservative, Durham, ON]

Thank you, Mr. Chair.

Thank you to my colleagues for allowing me to join you today.

Thank you to all the witnesses for your very interesting contribution to this dialogue.

Since my background is that I have done some energy regulation as a lawyer and, until my election, sat on a board of a local distribution company in Ontario, my questions will be reserved for Mr. Bradley.

I think you said the largest barrier to innovation and electricity is the cost of the technology. At the distribution level as apart from generation, with a regulated industry, with rate basing every four years, how seriously can distributors innovate, because they're essentially setting prices based on what happened four years ago? Do you see any innovation in the regulatory sense for the sector?

[Francis Bradley]

Yes, we're starting to see some interesting new approaches to regulation. We're seeing some jurisdictions that are using different forms of performance-based regulation, PBR. But the key in all of this, of course, particularly with respect to distribution, is the regulator.

When we talk about concerns with respect to the cost of that new technology, those costs ultimately will be borne by the ratepayer, but before you even get to that point, the regulator has to be convinced that those investments are indeed prudent. That's the first step before we even get out of the gate, to be able to make the case that those investments in infrastructure and in newer, smarter infrastructure are indeed prudent.

In some jurisdictions elsewhere in the world, when proposals have come forward to, for example, move toward smart meters, regulators haven't always said yes.

[Erin O'Toole, Conservative, Durham, ON]

I know that Toronto Hydro has been pushing this issue because of its challenges with infrastructure over the next 10 years, but it doesn't seem as if the provincial minister has been heeding its warnings. Do you have any comment on that, or might you not want to comment on that?

[Francis Bradley]

I wouldn't comment on the relationship between Toronto Hydro and either its shareholder or the province, but I have been following media reports as they have been making infrastructure investments in Toronto and seeing them change. I was talking earlier about 40-year-old assets. There are media reports of some large transformers that are a lot older than that. On the one hand, we should be concerned that there are assets that are that old in any of the systems in this country. On the other hand, the fact that they've been able to maintain some of this equipment and keep it operating for 50, 60, 70 years, I think is a credit to the people who are operating those utility companies.

[Erin O'Toole, Conservative, Durham, ON]

Quickly, Mr. Bradley, I want to explore something Mr. Hsu said in his questions about a lack of workers. The recent LDC review by the wise persons' committee—Elston, McFadden, and Laughren; all our parties were represented in those three esteemed gentlemen—says there are a lot of inefficiencies because of the number of local distributors, at least in Ontario. They recommended amalgamation within that sector to the province to not only make it more efficient but to save ratepayers money. Don't you see that skills shortage being addressed through amalgamation?

[Francis Bradley]

The skills shortage isn't just in Ontario and it isn't just with the LDCs. Even in places where you've got one integrated utility company, in British Columbia, in Manitoba, in Saskatchewan, they are facing the same challenges with respect to skill sets.

I've read the report that you referenced and they do make a compelling argument, but the skills challenge faced by the industry is far greater than the efficiencies that would result from amalgamation in Ontario. This is an issue not just for Canadian utility companies, it is a global issue. We see it as a North American issue because there have been a number of incidents whereby utility companies in the United States have come here to recruit personnel. When it's minus 40 degrees and they're knocking on the door of a power line technician and offering him a job in Florida or Texas, it sometimes makes it difficult for us to try to compete with that.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. O'Toole. We go now to Ms. Liu, followed by Mr. Anderson.

Go ahead, please, Ms. Liu.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

Thank you, Mr. Chair.

If you would allow me, I'll extend the same courtesy that Mr. Hsu did. I would like to read aloud the motion I submitted last week, which we will be discussing later today. It states:

That, pursuant to Standing Order 108(2), and given the repercussions of the 2012 Fall Report of the Commissioner of the Environment and Sustainable Development on the natural resources sector, the Committee postpone its current study and undertake a study of chapters 1, 2, 3, 4 and 5 of the report, beginning on February 26, 2013 and reporting to the House of Commons no later than June 7, 2013.

I'm moving on to my questions.

My questions are mostly for Mr. Bradley.

Thank you for your presentation. I want to pick up on Mr. Julian's questions about the smart grid. You touched on a few recommendations and things the government could do to help it along.

I don't have a lot of time. If you could provide the committee with more detailed recommendations on what the federal government can do to help establish a smart grid, we would certainly be very keen to review them and possibly include them in our final report.

You mentioned some barriers as well. I would like you to expand a little on what you said. You talked about the high cost of new technologies. What do you recommend in terms of addressing that challenge?

[Francis Bradley]

The high cost of new technologies is simply the reality. We aren't asking the government to do anything, just stating a fact.

An analogy would be with the first car I bought. I paid $1,800 for it. When we built the system so many years ago, as I said, there were 20 million Canadians. Now there are 34 million Canadians. By the same token, I can't get away with a coupe anymore; I need a minivan because I've got to haul the kids around. The reality is that a car today costs more than it did 10 years ago.

With respect to the cost of new technologies, I don't think we would be asking anything specific for government to do. It is really just a statement of the reality we are facing. Again, it isn't terribly surprising: one, things today are more expensive than they were previously; and, two, the new technology itself is more expensive initially.

At the same time, some of this new technology will probably go on the same sort of trajectory as other new technology, so that over time the price will decrease. We've seen a significant reduction in the cost of all kinds of consumer electronics that were outrageously expensive when they were first introduced. Frankly, we've seen the same thing with respect to wind generation and turbines. Turbines were prohibitively expensive a dozen years ago, and in some jurisdictions they are very cost competitive today. We're probably on that trajectory, as well, with respect to solar power.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

I'll stop you there because my time is limited.

I'd like to hear what you have to say about changes in the last federal budget to the scientific research and experimental developmental tax credit. What kind of effect do you think this will have on the sector?

[Francis Bradley]

We've had some concerns about the SR and ED program, but most of our concerns have been with respect to how the SR and ED program was being implemented and the administration of the program.

If the committee is interested, we have submissions that we've provided to the finance committee in previous years. We certainly would be prepared to forward them to the committee, or to individual members, if they'd like to see what we've had to say on SR and ED in the past.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

Sure. If you could table those with the committee, that would be great.

You mentioned SDTC. That was a focal point of your recommendation as well.

Do you have any comments concerning the efficacy of the ecoENERGY program?

[Francis Bradley]

I have not personally been directly involved with that particular program. Most recently, as I said, my involvement has been with SDTC.