Thank you, Mr. Chairman, and members of the committee.
Federal electricity policy must be grounded in Canada's Constitution. Electricity is provincial jurisdiction, not federal. Historically, electricity policy oversteps of the federal government beyond its constitutional authority have almost always harmed our prosperity. I'll address an ongoing example, the federal loan guarantee subsidizing the Muskrat Falls project in Labrador, in a moment.
There are positive actions the federal government can and should take to enhance the long-term efficiency of electricity service to Canadians. The federal government ought to exercise its authority to promote interprovincial trade so that we can have free trade in electricity within Canada, with fair rules around transmission pricing and open access. The federal government ought to end the current discriminatory effect of the federal income tax rules that favour government-owned utilities over privately owned utilities by restoring something called the Public Utilities Income Tax Transfer Act repealed by the Chrétien government in its 1995 budget. The federal government should also commit to enhancing the availability, timeliness, and quality of economic data on the energy sector generally across Canada. This is an area where Canada lags badly behind the U.S. and the EU.
The committee asked for input on regional electricity independence. There's already significant regional electricity interdependence, mostly between provinces and the respective U.S. neighbouring states, but also between provinces where opportunities exist. Policies forcing increased east-west electricity exchange run the risk of reducing the efficiency of overall electricity trade. The major trends now in electricity generation technology are toward smaller-scale distributed generation. Power supply is naturally a local business. Where inter-regional power transmission is justified, it's mostly for reliability reasons.
Canada has massive transmission investments, but has experienced a long period of declining consumption. Canada's emphasis with respect to transmission should focus on extracting best value from existing assets. There is no need for the federal government to spend any money on transmission.
What about greenhouse gases? The overall greenhouse gas intensity of Canada's electricity sector is low by international comparison. Ontario's coal phase-out program, which turned out to be a much greater net economic penalty than expected, provides a cautionary tale. All of the major capital projects in the power sector in recent years, justified substantially on the basis of their green credentials—I'm talking of B.C.'s Site C, Manitoba's Keeyask Bipole III, Ontario's FIT and nuclear refurbishment programs, Alberta's off-coal program, and Newfoundland and Labrador's Muskrat Falls—will all have punishing impacts on consumers.
With Newfoundland and Labrador's Muskrat Falls there is much harm to be mitigated. Former prime minister Steven Harper's justification for offering the federal loan guarantee, without which this project could never have started, was largely tied to greenhouse gas reductions. Even if the project can be completed on its current officially estimated cost and schedule, the province will require a federal bailout, perhaps as much as forgiving the entire amount of the federal loan guarantee recently topped up by the Trudeau government to $7.9 billion. Without a federal bailout, Muskrat Falls will cause severe energy poverty in Newfoundland and Labrador, and all the social and economic consequences that entails.
In addition, the federal government should act quickly to broker a power storage agreement between Newfoundland and Labrador and Quebec, without which the Muskrat generator will be substantially inoperable. The longer Muskrat proceeds without an energy storage agreement, the greater the risk of interprovincial conflict.
What are the opportunities for aligning federal policy with the Canadian energy strategy issued by the premiers? The CES calls for more federal research. While well-targeted and well-managed basic research would be positive, notice how unsuccessful federal government spending on energy research has been in the last many decades. The largest federal energy research project was, for 50 years and many tens of billions of dollars, the CANDU program, a technology now at its dead end. A smaller example is research on wind power to serve remote users. Decades of research have produced little beyond the need for more research.
What about Canada-U.S. electricity trade? The Canadian federal government appears to be vulnerable to NAFTA suits initiated by U.S. owners of power plants near our border who are forced to compete against subsidized exports from Canadian provincial governments hell-bent on overproducing electricity. Defending such suits would put the federal government in the awkward position of aligning against the interests of Canadian consumers.
In conclusion, in matters related to electricity, the federal government should stick to its constitutional knitting. In addition, it should mitigate the harm it is causing to the future of the people of Newfoundland and Labrador.
Thank you.