Natural Resources Committee on June 5th, 2018

[Steve Lappin]

Again, I guess it's all in degrees in terms of mix. I suppose you could cross that line at some point where it almost becomes a competitive element with folks like ourselves who do provide that sort of data. I think we've seen a couple things. The EIA has existed for a long time. Our parent company and other large futures exchanges.... I'm not aware of any issues they've had where they felt that in any way infringes on or competes with their current business. I think we have a working model. I'm not aware, again, in our limited view of the U.S. markets, that it's created any sort of issue there.

I think the second one was to your point when you said real time versus historical.... As Greg said, once things become historical, and that can sometimes be almost in minutes and hours—I don't mean days or weeks—it becomes of limited value to the actual wholesale trading market. It's useful to those who use that data and pay for it, etc. I think that's the other key difference, whereas ours, when it's live, real time, and you're actually making trading decisions, then it's very valuable. Commercial entities like ourselves will want to maintain, provide, and charge for that service. However, I think it's almost impossible for the EIA or any central agency to try to maintain and publish that on a real-time basis.

I think they're almost two different products when you look at it. Certainly the latter, what a central agency could do, I think, would be beneficial to the market as a whole, without competing. Some of them do. They'll take historical information. Could they scrape that from a centralized source? You may see marginal impact that way, but I think it would be marginal at best.

[The Chair, Liberal, James Maloney]

Thank you. I'm going to have to stop you there.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Thank you.

[The Chair, Liberal, James Maloney]

Ms. Ng, it's over to you.

[Mary Ng, Liberal, Markham—Thornhill, ON]

Thank you, gentlemen, for coming in to speak to us today. Your testimony is really helpful.

We've certainly heard from a lot of witnesses who have talked to us about the data gaps that exist overall, either in specific jurisdictions or nationally. I think about the purpose of why it is that we're doing this study. We're trying to learn and understand how and what the benefit of a national data strategy could look like because we want to be able to have data that will help inform evidence-based...or data that actually informs good policy-making and good decision-making. That data would exist in multiple places, but it isn't coming together, it isn't being collected, or it isn't being analyzed in a way that also helps not only that good decision-making, but also good decision-making with respect to how this country will meet its climate goals.

At a very macro level, that is what we're trying to understand and that's what we're trying to get some advice on from the many people who have come to talk to us, so that we can learn where those gaps might be, and what the purpose of a single place might be and what they might need to do to gather, analyze, and put out data for decision-making, but also for Canadians, for people to understand and learn what contributes to their carbon footprint and how that data might be relevant to them so that they can make choices. There's that broad spectrum.

I'm interested to learn from you. What you do is about real-time, day-to-day trades and settlement. That data isn't going to be helpful in the purpose that I just talked about, which is really evidence-based decision-making so that consumers can understand patterns and behaviours so that they can change, or so that governments and businesses can make good investment decisions or good policy decisions on the basis of the data.

I know that you touched on our maybe being able to use that information, or the central body maybe being able to use that historical information for the purposes of decision-making, but where could that collaboration be most useful, given the macro of what we're trying to understand here around a national data strategy for energy use, and, therefore, climate reduction goals?

[Steve Lappin]

To clarify, when you say “Where could that collaboration be most useful”, in other words, do you mean “How could we interact with that agency or whatever to...”?

[Mary Ng, Liberal, Markham—Thornhill, ON]

Correct. Your data, how could that be useful?

Mr. Whalen asked if there would be data that would actually help consumers make investment decisions that might be different because they actually have different information that they don't have today. I'm just trying to understand it from your perspective. Can you give us an idea of how your data would be useful in that macro context?

[Steve Lappin]

I'll start, and Greg can maybe add.

Certainly what we have, because there are so many pieces to it, is a volume metric, how much. That's going to tell them a lot about supply and demand. Certainly that sort of information we have, and then, of course, there's the pricing around it. Underlying production or underlying generation for power, those sorts of thing we don't have. When I say pricing spread, it's what the difference is in Ontario for the gas or the crude oil, versus in Alberta, versus in Saskatchewan, or anything like that. You can start to get those differences, plus, of course the historical elements. What's the trend and pattern? Where's it going?

It could be akin to anybody who's trying to decide whether to lock in their mortgage rates or whatnot. I think you could go back to see interest rates in terms of movements, trends, what's happening. Because interest rates are a single number across the country, here you could actually see, by region and district, those differences.

That is stuff we have, and I don't see issues in terms of working with a central agency, in terms of providing that rather than their replicating it. You go to a reputable source for that. You provide all of that information, which betters the overall information within the marketplace going forward. That's where I see that collaboration, this joint government-private entity, where they're providing it, and again, not somebody else trying to replicate and do what's already being done in the market for many years.

I just want to be clear about the limitations of the value to consumers. I think there would be value for those sorts of decisions, but anything beyond that....

I'll comment further to the global, that when entities outside of Canada are looking to invest in Canada and make decisions, we get these random phone calls asking if we can you help them out. You know what I mean. It would be wonderful if they had a place to start as they commence their looking at Canada as a place to invest.

[Mary Ng, Liberal, Markham—Thornhill, ON]

Okay, that's good.

[Greg Abbott]

That's where I was going to go, too. The pricing, it's not.... It's true, complete supply dynamics, supply and demand dynamics, at work here. While we aren't publishing volume numbers or we aren't publishing production numbers, with our real-time markets the pricing is truly reflecting that. If the market gets flooded with supply one day, then the price drops, and then people are extrapolating that this is what's going on. It does allow you to make those types of decisions by looking at just pricing information.

I do think it's closer to what your last point was, Steve, because I do think it 's a real opportunity. This is where we see that. When people are trying to decide whether to generate new production, or if the Alberta government, for example, was kicking off a renewable energy program and trying to get electricity generation that was more environmentally friendly, then people would start using that pricing information to decide what the actual price is right now. They'd make real-time pricing decisions around production generation and that type of thing, and whether to build more or shut in with that type of information. It's important.

[The Chair, Liberal, James Maloney]

We're going to have to move on, sorry. We might get back to you.

We go to Mr. Schmale for five minutes.

[Jamie Schmale, Conservative, Haliburton—Kawartha Lakes—Brock, ON]

Thank you, Chair. I appreciate that.

Gentlemen, thank you again. When we're talking about this data—and I think you have mentioned it before already in this line of questioning, and previous witnesses have done so as well—my first question is on trusting the information. That seems to be paramount in everything, and rightfully so.

What agencies do you think would be best placed to translate this data for consumption? Is it the government? Is it an NGO, private companies? Who would be best suited for that?

[Steve Lappin]

That's a bit of a tough one. In our biased opinion, we would say it would be commercial entities, of course.

[Jamie Schmale, Conservative, Haliburton—Kawartha Lakes—Brock, ON]

Hear, hear!

[Steve Lappin]

We spent a lot of money and a lot of experience to get that right. Of course, it's important—again, speaking selfishly—for us entities to remain relevant in the market, and to be the source of that data would be a great thing.

I think, though, to go back to what we said earlier, that the issue is that we, as one example of an entity that could provide that, can only bring together one part of it. I'm not aware of any, but there may be various aggregators who can do that. My answer leads back to that it almost has to be a national centralized place that can actually pull it in, to ensure consistency, to ensure credibility in terms of the integrity of what's brought, with private sources providing that information.

That sounds like a collective effort, but you do need that centralized hub, I think, to be able to pull it all together.

[Jamie Schmale, Conservative, Haliburton—Kawartha Lakes—Brock, ON]

Just to clarify, you mean the data, not the analysis of that data.

[Steve Lappin]

I think I'm referring to both. I know what the EIA puts out for their analysis. I assume it's all done centrally by them. It's excellent. It's well done.

I know individual production companies, BP, for example, do wonderful analysis in annual reports. CAPP, the producers, and so on, do analysis on that basis, but again, you're going to get those individual interests for their group. I think, if it's going to be broadly out there to the public, you need somebody who ensures that it's reflective of the overall market rather than of an individual interest.

So, yes, it's both data and analysis.

[Jamie Schmale, Conservative, Haliburton—Kawartha Lakes—Brock, ON]

How do you protect for bias in that information—you, the private sector, and otherwise?

[Greg Abbott]

From an NGX perspective, almost all of our data, definitely all the price index data is completely what we call “transparent”. It's all built off of transactional data done on screen. When I talk about the two data products, the price indices, which are very important, are completely transparent and done on screen, so there is no real opportunity for us to bias those numbers.

For the price settlement curves, as I said, we use multiple sources to develop those curves on a daily basis. Then, those curves are sent out to the marketplace as well, and the marketplace has a half-hour period to reflect or respond to those. From that perspective, really, it kind of eliminates the ability to bias those numbers.

[Jamie Schmale, Conservative, Haliburton—Kawartha Lakes—Brock, ON]

Okay.

Do you see any further issues if an agency within government provides the analysis of this data? Would you also do your own analysis on it as well, or would you take that as final?

[Steve Lappin]

We would, for our purposes, continue to do our own analysis. Sorry, do you mean for our own purposes, or are you speaking in general, when entities are taking a look at that data and analysis?

[Jamie Schmale, Conservative, Haliburton—Kawartha Lakes—Brock, ON]

I mean more in general, but if you....

[Greg Abbott]

Yes.

[Steve Lappin]

I think it's always a combination of those items, ultimately depending who it is and what their purpose is. I know that the EIA, for example, is the first starting point where they go for that basic analysis. Then, folks would typically build upon that. We do that as well.

I think that's it. I don't think anybody should fool themselves into thinking they're going to have one place where they can get all the answers. It just can't be there. It may satisfy the general public, down to wholesale participants, but those trying to get a little more sophisticated, in-depth analysis are going to have to use multiple sources, for sure.

[Jamie Schmale, Conservative, Haliburton—Kawartha Lakes—Brock, ON]

Right. I think in—