Transport Committee on April 11th, 2024

[The Chair, Liberal, Peter Schiefke]

I call this meeting to order.

Welcome to meeting number 108 of the House of Commons Standing Committee on Transport, Infrastructure and Communities.

Pursuant to Standing Order 108(2) and the motion adopted by the committee on Thursday, February 1, 2024, the committee is meeting to discuss the Canada Infrastructure Bank's involvement in the Lake Erie connector project.

Today's meeting is taking place in a hybrid format, pursuant to the Standing Orders. Therefore, members are attending in person in the room and remotely using the Zoom application.

Although this room is equipped with a sophisticated audio system, feedback events can occur. These can be extremely harmful to our interpreters and can cause serious injuries. The most common cause of sound feedback is an earpiece worn too close to a microphone. We, therefore, ask all participants to exercise a high degree of caution when handling the earpieces, especially when your microphone or your neighbour's microphone is turned on. In order to prevent incidents and safeguard the hearing health of our interpreters, I invite participants to ensure that they speak into the microphone into which their headset is plugged, and to avoid manipulating the earbuds by placing them on the table, away from the microphone, when they are not in use.

I'd like to now welcome our witnesses for today.

First, from NextEra Energy Resources, we have Mr. Matt Pawlowski, vice-president. Welcome to you, sir.

By video conference, from Independent Electricity System Operator, we have Mr. Chuck Farmer, chief energy transition officer and vice-president of planning, conservation and resource adequacy; and Barbara Ellard, director, resource and system adequacy. Welcome to you both.

For the second half, we will also be joined by the Honourable Lisa Raitt. She will be joining us by video conference, and we will provide her with an opportunity for opening remarks at that time.

Colleagues, before I turn the floor over to our witnesses for their opening remarks, I want to make three very quick statements.

The first is with regard to photography in the room. When the committee is in session—for all those joining us in the gallery—photography is not permitted. If you've already taken photos, it is not permitted to share those online.

The second is just some housekeeping for members of the committee. You've all been given the budget for this study. I just want to know if there are any questions or concerns. If not, I would ask for unanimous consent to adopt the budget as proposed.

[Some hon. members]

Agreed.

[The Chair, Liberal, Peter Schiefke]

Thank you, colleagues.

Third—and finally—I'll turn the floor over to you, Mr. Strahl, as I believe you'd like to address the motion that you put forward.

[Mark Strahl, Conservative, Chilliwack—Hope, BC]

Thank you, colleagues.

I introduced this motion previously, but it was adjourned due to another study we were undertaking. However, we would like, as our next study, to pursue this motion on Lynx Air or airline competition in Canada. I'll just read it again. The motion says:

That, pursuant to Standing Order 108(2), given that Lynx Air has filed for court protection from creditors stating that “the compounding financial pressures associated with inflation, fuel costs, exchange rates, cost of capital, regulatory costs and competitive tension in the Canadian market have ultimately proven too steep a mountain for our organization to overcome” the committee invite the Minister of Transport, the Commissioner of the Competition Bureau, the National Airlines Council of Canada and other witnesses the committee deems relevant, to discuss the state of airline competition in Canada and that the committee report its findings to the House.

If there is agreement, I am hoping that this study would immediately follow the completion of these couple of meetings here on the Infrastructure Bank.

I'd like colleagues' feedback if there is anything they'd like to see added or removed from the motion, but we think it captures a good group of witnesses who can be invited. Whether or not they can make it is another question.

I turn it back to you, Mr. Chair, to see if there is agreement to adopt this motion.

[The Chair, Liberal, Peter Schiefke]

Thank you very much, Mr. Strahl.

Are there questions or comments, colleagues?

Mr. Bachrach.

[Taylor Bachrach, NDP, Skeena—Bulkley Valley, BC]

Thank you, Mr. Chair.

I believe we planned to do a study on competition in the air sector, particularly how it relates to rural Canada. Is that correct? Perhaps you could let us know where that sits on the docket. I think there might be some overlap. Perhaps we could partition part of that study to deal specifically with the Lynx Air issue.

I am very keen to get to the competition study to talk about the cost of air travel in northern Canada, as it's relevant to the communities I represent. I wouldn't want us to knock our work plan off-kilter too much, but at the same time, I agree that this is a worthy area of inquiry. I just wonder whether we can merge the two.

Thank you.

[The Chair, Liberal, Peter Schiefke]

Thank you, Mr. Bachrach.

The timing does coincide somewhat. As of now, a business planning meeting is on the schedule for Tuesday. Thursday we were going to address the final meeting of the accessibility study that we adopted at our previous meeting. The following Tuesday, we were going to begin the study as proposed by Mr. Strahl. Following that, we were going to dive into the study as proposed by Mr. Badawey about rural and remote airports and accessibility and competition. One would be going right after the other.

If it is the will of the committee, perhaps they could be combined in some way, shape or form, or else they could just flow from one another. It really is the will of the committee on that front.

Mr. Barsalou‑Duval, you have the floor.

[Xavier Barsalou-Duval, Bloc, Pierre-Boucher—Les Patriotes—Verchères, QC]

Thank you, Mr. Chair.

I agree that we should study this topic, obviously. Like many other topics that have been submitted on the committee, I feel this is an important one. So I have no problem with us passing the motion.

In terms of prioritizing the studies, we may have a chance to talk about that, because as I understand it, there is a business planning meeting scheduled for next Tuesday. We could deal with it at that time. It will be easier to do so if we can review all business at an already scheduled planning meeting, rather than at a study meeting.

[The Chair, Liberal, Peter Schiefke]

Thank you, Mr. Barsalou‑Duval.

Ms. Murray.

[Joyce Murray, Liberal, Vancouver Quadra, BC]

Chair, I'm supportive of your suggestion that this be combined with the other airline competition study. I would love to make sure that we have time to explore some issues around transport and conservation matters. I have a potential study on that in the works.

I would like to make sure that we have time for some other issues. If that means combining two similar studies, then I'm in favour of that.

[The Chair, Liberal, Peter Schiefke]

Thank you, Ms. Murray.

Mr. Bittle.

[Chris Bittle, Liberal, St. Catharines, ON]

Not to add too much, but just in agreement with my colleagues from the NDP and the Bloc and Ms. Murray, perhaps it's better if we sit down next week to discuss merging this. We're not opposed to this. I don't know if there's consent from the Conservatives to withdraw it so that we can discuss it next week and have a broader study on competition, which is something that we'd like to see.

I'm not seeing anything, so I guess I'll move that we adjourn debate on this topic.

[The Chair, Liberal, Peter Schiefke]

Is there any objection to adjourning debate and resuming next Tuesday, when we have our business planning meeting?

(Motion agreed to)

Debate is adjourned.

We will now resume with the order of questions today.

We'll begin with opening remarks from Mr. Pawlowski.

The floor is yours, sir, for five minutes.

[Matt Pawlowski, Vice-President, NextEra Energy Transmission]

Thank you and good morning, Mr. Chair.

My name is Matt Pawlowski. I am vice-president of development at NextEra Energy Transmission. I am responsible for the development of the Lake Erie connector project.

NextEra invests in, builds out and operates clean power solutions in North America. In Canada, NextEra has majority ownership of a 450-kilometre electricity transmission project located between Wawa and Thunder Bay, Ontario. We also own and operate wind generation and energy storage facilities.

I would like to thank the committee for inviting me to speak about the Lake Erie connector project. NextEra is hard at work on this project, building on the efforts made by the previous owners and moving it forward.

By way of background, the Lake Erie connector is a proposed 117-kilometre underwater high-voltage direct-current transmission line linking the province of Ontario to the Commonwealth of Pennsylvania. In July 2022, the original owners of the Lake Erie connector project suspended its development given the prevailing economic conditions. In January of this year, NextEra acquired the ownership interests in the project.

NextEra sees great value in the Lake Erie connector. This includes local economic opportunities and increased reliability and resiliency for the Ontario electricity grid through new access to the PJM market. As the new owner, we are actively engaged in discussions with Ontario’s Independent Electricity System Operator and first nations. NextEra’s efforts are supported by the Mississaugas of the Credit First Nation, as well as the Six Nations of the Grand River elected council.

Another important phase of Lake Erie connector’s development will be collaborative discussions with the Canada Infrastructure Bank. We view the CIB’s role as an important potential project investor and also as facilitating first nations' involvement in the project. However, let me be clear: The Lake Erie connector has not entered into any project financing agreements with the Canada Infrastructure Bank. It has not received any funding from the Canada Infrastructure Bank.

While we are happy to assist the committee in understanding the viability of the Lake Erie connector under NextEra’s ownership, we are not able to address matters that predate our involvement in the project.

I want to emphasize that NextEra stands ready to pursue the development of the Lake Erie connector. We are excited about the project. We view it as an innovative way to strengthen Ontario’s grid reliability and resiliency and to diversify Ontario’s access to power markets.

I look forward to your questions. Thank you very much.

[The Chair, Liberal, Peter Schiefke]

Thank you very much, Mr. Pawlowski.

Next, we'll turn it over to the witnesses from the Independent Electricity System Operator.

The floor is yours. You have five minutes, please.

[Chuck Farmer, Chief Energy Transition Officer and Vice-President, Planning, Conservation and Resource Adequacy, Independent Electricity System Operator]

Thank you, Mr. Chair, for the invitation to appear before this committee.

I am the vice-president of planning, conservation and resource adequacy and chief energy transition officer for Ontario's Independent Electricity System Operator. My role is to ensure the long-term reliability, affordability and sustainability of Ontario's bulk electricity system, and my responsibilities include long-term system planning, overseeing the acquisition of new generation and other system infrastructure, and the delivery of energy efficiency programming.

I am joined today by my colleague Barbara Ellard, our director of resource and system adequacy, whose role is focused on acquiring generation and other system resources. Barbara led the commercial negotiations on the Lake Erie connector project.

As background, the Independent Electricity System Operator, or IESO, is the provincial agency accountable in legislation for maintaining the reliability of Ontario's electricity system. We operate and ensure the reliability of Ontario's power grid in real time, 24 hours a day, seven days a week, balancing supply and demand in Ontario and into neighbouring jurisdictions. We also plan for the reliability, affordability and sustainability of Ontario's electricity system over the long term, ensuring we have the infrastructure in place to meet the province's needs up to 30 years into the future.

I believe it is important to note that the IESO does not own any of the system's assets or infrastructure. We are an independent operator and planner of the entire system. We ensure that all of our assets are working in unison and ensure the reliability of Ontario's electricity system without having any financial interest in the assets themselves. We can be compared to air traffic controllers, who don't own the airplanes or the runways, but instead of safely guiding planes, we move electrons around the system so that Ontario continues to have reliable access to electricity where and when the province needs it.

As I noted at the beginning of my remarks, one of my responsibilities at IESO is to oversee the assessment and potential acquisition of new electricity infrastructure projects, often through competitive procurement processes or through bilateral negotiations. This work included assessing the value of, and subsequently negotiating a commercial contract for, the Lake Erie connector project that was being developed by ITC Holdings. These negotiations concluded in 2022, when ITC Holdings decided not to pursue the project, citing macroeconomic changes as impacting the overall project.

What I would highlight is that the focus of any IESO involvement in the project was to ensure the best value for Ontario's ratepayers. Through this lens, our assessment at the time showed that the project, and its negotiated agreement, was expected to be of value to Ontario's ratepayers by contributing to the reliability and affordability of our electricity system.

For context, Ontario has transmission interconnections with neighbouring provinces and states, including Quebec, Manitoba, New York, Minnesota and Michigan. Through these interconnections, we import and export electricity daily through our electricity markets. This adds competition that helps drive down costs, allows us to more efficiently use the assets within Ontario and serves as a crucial source of supply when Ontario is experiencing tight conditions on the system.

We became aware of Canada Infrastructure Bank's involvement in early 2021. Overall, the focus of our interactions with the CIB was limited to understanding what its financial impact on the project would be for Ontario's ratepayers, as well as sharing our views on the value of the project to Ontario. The IESO was not party to any agreements between CIB and ITC, and if the project had proceeded, our contractual relationship would have been only with ITC.

With that, I thank you for this opportunity, and we look forward to answering questions.

[The Chair, Liberal, Peter Schiefke]

Thank you very much, Mr. Farmer.

We'll begin our line of questioning today with Dr. Lewis.

Dr. Lewis, the floor is yours. You have six minutes, please.

[Leslyn Lewis, Conservative, Haldimand—Norfolk, ON]

Thank you, Mr. Chair.

Thank you for coming, Mr. Pawlowski.

I understand that the Lake Erie connector project has been suspended since the summer of 2022. How likely is it to go forward under NextEra?

[Matt Pawlowski]

We are actually very excited about the Lake Erie project. In the due diligence efforts that we performed over several months, we found it to be a great project for market access between Ontario and PJM. With the changes in conditions that are going on in the electricity system, including resources, low growth and other factors, we see it as a critical asset for Canada and for IESO going forward.

We are very excited about developing the project. We want to move it forward, and that's why we're happy to testify here.

[Leslyn Lewis, Conservative, Haldimand—Norfolk, ON]

NextEra is a Fortune 200 company valued at $120 billion. Last year, NextEra made $22 billion U.S. in profit, making it one of the most profitable energy companies in the world.

You said that it hasn't received any money from the CIB. Is it your testimony today that your company has no plans to take low-interest loans from the CIB?

[Matt Pawlowski]

We have actually just re-engaged in a conversation with the CIB and are looking forward to engaging it on this project as a potential partner. We look at the involvement of the CIB in multiple ways. Financing is just one of the ways we look at it. The other way is, as I mentioned in my opening statement, as a partner with first nations and as a way to involve first nations in the project. It's not just about the financing; it's about other things the CIB brings to the table.

[Leslyn Lewis, Conservative, Haldimand—Norfolk, ON]

Why does a $120-billion company, one of the biggest energy companies in the world, need a subsidized loan from Canadian taxpayers in order to build this transmission line?

[Matt Pawlowski]

The involvement of the CIB is not just from a financial perspective. We—

[Leslyn Lewis, Conservative, Haldimand—Norfolk, ON]

But you do plan to take a low-interest loan from the CIB. Even though you are a $120-billion company, Canadian taxpayers are essentially going to fund this project.

[Matt Pawlowski]

We have engaged the CIB in discussions, as we do with many other financing partners. We view the CIB as an investing partner.