ISSN 0542-5492 First Session - Thirty-Second Legislature of the Legislative Assembly of Manitoba STANDING COMMITTEE on PUBLIC UTILITIES AND NATURAL RESOURCES 31 Elizabeth 11 Published under the authority of The Honourable D. James Walding Speaker VOL. XXX No. 4- 10:00 a.m., THURSDAY, 13 MAY, 1982. Printed by the Office of the Oueens Printer. Province of Manitoba

MANITOBA LEGISLATIVE ASSEMBLY Thirty-Second Legislature Members, Constituencies and Political Affiliation Name ADAM, Hon. A.R. (Pete) ANSTETT, Andy ASHTON, Steve BANMAN, Robert (Bob) BLAKE, Pavid Ri (Dave) BRO WN, Arnold BUCKL ASCHUK, John M. CARROLL, Q.C., Henry N. CORR IN , Brian COWAN, Hon. Jay DESJARDI NS, Hon. Laurent DODICK, Doreen DOE RN, Ru ssell DOLIN, Mary Beth DOWNEY, James E. DR IEDGER , Albert ENNS, Harry EVANS, Hon. Leonard S. EYLER, Phil FILMON, Gary FOX, Peter GOUR LAY, D.M. (Doug) GRAHAM, Harry HAMMOND, Gerrie HARAPIAK, Harry M. HARPER, Elijah HEMPH ILL, Hon. Maureen HYDE, Lloyd JOHNSTON, J.

Frank KOSTYRA, Hon. Eugene KOVNATS, Abe LECUYER, Gerard LYON, Q.C., Sterling MACKLING, Q.C., Hon. AI MALINOWSKI, Donald M. MANNESS, Clayton McKENZIE, J. Wally MERCIER, Q.C., G.W.J. (Gerry) NORDMAN, Rurik (Ric) OLESON, Charlotte ORCHARD, Donald PAWLEY, Q.C., Hon. Howard R. PARASIUK, Hon. Wilson PENNER, Q.C., Hon. Roland PHILLIP S, Myrna A. PLOHMAN, John RANSOM, A. Brian SANTOS, Conrad SCHROEDER, Hon. Vie SCOTT, Don SHERMAN, L.R. (Bud) SMITH, Hon. Muriel STEEN, Warren STORIE, Jerry T. URUSKI, Hon. Bill USKIW, Hon. Samuel WALD IN G, Hon. D. James Constituency Ste.

Rose Springfield Thompson La Verendrye Min nedosa Rhin eland Gimli Brandon West Ell ice Churchill St. Boniface Aiel Elm wood Ki ldonan Arthur Emerson Lakeside Brandon East Ri ver East Tuxedo Concordia Swan River Virden Kirkfield Park The Pas Rupertsland Logan Portage la Prairie Sturgeon Creek Seven Oaks Niak wa Rad isson Charleswood St. James St. Johns Morris Robli n-Russell St. Norbert Assiniboia Gladstone Pemb ina Selkirk Transcona Fort Rouge Wolseley Da uphin Turtle Mountain Burrows Rossmere lnkster Fort Garry Osborne Ri ver Height s Flin Flon lnterlake Lac du Bonnet St.

Vital Party NDP NDP NDP PC PC PC NDP NDP NDP NDP NDP NDP NDP NDP PC PC PC NDP NDP PC NDP PC PC PC NDP NDP NDP PC PC NDP PC NDP PC NDP NDP PC PC PC PC PC PC NDP NDP NDP NDP NDP PC NDP . NDP NDP PC NDP PC NDP NDP NDP NDP

LEGISLATIVE ASSEMBLY OF MANITOBA THE STANDING COMMITTEE ON PUBLIC UTILITIES AND NATURAL RESOURCES Thursday, 13 May, 1982 "ime - 10:00 a.m. :HAIRMAN - Mr. Harry Harapiak (The Pas). MANITOBA HYDRO-ELECTRIC BOARD IIR. CHAIR MAN: I call the Comm ittee to order. lt is 'ublic Util ities and Natural Resources and we are :onsidering the An nual Report of Man itoba Hydro. Mr. Brown, I had your name on the list, so would you ike to go at this ti me? iiR. ARNOLD BROWN (R hineland): Thank you. My irst question would be add ressed to the Min ister.

I 1otice in looking over the names of the people on the �oard at the present ti me, I am wondering who is ;peaking for the farming commun ity; when you will be >Uilding transmission lines, a large portion of tho se ransmission lines will be going through the farm :ommunity and also they are huge consumers of elec­ ricity. Is there anyb ody representing the farming :ommunity on the Board at the present time; that is, :m active farmer? III R. CHAIR MAN: Mr. Min ister. 'iON. WILSON PARASIUK (Transcona): I will have to jo some chec king on that, I think that is a va lid ques­ :ion. Mr.

Mi nish, I know, had a farm background, but 1e is now a businessman in Swan River. I don't know if 'le is st ill involved in farming or not, but I will check 1nto that. I don't know if the previous Board had any­ :me who was an active farmer; maybe you were an active farmer. I don't think that Peter Fox, the ML A who sits on the Board right now, is an active farmer as such, although I do know that he is a power engineer. The Board is sti ll not completed in terms of its com­ position. There are 3 or 4 other spots to be filled.

I know we wanted rural representation and I take your concern as a valid one and I will look into it. MR. BROWN : lt is of special concern in my area where land is selling for between $1,500 and $2,000 an acre, where you have a lot of special crops which have to sprayed by plane, and hydro lines do create a lot of havoc and a lot of negotiation will have to be done with the rural comm unity if they are going to be accepting a line down that way.

There is great concern already being shown on the Mandan line and I believe that it is rat her imp ortant that Hydro add ress themselves to that particular prob­ lem, if they have any intention, that is, of going ahead with the Mandan line. There was mention that the Board policies had been reviewed and that some major changes had been made. I believe that this stat ement was made by Mr. Cherniack. I wonder if he could explain what major changes had been made? MR. CHAIRM AN: Mr. Cherniack. MR. SAUL CHERN IACK: Mr.

Chairman, maybe it is 56 too early in the morning; I do not recollect saying that major changes have been made. I will take a moment to look at my notes, but I must say offhand that I do not expect that sta tement would be a correct one. If I made it, I was wrong. I don't think I made it, in which case Mr. Brown is wrong. MR. BROWN: I do not have a copy of Mr. Cherniack's statement, so it is just that I made a note while he was speaking, so I could have understood him wrong. I don't really know. My question would sti ll be as far as transmission lines is concerned.

What is the policy at the present time - and maybe Mr. Blachford can answer that one - in getting the right-of-way for transmission lines? MR. CHAIRMAN: Mr. Blachford. MR. L.D. BLACHFORD: The policy on these larger transmission lines is once the route for the transmis­ sion lines has been selected to expropriate the land, expropriate a right-of-way for the transmission line, and to pay 75 percent of market value for the acreage that is included in that right-of-way. MR.

BROWN: I suppose this would be an easement that you are ta lking about, that you would get an easement to put the power line across that property. In other words, the policy then really has not change d in the last six months from what was in force previously. MR. BLACHFORD: That is correct, it has not changed . MR . BROWN: Thank you. MR. CHAIRM AN: Are there any further questions? MR. BROWN: Yes, I have further questions.

I notice that the rate that we are selling power to the Un ited States has not increased over the last four years or so, and yet the cost of generating, if we are to understand what is really happen ing within the industry, is increasing considerably. What is the generation of coal doing in North Dakota? Is that price also escalat­ ing or is that the main factor why we cannot get better rates for the power that we are exporti ng south? MR. CHAIRMAN: Mr. Blachford. MR. BLACHFORD: I believe the cost of coal just south of Manitoba has remained relatively static.

However, a large contri butor to the stabilization of the cost of energy down ther e is the fact that the utilities im mediately to the south have in the past years brought on some very large and very efficient generat­ ing units and this has tended to keep the price of energy down in that market area. MR. BROWN: If we are tal king about power selling from Limestone - whenever Lime stone is built and the cost is going to $3 billion - has a study been made or do you know what the selling price of that power is

Thursday, 13 May, 1982 going to be at that time? MR. BLACHFORD: I don't have the concise figure on the basis of a $3 billion number. Ho wever. I think the member knows we hope to bring it in before that time. and based on appr oxima tely $2 billion. it works out to about 40 to 50 mills per kilowatt- hour. depending on the assumptions made. MR. BROWN: 40 to 50 mi lls. MR.

BLACHFORD: If the price of generation from coal of electricity is not going up at the same rate that the price of generation from water is going up. the generation from nuclear power is not going up either and in Ont ario. of course. they are producing their power. Do you see a danger that at some point in time in Mani to ba. it is not going to be via ble for us to generate power from water? MR. BLACHFORD: No. I don't foresee that.

While the current price of interruptible energy in the U.S .. imm ediately south of us. is relatively stable. the pro­ jections are that the price of energy in that area will also climb considerably over the next few years. Their new generation also costs a lot more than what the current generation has cost. MR. BROWN: Mention was made that you were nego­ tiati ng with Wisconsin. Is there anyth ing further to report on these negotiatio ns? How are you coming along with extending the line. I suppose it would be the line to Minneapolis which would be extended? MR.

BLACHFORD: These negotiatio ns haven't really progressed to the extent where these kind of details are being looked at yet. They are really just getting started with the neg otiatio ns. MR. BROWN: Is the ultimate goal of Ma nitoba Hydro going into Wisconsin to try to reach the Chicago market? MR. BLACHFORD: That might be a desirable end result if we could get that far. MR. BROWN: I believe. if I remember correctly, that you have to get to the Chicago market before you get into an area where there is a price high enough really to justify large expenditures of monies in new generation.

I would like to get back to the Mandan line. How are negotiations proceeding with Mandan line? We have been hearing a lot about the South Dakota and North Dakota communi ties over the re really fighting the line and they have been winning some court cases, which made Nebraska have to justify the power line. How are negotiations coming along with the Ma ndan line? MR. BLACHFORD: Our negotiat ions with the Nebraska Public Power Dist rict are proceeding. I think that we are almost at the stage where we will have a definite agreement with them.

As far as the NPPD 's activities in the Un ited States are concerned, we understand that they have got appr oval, of course. in the State of Nebraska. In the State of South Dakota, 57 they were turned down by the public utilities agency there on the basis of having not proved the need for this power in Nebraska. They are taking this to a court in South Dako ta and it remains to be seen how it comes out. In North Dakota. they are expecting to file their route for the line sometime within the next few weeks and I think that is a general statement of where we are at. MR.

BR OWN: Is there any indi cation that the route might be changed somewhat because of the objec­ tions of the communi ties? MR. BLACHFOR D: I don't think we can say anything about that at this stage. They tell us that they must file a route that goes from the 49th parallel right through North Dakota. 1t has to be filed that way. What objec­ tions may be raised, we can't say. MR. BR OWN: When you are negotiating with Nebraska Power, at what rate are you discussing? Are you discussing the new rate which we can possibly see from Limest one as the 40 to 50 mill rate?

Is this the rate that you are discussing with them, or is rate not entering into the agreement at the present time? MR. BLACHFORD: The cost of energy is not entering into the agreement at this time. lt is based strictly on the diversity of energy between Manitoba and mainly Nebraska. There is no cost of energy entering into the basic agreement. MR. BROWN: Is there any deadline that you are talk­ ing about in terms of when you would like to have this line completed? Is Nebraska pressing Manitoba Hydro for some kind of a date? MR. BLACHFORD: They have indicated that cur­ rently their date for this is 19 88.

Manitoba Hydr o's stance on this is that as long as we keep the conditions of the agreement, as we have them laid out in the Letter of In tent that was signed with them almost two years ago, a year or two or th ree or four doesn't really make that much difference to the basic economics of the line which is based on the diversity between the systems. MR. CHAIRM AN: Mr. Downey. MR. JAMES E. DOWNEY (Arthur): Mr. Cha irman. the Manitoba Hydro has init ially or. I guess, in the initial stages of their development. through the foresight and the drive of one parti cular former Premier of this province. Mr. D.l .

Camp bell, with his rural electrifica­ tion program, made a very important move to bring a source of renewable power to the farms and to further advance the ag ricultural people throughout Ma nitoba in their lifestyle and their ability to produce food.

The cost at which that was provided to the farm commu n­ ity was quite reasonable and the cost of installation of the utility to the yard, if I understand it correctly, and maybe there's people here with a little more knowl­ edge of it than I could correct me, but I understand at that par ticu lar time there was no di rect charge or inst allation charge to the farmer or to the indi vid ual rural resident. Is that correct?

Thursday, 13 May, 1982 MR. BLACHFORD: I am sorry, I am not aware of just what the circumstances were at the time of the initial installa tions were made, but currently the instal lation addi tions to the systems are made on the basis of costs. and when a new inst allation is requested it depends really on what the utility has to do to make the connectio n. There are parameters sei out to as how far we'll take a line before the customer has to pay a contribution, a construction contribution.

Beyond that, the customer has to pay a contribution and what he has to pay is based on his expected load as well as what the construction cost is. MR. DOWNEY: I appr eciate that.

The point I am try­ ing to make is that initia lly when the utility was made avail able, the objective was to provide a power source to the farm community because of the fact that we had an abundan t supply of water power that would be in the best interest of the domestic users. both residen­ tial and farm users, at very low, if any, installa tion costs. lt was built into the overall rate structure and paid for over the developmental stages of the utility.

I guess that's the kind of principle that I would have hoped that we could see still carried out, because I think that when we are looking at the changes that are taking place in agriculture, and the fact that in most agricultural communi ties we do n't have the availabil­ ity of natural gas as they do in some of the other provinces. and the fact th at the nonrenewable energy, such as our traditio nal diesel fuels and the petro­ chemical industry, have increased in costs so much that to maintain an advantage, tha t I think we have as Ma nitobans - that the present policy, if 1 understand it correctly, when it comes to mode rnization of some of the farm units; I would like to first of all, I think Mr.

Blachford has indicated what the policy is, after so far there is a charge. When we talk of insta llation of elect­ ric motors to power irrigation equipment; when we talk of additional power, thr ee-phase power to oper­ ate grain dryers. because we are seeing a treme ndous move towards that in the agriculture community, but in most cases that have been brought to my attention, Mr. Chairman, the initial costs of installa tion of the equipment needed to provide that th ree-phase power is prohibitive for those farm people to install that kind of a power supply.

I've had probably three cases brought to my atten­ tion that, first of all, there seems to be an incon sis­ tency in the policy that, in fact, different farmers have been charged different rates. One parti cular case that was brought to the attention of the Ch airman some time ago by myself where a dairy farmer right south of Brandon, which is in my constituency, lost his dairy barn because of fire.

The power has to be taken from one side of No. 10 Highway to the other side just across the road, and the cost to change to a th ree­ phase power when he's building a brand new dairy operation and wants to modernize his power input, the cost seems somewhat exorbitant when it's com­ pared to the cost of inst alling thr ee-phase power for a corn drying unit in another part of my constituency. I would hope that number one.

Hydr o would be able to work out a mechanism or a financial arrangement with the farm com munity where rather than paying all the initial costs of the inst allation of tha t project up front. that it could be paid for over a longer period of 58 time. I think it would encourage them to use more hyd ro-electric power, allow them to moderni ze their farm operations and after all I think that they have been the basis that has paid for the residentia l, and farm people have been the basis to help pay for the hydro over the longevity of the utility.

Of course, it's advanced into other extra provincial sales and other power uses with the development of the province and tha t's all a very good objective, but I don't think they should forget the basic people that it was set up to provide service for and tha t's the people of Ma nitoba, the residents and rural Ma nitobans.

I would hop e and I would request that Manitoba Hydro would consider a financial arrangement with farmers who want to update or modernize their power to three-phase power so that they could pay for that inst allation over a longer period of time, rather than having to put the exorbitant am ount of money in a lot of cases up front which in most cases doesn't allow them to proceed to use the utility that I think should be used first of all in Ma nitoba and then sold outside the province.

So I think if the Cha irman or the Minister could clarify what the policy is currently as far as the updat­ ing of hyrdo service to farms, a chan ge-over to thr ee­ phase power, what are the guidelines that they use to say whether or not how much a farmer pays, whether he has to go one mile, two miles, or if he just has to go half-a-mile across the road or even the width of a highway and a road allowance to his dairy farm. What is the policy? MR. CHAIRM AN: Mr. Mini ster. MR. PARASIUK: Well, I'll ask Mr. Blachford to give us the policy.

In terms of the concerns that the member raises, I assume that they a re concerns about past practices of Hydro with respect to a modernization of electrical provisio n. I think the concern you raised deserves consideration and I give you the commit­ ment that I will ask Hydro to do a review of the concern that you raise and to tel l me what that might cost the Hydro utility, whether in fact it would cost anything or whether in fact it's just a matter. as you say, of pha sing payments out over a period of time because ther e could be a heavy front end cost to it.

I think that the concern you raise is a valid one, a legitimate one, and I'll be asking them to review it, but I thin k if Mr. Blach­ ford could provide any clarification as to what is in place right now, maybe he could do so. MR. CHAIRM AN: Mr. Blachford. MR. BLACHFORD: As in dicated , this policy is based on cost. I believe the original remise when the rural electrification was put in was to supply the home and now that it's getting into ind ustry it becomes a differ­ ent set of circumst ances.

The policy that we have, based on length of line and then on cost after that, is consistently applied. lt may seem inc onsistent to some persons because they are further away from the source than others and this will have an effect on it. In the case that Mr. Downey mentions, I looked into thi s myself and it is a good distance that the three pha ses have to be brought to this parti cular farm. hence the higher cost, and this is combined with the fact that the parti cular customer is not going to

Thursday, 13 May, 1982 increase his load or he hasn't demonstr ated that he's going to increase his load with the th ree-phase power. Hence, we're asking for what certain ly seems like a fair amount of money for that. MR. DOWNEY: To the Mi nister, Mr.

Chairman, I app reciate his willingness to review the po licy on pay­ ing for installa tion charges on a longer term period versus up front, because with the feeling that I have and with the information that we have sometimes received from Hydro, at certain times we have excess cap acity of water going over the generators and it seems a shame that when we have a Manitoban and a ready consumer ready to use more power that he's kept from doing that because of prohi bitive charges. If an agreement could be worked out between the Hydro and the farm community, I think it would be in the best interests of them both.

In getting back to my initial comments about the objectives of providing hyd ro-electric power for Man­ ito bans, I guess when a person thinks back in his lifetime about what are some of the highlights of hap­ pening in rural Manitoba, that when you're living in the southwest corner of Manitoba and you've used coal oil lamps, you've used wood stoves, you've used refrigerators that were not powered with electricity, and about 19 52 at a

part icular day the hydr o was installed and the hydro lights came on, and I'll tell you it was one of those times in a person's history that you want to remember and it was really dramatic to any community that had those lights turned on and the power ava ilable.

Tha t's the kind of objective I hope that we can carry on and as I say with the moderniza­ tion, parti cularly with the grain drying equipment and with the irrigation equipment that could be heavy users of power, hyd ro-electric power, it would be a shame to continue to prohib it them from being used and to use high-cost high-taxed diesel fuels and that type of thing. To Mr. Blachford, there's one area of inconsistency that I want to point out and that was one par ti cular system was put in for a grain dryer in one parti cular area of my constituency at a certain cost and it seems somewhat of a reasonable cost.

Another individ ual, sometime following that, had the same kind of work done, apparently at a less distance and the same kind of equipment, and the cost was somewhat higher. Subsequent to bringing it to my attention and to some of the local Hydro people's attention, there was an adjustment made to the latter person who had paid more, What I'm having difficulty finding out is: what is the policy, what are the specific charges and I think it would be helpful if that could be pointed out?

As far as the dairy farmer is concerned, I tried to point out that the hydro does not have to move very far. lt moves from the east side of No. 10 Hwy. - and most people here know what it's like south of Bran­ don, No. 10 Hwy. runs straight south of Bran don. There's a dairy farm, the front page of The Free Press carried the fire and the unfortunate situation that they had. The hydro has to be carried from the east side of the highway to the west side of the highway. I wouldn't want to go metric, I would stick to yards, but it is a very short distance.

They put up a brand new modern dairy barn, a commitment to produce food and milk for the people of Brandon and all the south west corner. They 59 want to put in a new modern power system from the Hydro, but the one reason that they have to pay so much money is that they are not going to use more power. If they said they were going to use more power, then it probably wouldn't cost them as much. I think the farmer is an honest person. He doesn't want to work the system and say, sure, I am going to use more power and a year later have only used the same amount. I don't think it is a good criteria.

I think if he is modernizing his power unit in a way in which will give him other advantages, that he shouldn't be restricted from doing it. I again can't find out why the cost of $5,000 to do that is put in place. When we look at what has ha ppened in the grain drying ind ustry, for example, where they have had to move maybe a mile-and-a-half or a mile-and-a-quarter with thr ee-phase power, when the cost to do that is somewhat less than the $5,0 00 to go across the road.

So, I would hop e that I have pointed the problem out well enough that Hydr o would take a serious look at it and try to correct the anomaly and come out with a stated policy on it, and as the Mini ster has in dicated give the farm community some ability to pay the up­ front costs over a longer period of time on their Hydr o bill and I would be satisfied. Thank you, Mr. Cha irman. MR. BLACHFORD: We don't mind revealing this pol­ icy. it is well known to everyone withing Hydro and anyone who wants to ask for it. I will get the policy and make it available. MR. CHAIRMAN: Mr. Orchard. MR.

DONALD ORCHARD (Pembina): Thank you, Mr. Chairman. I don't know who would be the best person to respond, possibly the Minister or maybe the Cha ir­ ma n. Ir rigation systems have gone in, in the last few years, centre pivot type, and often they are a fair dis­ tance away from that thr ee-phase power that my col­ league, Mr. Downey, has mentioned. The cost of get­ ting thr ee-phase power to them has caused these people to elect to go to diesel generated electricity. The Federal Government has a number of programs on right now which promote off oil.

Do you know whether there is any off-oil incentives or subsidies or grants from the Federal Government to switch centre pivot irrigation systems from diesel generation over to electric generatio n? MR. CHAIRMAN: Mr. Minister. MR. PARASIUK: Right at this time, I couldn't say spe­ cifica lly. We have asked the Federal Government to work with us to try and in fact substitute hyd ro­ electric power in every possible instance for nonre­ newable oil and natural gas. Sometimes, what happens, when the Federal Government announces a program, is that they haven't worked out the specifics.

We have had that in a number of other instances, but the point you raise is one that has been brought to my attention the first time by you today right now. Certainly, I undertake that both my department and Ma nitoba Hydro will pursue this with the Federal Government to determine whether in fact there are any incentives or

Thursday, 13 May, 1982 could. in fact. be developed incentives to do this. MR. ORCHARD: On past occasio ns. I have quizzed Hydro on their thr ee-phase line delivery policy. I haven't always been in agreement with it during our term in power. I found some of the charges to be too high to encourage the person to go to thr ee pha se and as anyone knows any time you get past, I think, thr ee horsepower in an electric motor, your three phase is less costly for the motor and more efficient to run. I thin k in today's day and age, everyb ody is after effi­ ciency.

I know that Ma nitoba Hydr o has got about a 9.5 percent interest program for homeowners to replace windows, doors. energy saving sorts of fea­ tures in homes. and yet when the business community or the farm community approaches Manitoba Hydro on the basis of going th ree phase and accomp lishing some similar energy savings and cost savings to their business or their farm operat ion. they have been in the past stymied by the cost of three-phase delivery. whether it be a short distance or a reasonably long distance.

I think, no criticism of the present adminis­ tration, this is just a time for the system to take a look at thr ee-phase inst allation and attempt to develop a policy that would make the conversion over to three phase in as many cases as possible affordable. Sure, you are not going to do it to everyone because every­ one doesn't need it.

I think. there is a 15 horsepower minimum on a business requirement before they bring in th ree pha se at either a reduced or no cost. but I would certain ly encourage this Minister and he would have my support to develop a new po licy to get thr ee pha se more readily ava ilable to the larger busi­ ness and farm users. MR. PARASIUK: In this respect. I will ask Hydro to do the study of the costs. I indi cated that to Mr. Oowney and I think that in terms of whether in fact it should be front ended or paid over a period of time.

I think that may in fact require a government decision because Hydr o administers th e home instal lation program right not, but it is a government program and that would be a government decisio n. I think the com­ ments of both Mr. Downey and Mr. Orchard are well taken. In terms of Mr. Oowney. I lived on a farm 7.5 miles from the corner of Portage and Main and we had a coal oil lamp as well. So. I could see the bright lights oft he city. but I didn't have them in my house and I can app reciate the ch ange that occurred in our life and the life of our family when we in fact got electricity in ther e. MR.

ORCHARD: I have always remembered electric­ ity. Another question that is along the lines of this thr ee-phase power provisio n, a number of people. when they have priced out the cost of th ree phase to their premises and found it out of hand, that they just can't capitalize tha t much cost. they have gone to the phase converter route. Once again. I think the phase converter route is not as efficient as di rect th ree pha se. but it's sort of in between.

While the Minister is maybe reviewing some of the energy programs, maybe a low interest loan or a lower interest loan or a long­ term spread out cost of phase converters might also be cons ider ed in any of his deliber atio ns with 60 new policy. MR. PARASIUK: Sure, and indeed any particu lar specifics in relation to the topic that has been raised today. if the people think of them later on. please send me a note outlining more of them. I think that if we are going to look at it. which I think is a valid request.

I can't commit myself with respect to an answer. but certain ly looking at the various asp ects that the members are raising today is a commitment that I make. If you have others. please raise them or send me a note. MR. ORCHARD: A question to the Chairma n.

I think it was maybe two fall ago, the general Carman and Morden area. there is a belt in between there that went into and will stay in, I presume, corn production for the foreseeable future and there was a lot of grain dryers went in with pretty substantial load increases. lt was getting borderline as to whether some of the lines had capacity to carry this very high seasonal requirement. Are any of these areas like the Carman­ Morden area or possibly over into the Red River Val­ ley, are there any areas that are now overloaded with the present line capa cities that have been in place for several years? MR.

CHAIRMAN: Mr. Blachford. Were you directing a question at the Ch airman or the Chi ef Executive? MR. BLACHFORD: Mr. Chairman. I am not aware of any specific cases. but I think it's true tha t we are cont inually upgrading these lines and increasing the cap acity when it is necessary. I am not sure of the geography. I did mention the other day there was a large line plan to go down to Letellier. I think tha t's in the same general area, is it not? MR. CHAIRMAN: Mr. Orchard. MR. ORCHARD: it's further west.

Some couple. th ree, four months ago there was some indi cation that Onta­ rio was not going to be renewing their power sale agreement with the province. When will they no longer be buying power from Manitoba Hydro? MR. BLACHFORD: I believe within two years. under the current arrangements, they will no longer be buy­ ing power from Manitoba on a continuing basis. MR. ORCHARD: What will be the revenue implica­ ti ons. the decrease in revenue from the loss of that Ontar io sale? MR. BLACHFORD: lt would appear that there would be some decrease.

Just from memory, I believe we're getting somewhere in the order of 18 mills for kilowatt -hour on the average from Ontar io at this time. Tha t power that sold on the interruptable market to the U.S. - well in the last 12 months. we've averaged somewhere between 15 and 16 mills, so ther e could be a decrease. MR. ORCHARD: Then basical ly the CEO is saying that the Ontario cap acity that will no longer be required by Ontario will move into the U. S. market?

Thursday, 13 May, 1982 MR. BL ACHFORD: I would expect that would be the case. MR. ORCHARD: Does that represent all of the Onta­ rio sales or just a portion of them that they are not going to be renewing? MR. BLACHFORD: Within the two years, I believe it is all the Ont ario sales. They pha se out and I believe one of them pha ses out this year. MR. ORCHARD: Would it be possible - I realize the figures probably aren't readily avail able - would it be possible at a later date to provide me with a guessti­ mate as to what that might represent on a decreasing revenue to the system? MR.

BLACHFORD: Yes, I will look into these figures and as I say, it is from memory, the y'll have to be checked. MR. CHAI RM AN: Mr. Minister. MR. PARASIUK: Yes, on this, for these types of ques­ tions, we'll take them down as notice and I think the normal procedure is to mail the specific technical information to the members afterwards. MR. CHAIR MAN: Mr. Orchard. MR.

ORCHARD: In the Annual Report on Page 7, extraprovincial power is broken down at 22 percent of Hydro revenues for '80-81 and I suppose there will be a similar - well, each year they have a similar char t­ and when we get into the detailed financial statistics, it doesn't break do wn the value of th ose sales say, in dollar value, to Ontario, to Saskatchewan and to the Uni ted States. Is that breakdown ava ilable? MR. CHAIRM AN: Mr. Blachford. MR. BL ACHFORD: Yes, we have a breakdown between Canadian provinces and the U.S. MR. ORCHARD: Would you have that breakdown with you this morning? MR.

BLACHFORD: The total for the year just fin­ ished, March 31 st, 19 82, was $72,383,759.00. Of this amount, $49,800,000 almost went to the U.S . There was about $6,900,000 went to Saskatchewan and $15 ,700,000 went to Ontario. By the way, I was wrong here. The rate in mills to Ont ario for the year was 14 .5 mills, the rate to the U.S. for the year was 15 .8 mills, so contrary to what I though t, we mig ht gain a bit on this. MR. ORCHARD: Do you have the mil ls to Saskatchewan? MR. BLACHFORD: The actual for the year was 20. 1 mills. MR. ORCHARD: Thank you.

I had one more - I will defer until I find my other questio n, Mr. Chairman. MR. CHAIRMAN: Mr. Man ness. 61 MR. CLAYTON MANNESS (Mo rris): Thank you, Mr. Chairman. I have learned one thing today, do n't go after Mr. Orchard or he'll ask most of your questions. I would like to ask a question if I can on reserves. I gather that reserves have just really been built in the last thr ee years and for the various reasons given over the other day, that in fact they have dropp ed and will continue to drop.

I am wondering if Manitoba Hydro has a policy regarding the optimum level of reserves which they would - given that Hydro was making money, would there be a optimum level at which they would like to reach and thereat stay? MR. CHAIRM AN: Mr. Blachford. MR. BL ACHFORD: If I may presume to speak for the Board, I don't believe there is a reserve figure that's fixed; $10 0 million seems to be a good figure. If you recall the graphs that we showed on the overhead here the other day, we get to a point some years down the line where we could lose that much in one year.

That is to say we could fail to earn that much in sales if we had to buy instead of generating with water power. So possibly 10 0 is a good figure, but as far as I know, there is no policy fixed on that. MR. CHAIRM AN: Possibly Mr. Cherniack would like to comment on that. MR. CHERNI ACK: Mr. Chairman, I've attempted - well, I've confirmed the fact that according to Hydro records and Hydro memories, there is not a policy on what is a good debt equity ratio and since the freeze was imposed, there was no point in establishing a policy because there was no control.

There are many arguments that seem to vary between 80 some per­ cent debt in Quebec -(I nterjectio n)- 70-30 in Quebec; where 70 percent is debt 30 is equity. Tha t, I think, is the outstanding one. I think Nova Scotia is in the deficit position like 10 1 debt to-1 equity. Manitoba is now somewhere around 97 percent debt, 3 percent equity and the projections by staff is that in a few years, it will be insolvent in terms of having no equity. But I find that there was never any objective estab­ lished, although it is always being discussed, but it has not been done at any time in my investigatio n.

Does that answer you? MR. CHAIRM AN: Mr. Man ness. MR. MAN NESS: Well, I take it then that it has not, in fact, been discussed at the Board level. But is it the intention then of the new Cha irman to make thi s a relevant topic, one that will be possibly acted upon in the future? MR. CHER NIACK: Mr. Chairman, because I found that there was no policy, I have certainly indi cated that I would like the Board to start discussing what is the optimum objective, but we're long range from that.

The projection that we have, that was distributed to all members through the Minister, indi cates that we have to know where we stand in relation to our ability to raise the rates in order to think in terms of what is the optimum debt equity ratio. I might say that, because Manitoba Hydro's debt is guaranteed by the Province

Thursday, 13 May, 1982 Mani toba. I personally am not too impr essed with � im portance of there being a large equity related to � total assets of Hydr o, because the only justifica­ •n for a large equity would be to be able to go to the uket showing a better potenti al, but I do believe that e provincial ability to guarantee makes it less impor- 11. Although I also believe that in the Ur iited States peci ally, they are starting to look at the utilities as lll and it would be advisable to have a debt equity tio that is more representative of that which exists in her Crown utilities.

But we are far from that on the tse of the projections that have been distributed, 1ich indi cate that by 19 84 we'll be down to $1 5 mil­ on in reserve. That would be al most a 99 to 1 debt 1uity ratio.

I do believe that if you think in terms of rate stabiliza­ >n, then that is the important reserve one should ink about and rate stabilizat ion's objective is, of >urse, that when one sees that one is running into a lficit positio n, one can adjust the rates gradually ther than all at once by leaning on the reserve. here we now have $10 0 million, which the Chi ef <ecutive Officer says is pretty good at this stage, I ink it is true that with $10 0 million in reserve you can Jjust rates so that they don't hit with a tr emendous 1pact all at once and that is the reason, I assume, I :cept, tha t ma nagement has recomm ended an 1mediate rate increase so that the projected deficit ill come with a lesser im pact and rather than their ·ojection of a minim um of 31 percent increase it ould be made less by making use of the reserve.

I wonder if that answers the questio n. IR. MANNESS: Yes, it does. I'll just ask one final uestion, does the Chairman then see as one of his bjectives is working towards a system of rate changes, 1ostly increases I suppose, that wou ld attempt to ork towards a goal of maintaining then a specific ebt equity ratio or, indeed, a set figure of reserves? IR. CHER NIACK: Mr.

Chairm an, my personal objec­ ve, of course, is to serve Hydro and in serving Hydro means the Ma nitoba ratepayers of Hydro and that 1eans keeping the rates as low as possible. lt would e wrong in my estimation to aim at a high equity ratio ) debt if it means raising the rates tremendously at 1e expense of Ma nitoba ratepayers. I think that might e an exercise that would be of little use. lt is, how­ ver, desirable in my opinion that you have a constant ate stabilization reserve available to adjust to abn or­ lal times such as we've had in the last couple of years.

"here's no question that these last two years were bsolutely abnormal and that because of that, the trojection now is that with normal flows, but with still he pressure of higher interest rates and higher infla­ ion than was expected, that we are still running into a tosition where it is possible that if Hydro is not tllowed to raise rates until the end of the freeze period tnd is then told, wel l, you don't go 31 percent or, 1ssuming these projections are valid or hold valid over he next couple of years, that Hydro mig ht be in the >osition of having to say to government, "We must aise rates under the Act," because in my interpr eta­ ion of the Act you can run planned deficits for a year >r two providing they don't im pinge completely on the ate stabilization reserve.

I don't think under the Act 62 we are allowed to operate Hydro to a stage where there is no reserve and we're running an absolute deficit. So, my own thought is that either we have to be allowed to raise rates or we have to be subsidized further by the taxpayer rather than the ratepayer, or the law would have to be changed, and that I really don't think is a terrible thing, but that's not within my province.

But it would be possible to project, let's say, 10 or 11 percent increase over a period of time which will actually drive us, according to these projectio ns, into a deficit position overall, but gradually get us out of it. I think we can only do that if the law is chan ged and as I say that is not within my responsibility. MR. MANNESS: Thank you. I'd like to change the subject somewhat to a brief question on the tr ansmi s­ sion line that now goes to the States just west of the river. What is the name of that lif!e, so I can refer to it? MR. CHAIRM AN: Mr. Blachford. MR. BLACHFORD: There are th ree of them.

Are you thinking about the 500 kV line? MR. MANN ESS: I'm thinking of the large one that goes through the municipality of McDonald and Morris. MR. PARASIUK: Tha t's on the west side. MR. MANNESS: West side, did I say east? MR. PARASIUK: No. I think they were thinking of the east side. MR. MANNESS: I'm saying the west side. MR. BLACHFORD: I guess this is the 230 kV line to Grand Forks. MR. MANN ESS: I see. I would like to refer to it by name, if it has a name, and I don't know it myself. MR. CHERNI ACK: Is n't that a name? MR. BLACHFORD: I don't believe so. MR. CHER NIACK: I think you should give it a name. MR.

PARA SIUK: What name would you like to call it? MR. BLACHFORD: The line to Grand Forks. MR. CHE RNIACK: We'll consider it. A MEMBER: What about the Man ness line? MR. MANNE SS: Well, I have enough things that go thr ough my farm that I have tr ouble with. I suppose the question I wanted to ask, I want ed to know if all claims or if all settlements with farmers, through which this line passes their farms, have, in fact, been settled or would you have any way of knowing that?

Thursday, 13 May, 1982 MR. CHAIRMAN: Mr. Blachford. MR. BLACHFORD: I believe on this line, they have certainly been settled. That line, if we're speaking about the same one, has been there for appr oximately 10 years. If you're speaking about the 500 kV line from Dorsey that ultimately goes to Minneapolis, I'm not sure that has all been cleaned up as yet. MR. MAN NESS: Well, I think tha t's the one I'm speak­ ing of then, is the Dorsey line then. MR. PARASIUK: That's on the east side of the river. MR.

MANN ESS: I'm led to believe that, in fact, there are some landowners that have not at least accepted the settlement officially on the line on the west and I was wondering if there was an open file or if there was any comment that he-could give. If not, I'll move to the question brought up by Mr. Orchard on drying and surge drying.

Is the heaviest usage on start -up of these dryers that are coming into some areas - they are located in the heavier concentration, of course, than some areas that are growing corn - and I'm wondering if there is a policy, because I happen to know of some people that have put in dryers and then had Hydro come to them to determine the star t- up requirement of the fans as such? I'm wondering if there is a policy specifica lly to this or is it just that if you happen to be the third person on the line you may be precluded from building or establishing a dryer? MR.

BLACHFORD: I'm sur e there is no preclusion from putting in a dryer, but if that consumer is unfor­ tunate enough to be the one who asks for an increase at the time when the line has been loaded, then I think he can probably expect to pay more than the others have paid, which is an unfortunate circumstance but that's the way it works. MR. MAN NESS: Well, is that just to upgrade then the ability of the line, to bring in higher voltage, or is that just for being further down on the list? MR.

BLACHFORD: 1t sounds to me as if it will be further down the line of that, you know, further away from the source and ther efore it will be an upgrading in the line. Presumably, he has power to start with. MR. MANNESS: And then in the case where you're not further down the line, you just happen to be the fourth person using it but you may be first up, you know, you may be closer to the source, does that have ... MR.

BLACHFORD: Yes, this is all getting theor etica l, but if he were the first to ask for the power and the line cap acity was there, he would presumab ly not have to pay as much as if the capacity was not there. MR. MAN NESS: Another question I'd like to ask is the policy surrounding home heating. lt seems to me over the last little while or so, I haven't seen the same empha sis on heating electri cally. Has there been a change at all in the whole attit ude by Manitoba Hydro in this regard? 63 MR.

BLACHFORD: For a number of years, electric home heating has not been pushed, it has not been mar keted, but if a consumer comes along and asks for a connection for home heating, he is given it. MR. MANNE SS: Is there some specific reason why the policy in effect some, I don't know, four or five years ago when in fact home heating was marketed, why that policy no longer exists? MR.

BLACHFORD: I believe the backg round on this in the electrical industry is that from the time it began in Man itoba, as in other jurisdictio ns, you were able to bring down the price of power through the building greater machines and building larger developments, it brought the per unit price down. There was a great incentive to market more in order to bring the price down even further.

Now in the last 10 years, unfortu­ nately this has changed and in Manitoba, as in many other places, we've got to the point where building bigger and better does not necessarily decrease the price and th erefore, that coupled with inflation, increases the price and there's really no advantage to the general consumers to going out and trying to mar ket more for the purpose of bringing down the cost per unit. MR. CHAI RM AN: Mr. Cherniack. MR. CHERNI ACK: Mr. Chairman, if I might just add to that. My im pression or recollection was that po licy was changed around 19 75, but Mr.

McKean tells me it was even prior to that. That may tie in with the 1 0-year period that Mr. Blachford refers to where it was found that it was not economic for the existing ratepayers to push further use of power for purposes such as heating. MR. MANN ESS: Well, you say it wasn't economical. Are you thinking of the actual consumer or are you thinking of the whole electrical system, the whole Hydro system? MR.

CHERNI ACK: Well, my understanding and now I'm not speaking as an expert but just a person who's been asking this kind of question for the last few months. 1t is not economic, as I understand it, for the consumer to convert from natural gas to electricity. lt is economic to convert from a petro leum product or whatever you call it, oil, to electricity at this time. lt is not economic for the system, as I understand it, to be increasing the demand in Mani toba for the sale of electricity. Now having said that, I want Mr.

Blachford to expand on it or correct me if I'm wrong, but my impr ession is that it is to the advantage to sell it out of the province. I wonder if Mr. Blachford could elaborate. MR. BLACHFORD: Yes, that's true, it is to the advan­ tage to sell it out of the province when you don't have any other mar ket for it. But if you would care to look at the prices of energy and I'm speaking about kilowatt­ hours that come from the various Hydro plants that we have. We start now with the older plants and the cost of extracting energy from these plants right now.

On the Winnipeg River, ther e's somewhere in the order of, say, 5 mills per kilowatt -hour;

whereas you go up to

Thursday, 13 May, 1982 the Nelson Riv er and look at Long Spruce, last year it cost 10 .9 mills per kilowatt -hour to generate the energy from that plant as compared to Great Falls, which is an old one, is 3.71 mills per kilowatt- hour. Now when we have to build another plant on the Nel­ son Riv er because of inflation, not because of the site but because of inflation, it's going to cosf even more than the 10 mills. They suggested it might be 40 or 50 depending upon when it comes into service.

So every­ thing that causes Hydro to build more power is going to add to the general cost of electricity within the provi nce in money terms. MR. MAN NESS: Well then, in general, are you saying that it would be better if Mani toba Hydro, and I think maybe you made comment with reference to this the other day, that if Man itoba Hydro remained in a static position from now on forever ... MR .

BLACHFORD: If you looked only at the price of electricity and what the consumers are going to pay, that would be correct, but I'm sure that would not be the policy of the province, so that is another aspect that has to be looked at. MR. CHAIR MAN: Mr. Cherniack. MR. CHERN IACK: So again if I could add, what I've been learning and I must say, Mr. Chair ma n, that when I became Chair man of Hydr o, I was surprised to learn this kind of informa tion. I thought it was advan­ tageous to Hydro to be out pushing sales.

I think that Hydr o, under the legislat ion, is required to concern itself with providing power to Mani toba users and to maintai n the lowest possi ble rate. Therefore, the objective of Hydro is to ma intain the lowest cost and Hydr o, therefore, has to recognize that any increased production that is demanded will raise the cost to all the existing ratepayers. I use the word existing because the statement Mr.

Man ness made appl ies, status quo or I forget just what term he used, would be, I believe, correct for today's ratepayer. it is a different kind of objective, of course, for the province which concerns itself about the economic advantage of the province to look at expansion as being something helpful to pro­ vi ncial economy, but until Hydro gets such kinds of instructions or legislation, Hydro's objective is not in the Act in that way. Hydro's objective is simply to provide Mani toba users with the lowest possible cost and on that basis, I think that Mr. Man ness stated it or summarized it well.

I wish I could remember the term he used about a sort of a status quo or -(I nter­ jection )- "Static," yes. That's my underst anding, that's what I think I've learned in the last few mo nths. MR. CHAIRM AN: Mr. Min ister. MR. PARASIUK: I just wanted to add, the problem of front-end costs being high and the operating costs being low is one that is faced by hydro utilitie s around the wor ld. Tha t's one of the reasons that I contacted the Federal Government almost immediately upon being made Minis ter responsible for Hydro to, in fact, raise this whole question with them. Mr.

Orchard had talked before about some of the off oil incentive pro­ grams of a small nature. Well, if we're going to talk 64 about off oil in a major way within thi s country, then the Federal Government has to play a big role in developing a national energy policy that just doesn't talk about oil and gas. lf we want self-sufficiency in oil, one of the ways of doing that is to start providing financial arrangements in such a way that we can switch from oil to electricity or switch from natural gas to electricity. We feel that the Federal Government has a major role to play in this respect. MR.

MANNESS: Well, that is an interest ing comment because I'd like to relate a little story and then ask you for your int erpreta tion. I, over the last month-and- a­ half, have been actively working with a commu nity in my constituenc y who is attem pt ing to bring in natural gas. I know there's another area in the Constituen cy of Rhi neland where there's a group working with the aid of the Co-operative Development group, where in fact I think they are taking some of their lead from some of the things that have happ ened in Alberta, where instead of rural electrification it almost looks like rural gasifica tion.

I am wondering, the way the National Energy Program seems to be developing, at least in the written word there seems to be some opportunity for major support to helping groups within small towns outside of large centres to secure for them­ selves gas supplies. I am wondering what impact this whole policy change on a federal nature may have on Mani toba, but more specifically on Mani toba Hydro. MR. CHAIRM AN: Mr. Min ister. MR.

PARASIUK: This is a federal policy that is chang­ ing. lt isn't particularly static; it isn't particularly fixed and it is hard to get a clear reading on the amount of money they are prepared to ·put into this ultimately. lt is one thing that the Department of Energy is looking at in terms of when is the crossover point going to be reached in terms of economics. Is it more economical to heat with home heating or to heat with natural gas, if at the same time you are taking a look at what the future prices of oil will be and what the future prices of natural gas migh t be.

We are into an area that right now is quite unpredictable especially given the situa­ tion with respect to the world price of oil and whether in fact that is a temporary holding pattern or whether it's going beyond that. I know Hydro itself is cogn izant of these various changes taking place, plus the impr ovements that are ta king place with respect to gas furnaces. There have been some very major impr ovements in efficiency there and it makes the whole quest ion then of conver­ sion, especially from natural gas to electrical home heating, much more unpredictable. MR.

MAN NESS: Does this country or this nation have so much surplus natural gas that in fact possi bly Man itoba's greatest natural resource in a sense or its second greatest being water directed towards Hydro energy development, is there some chance that we, as a province, will first of all maybe not be eligible for potential federal grants in this area or secondly, do we as a provi nce have an opportunity to tie in our great energy source into this whole program? MR. PARASIUK: Those are valid points. Tha t is exactly

Thursday, 13 May, 1982 why we are sa ying you have a Na tional Energy Policy that has a whole set of programs geared to oil and gas only and has never taken into acc ount hydro-electric power. We are a province situa ted in the centre of the country, in a sense in the centre of the conti nent and we are in a position to talk about utilizing hydro­ electric power as a substitute, especially for oil which we are im porting right now.

With respect to natural gas, that situation seems to change every three to five years. it wasn't very long ago, I think , five years ago tha t builders and homeowners in Man itoba were being informed that they may not be able to hook up for natural gas with the next house that was being built and there was tremendous concern at tha t time .

That took place three or four years after the Federal Government, through the Nati onal Energy Board, had allowed the export of tr emendous amou nts of natural gas to the Un ited States, so we had this tremendous sh ift in policy and tremendous shift in long-term outlook with respect to long-term supply of natural gas. That sti ll seems to be as unpredicta ble as ever, although in the last while, in the last few years, it would appear that there seems to be developing a fairly secure long-term supply of natural gas. MR.

MANN ESS: What is our provi nce doing actively at the moment as far as atte mp ting to make Ottawa aware of where we fit into this whole energy situation in Canada and what we have to offer? MR. PARASIUK : In that respect, I think maybe some of thi s mi ght be better discussed when my Estima tes for Energy and Mi nes come forward, but certainly I have raised this very quickly with the Federal Min ister of Energy, Mr. Lalonde. We have launched a whole set of studies in this respect.

Again, he said that I was really the first Mini ster who had come forward in terms of this type of proposi tion, that the National Energy Policy should really be more than an oil and gas pol­ icy. He had felt in the past that provinces had been too hung up about jurisdi ct ional battles regarding energy and we said that we wanted to try and determine the problems and also determine the oppor tunities for resolving those problems . So, without making any comm itments with respect to the future, we certainly are pursuing ways and means by which hyd ro-electric power may in fact be substituted for oil especially.

MR. MANNE SS: Thank you. I find that whole area intr iguing, but I won't belabour it at this poin t. I would like to ask a quest ion though that may appear to be somewhat petty. I would like to ask it of Mr. Blachford. I am wondering if he feels that, in fact, Mani toba Hydro and therefore the Provinc e of Manitoba and all the users of Hydr o are receiving the most efficient output by employed field staff. I ask that question only from observat ions at ti mes and as recently as a year ago or very close, in wat ching poles being erected with three men working and six men wat ching. I just ask the general question.

MR. CHAIRM AN: Mr. Blachford. MR. BLACHFORD: I am sure it is always subject to

interpretation and indi vid uals, but I do believe the 65 Manitoba Hydro system is as efficiently served as we know how to do. MR. MANNESS: I'm sorry. I did n't hear the answer. MR. BLACHFORD: I say, I believe in this respect, the province is served as efficiently as we know how to do. We are constantly looking at this and I am sure no one can say that there is not room for im provement, but this is under constant surveillance. MR. MANN ESS: I am glad to hear that. That will satisfy me. One final question and Mr.

Blachford, you were tal king the other day about running an experiment, atte mp ting to bring water down from South In dian Lake and then I think you said that Lake went dry and the experiment had to be abandoned. Could you give us some further detail on the experiment which you were running? MR. BL ACHFORD: Yes, the general idea was to find out what the water levels on, I believe, it is Thr ee Point Lake downstream of Notigi and what the water levels would be at Tho mp son when various flows were run down the Burntwood Riv er.

About a year ago, a little more than a year ago, the flows into South In dian Lake were excellent, but about one year ago now, the Rein­ deer Ri ver went from a very high river flow to a flow that was down to what they call about a 2 percentile. This means that 98 percent of the ti me, it's better. So, it was very low. The result of this was that South In dian Lake, with this draw down that we are doing at about 34,000 cubic feet per second, began to come down very quickly. As you may know, we were restrained by the interim license on that Lake to a two foot draw down in any 12 -month period.

We got to the stage where we had drawn down this two feet. We st ill needed the energy. We went back to the department of government and asked them if they could waive this two-foot com mi tment that we had. They did that, but at the same time we had to cut down the draw from South In dian Lake and it's now down around 20,000 cubic feet per second and depending upon the freshet and the break up this year, it may even be less. But the inflow into that river went from a very high percentile down to about a two percentile flow which is the low­ est that has been recorded since the river began supp­ lying energy. MR.

MANNESS: Well, I sti ll don't quite understand what the nature of the experiment was. Was it to see how much water and how quickly you could rush it down? MR. BLACHFORD: No, the experiment was to see what levels would be obtained with various flows in the river at various poi nts in the river. Pointedly, Foot Print Lake, I believe, is the one that is near Nelson House and at Thompson. MR. MANN ESS: You managed to reach a level of 34,000 cubic feet per second. MR. BL ACHFORD: I believe that was the figure, yes.

Thursday, 13 May, 1982 MR. MAN NESS: Was that a stated objective or in fact when you attempted to go hi gher, did you want to reach 34,000 and see how long you can maintain that flow? MR. BL ACHFORD: We would have attempted to go higher depending upon the results of the 34,000 cubic feet per second. Unfortunately, as far as we went has not been fully diagno sed yet, so I don't know whether we would have decided that we would try a higher flow or not. MR. MANN ESS: Well, is this experiment now com­ pleted or is it just postponed to a time when, in fact, the South In dian Lake again recaptures its level? MR.

BLACHFORD: lt is postponed until such time as there is sufficient water to try aga in. MR. MANN ESS: Is there any conclusion at all from this experim ent at this time that you can relate to the opti mum level of South In dian Lake? MR . BLACHFORD: Sorry, that we can do what to South Indian Lake? MR. MANNE SS: That you can relate to the opt imum level of water in South Indian Lake? MR. BLACHFORD: No, we haven't completed the flow program and until that is fully comp leted, we won't really have all the answers. MR . CHAIR MAN: Mr. Scott. MR. DON SCOTT (lnkster): Thank you, Mr. Chair ­ man.

I wanted to make some com ments, first off, regarding some of Mr. Manness's earlier questions on a conversion from oil or gas or whatever the house may be heated by towards electricity. I wonder if the representatives from Hydro could possibly give me a cost estimate on the cost of conversion, the upfront cost for hydro. I understand it is in the vici nity of $10,000 per house. MR . CHAI RM AN: Mr. Blachford. MR. BLACHFORD: I believe this probably has refer­ ence to the current cost of generation in which would be required to supply the energy that the average house would need to heat it in the winter.

If we take 10 kilowatts to heat a house and a $1 ,000 per kilowatt for the generation and that's only part of the cost, then you arrive at his $1 0,000 figure. You also have the transmission between the power plant and the load centre plus the distribution and the transformation to pay for also. MR. SCOTT: When the incremental costs or the mar­ ginal costs increases with additiona l developments such as Li mestone or whatever, I believe you said it was in the vici nity of 40 mills per kilowatt hour, then you could multiply that cost per house by that factor as well? MR. BLACH FORD: I am sorry.

We are tal king about 66 two different thin gs. I am talking about the installa tion cost of a plant, whether you get a kilowatt hour from it or not. Now you are speaking about 40 mi lls, and that is referring to a different quantity. When Li mestone is built and if it is built to come on the line, say 19 88, the price is expected to be about $2.2 billion. This will work out to somewhere in the order of $2, 000, so instead of being $1 0,0 00, it will be about $20,000.00. MR. SCOTT: Thank you very much for that clarifica­ tion.

I think, you know, given that sort of evidence, I would like to commend the utility for almost an about turn from, I guess, eight or ten years ago when there was a strong promotion towards gett ing on with ready kilowatt and moving towards conversion, especially towards space heating, because I'd classify electricity as one of our highest quality and most versatile forms of energy. To be using it for such an inefficient use as space heati ng, I think is a very very unwise investment on behalf of Hydro and really on behalf of the ratepay­ ers and the citizens of Man itoba.

As the marginal rates go up with the increased production costs for bring­ ing on new rates or new power, it's even going to get worse. I would suggest that there be some form of standards established before a house is even permit­ ted to convert towards electricity; in most instances, that house would have to meet a certain insulation standard. Because if a house is insulated sufficiently, leaks are cut down sufficiently, if it's properly built, then it is poss ible to heat with electricity for a very low cost.

I believe the demonstrations under the Saska tche­ wan Energy House are getting down to a mere fraction of what the costs are for a normal home for heating with electricity. I have even heard figures as low as around $20 a month in the wintertime for heating and most of the heating being waste heat from everything from lights to stoves, fridges and that sort of thing.

So I would just, I guess, mak e a com mentary plea to con­ tinue the efforts that are presently being made towards seeking and using conservation as a source of supply and as a source to reduce the rate of growth, or the rate of the growth of the demand on the system. MR. BLACHF OR D: Yes, we are following very closely these developments and while it's not Hydr o's job to say how houses should be built, we are cer tainly encourag ing people who are considering electric heating to build their house or to change their house in order to make it as heat efficient as possible. MR.

SCOTT: Well, it may not be a Hydro responsibil­ ity to set the building codes, I suppose, as to what house qualifies. I would suggest that it is kind of in the interest of the utility that if it does not require some basic standard, then maybe what we should be doing is charging people for heating purposes of heati ng homes at a marginal rate. Because I understand right now, correct me please if I am wrong, that the hydro rate on a hom e that is using hydro as a heating source is lower than on a home which is not using hydro as a heating source.

There is a different rate adjustment so that the people aren't hit with really the full cost of supplying hydro to the home. MR. BLACHFORD: They get charged the standard

Thursday, 13 May, 1982 rate currently, but Mr. McK ean poi nts out they get the lowest run-off rate possib le, so it looks as if they've been charged a bit less. MR. SCOTT: Okay, that's fine. That is all I have at this time, Mr. Chairman. Thank you very much. MR. CHAIRM AN: Mr. Kovna ts. MR. ABE KOVNATS (Ni akwa): Thank you, Mr. Chairman. I have a couple of .questions, not too tech­ nical in nature, but something that's been of some concern to me for quite some tim e.

First of all, I would like it to be noted that I am one who has a strong feeling that the terms of reference for the Mani toba Hydro should be expanded, not just for providing cheap electricity for the people of the Province of Man itoba, but I think that the terms of reference should be expanded and poss ibly expanded to the energy of the future which is hydrogen power. But I will get back to hydrogen power in just a mi nute.

I wasn't going to bring it up at this ti me, I thought that it would be best brought up during the Minis ter's Esti­ mates, but I think that now I've touched on it, I will probably get back to it. I started remini scing a little bit back when I heard the Honourable Mini ster say something about coal oil lights in his home . I do recall a fellow by the name of Mr. Cameron who was put out of business by the electr"1cal power because he used to deliver ice - I guess we don't have iceboxes any more - Mr. Cameron was out of a job and this was quite a few years ago.

After saying that, I would just like to mention that the Customer Services Department of the Mani toba Hydro, I think, is second to none. lt is great. I think that they have pos sibly fallen down a little bit inasmuch as I think that the people of the Province of Man itoba should have been more aware of the rising costs of electricity. I am not looking to put blame anywhere. I think that it is a hindsigh t that the rising costs of electrical power has discouraged people from using electrical heating in their ho mes.

I think that there should be some concessions to people who want to use electrical power in their homes. I think that there should be some concessions to people who want to use electrical power in greenhouses and businesses and I know that ther e is special rates for some people in business, but I think that we could encourage peo­ ple in smaller businesses to use electrical power, par­ ticu larly greenhouses of which there are quite a few in my constituency. Rather than just carry on and

preamble -(I nter­ jection) - I will just get down to a couple of basic questions.

I don't want to get into anything too tec hni­ cal as one who pan ics everytime he turns on the light switch and the light doesn't go on, so I wouldn't understand the techn ical aspects too much about it anyway, but can anyb ody and I would ask the Hon­ ourable Chair man to direct the person who is going to answer, can anybody direct me as to what has been done with the Federal Government in the expansion of hydrogen power, the development of hydrogen power which is, in my opinion, the power of the future, as to getting grants from the Federal Government so that we can develop this hydrogen power in the Province 67 of Man itoba?

MR. CHAIRMAN: Mr. Mi nister. MR. PARASIUK: That was one of the topics that I raised with the Federal Min ister of Energy and it is one of the things that we are looking at. I have said this publicly elsewhere, that I think that hydrogen is a fuel of the future in that it can be stored. The problem with electricity is that it can't be stored and there have been some early looks at the possibility of producing hyd­ rogen thr ough the electrolysis of water and possibly tapping that into the natural gas pipelines. I think you can ship a mixtur e of thr ee or four par ts natur al gas with one part of hydrogen.

Also, hydrogen has a number of other uses. lt is the cleanest burning fuel. When it is used, it just produces water and oxygen. So, we are very definitely int er­ ested in this and it is not that speculative. lt is not that futuristic when you think of these generating stations having a life of 10 0 to 200 years and I guess with im provements almost an indefinite life, then if one talks about possible uses of electricity 15 or 20 years down the line, that isn't too futuristic with respect to the life of the plant that you are planning or a plant that you have in place right now.

I am concerned about one aspect fr ankly and that is the pol itical aspect. I am hoping that Mani toba will get an objective look. I know that to date there has been a strong tug of war between Ontario and Quebec with respect to research assistance regarding future hyd­ rogen development. We have put our oar in the water. We feel agai n, given our position right in the centre of the country, given the open approach that we are ta king with respect to electricity being part of really true comprehensive National Energy Policy, that we should get objective consi deration. We are pursuing it aggressively.

Some homework is being done on it and I hope that in due course, say by next Session, I can be in a position to respond more definitely as to where we are, but we have launched an aggressive approach in this respect. MR.

KOVNATS: Just to clear it up a little bit further, the pictur e is so wide and broad. lt is not just a matter of hydrogen power for the people of the Provi nce of Man itoba. lt is something that could develop the future of the Province of Man itoba inas much as there could be some arrangements made with - I under­ stand that hydrogen power could be a major factor in the refining of oil and w�1ether we can make arrange­ ments with the Province of Alberta to ship their oil here for refining or whatever. If he had it, it would put us in a real good bar gaining position.

I am sur e that the Hon ourable Mini ster will use all of these things in his negotiations with the other provinces and with the Federal Government. I do agree that ther e has been money allocated, because, I guess, I have been reading the same arti­ cles as the Honourable Min ister where Ontario and Quebec have received fairly large grants for the development of this hydrogen power. I think that we are in a position; we have cheap electricity; we have abunda nce of water power and we are the leaders when it comes to that sort ofthing. I think that, with the Honourable Min ister pushing, maybe we can get

Thursday, 13 May, 1982 something done on it. I think we are looking to some­ where 20, 25 years in the future, but now is the time to start. I have just got one other point that I would like to bring up. We do have an abunda nce of water and it is good quality water. I am not looking for a supposition of, if Garrison comes through because I don't think Garrison will come thr ough. I think that we will take the necessary ac tion, and I am not sugget ing violent action, but I think that we do have to work to see that thi s water coming from Garrison is not going to be damaged. Can the Honourable Min ister or Mr.

Blach­ ford advise me whether the water that would come from the Mi ssouri Basi n, if it did come, would have any effect on the generating of electricity in the Province of Mani toba? MR. CHAIRMAN: Mr. Blachford. MR. BLACHFORD: No, Sir, it would not have any effect whatsoever. MR. CHAIRMAN: Mr. Orchard. MR. ORCHARD: A question to the President, what is the - I'm not in metric here - but what is the British thermal units, the BTU's in a kilowatt of electricity? MR. CHAIRMAN: Mr. Blachford. MR. BLACHFORD: Approxi mately 3, 700. MR . ORCHARD: Thir ty-seven hundred BTU's per kilowatt hour.

The Chair man of the Board mentioned that it was probably prior to 19 75 when the case for home heating was de-emphasized. I can assure the Chai rman tha t it wasn't 19 73, because that is when I mo ved back to Mani toba and that is when the cam­ paign was sti ll on and that is when I unfortunately converted and I am now burning wood. Can the Presi­ dent indicate whether there is any basic difference in the efficiencies for electric space heating in homes between the baseboards, the electric furnace, central furnace conc ept and say, the ceiling radiant?

Are the re any basic differences in the level of efficiency of recovery of that 3, 700 BTU's per kilowatt hour from using those th ree prime systems? MR. BLAC HFORD: No, there is no difference in effi­ ciency as far as getting the heat is concerned. There is probably a difference in losses before it is felt. For example, in the basic centralized heating unit, the air tha t is heated will have to go along ducts before it gets to the place where you want the heat, but I would say it is a very small loss.

I believe that type of inst allation, assuming you are converting, is probably the most economical way to do it, but as far as efficiency is concerned, there is very little difference. MR. ORCHARD: Mr. Chairman, since we have had Hydro indic ate that there is some indication that further home heating may not be in the best int erests of the Man itoba ratepayer because of the cost of future expansion and Mr. Scott shares that concern.

I wonder if the Minis ter might give us a little clarifica­ tion on his May 4th addr ess to the Electric Service 68 League of Mani toba wherein he says, "Many of you in this room are directly involved in electric home heat­ ing and you are very conscious of the com parative costs of the vari ous energy sources. With the current rate freeze in Mani toba and the price increases under the Alberta -Canada Agreement, electric heat is less costly than oil and fast closing the gap with natural gas. One considers in the long term the conservation et hic resulting in hom eowners better insulating their facilities.

You very quickly reach the standards set for the energy efficient and the super energy efficient homes promoted by the Mani toba Electric Service League. To me it makes good sense to use electricity as your source of heat in these well insulated installations." MR. PARASIUK: We have a number of instances especially in rural Manitoba wher e people in rural Mani toba who have to rely on heating oil will, indeed, find it to be economic to switch to electricity.

There are instances where, if you had to look at natural gas and natural gas is very unpredictab le- right now, we are at a stage where I think people would find it diffi­ cult to predict the price of natural gas over a 1 0-year period, but from a provincial perspective and, I think, Hydr o has par ticular perspective, but from a provin­ cial perspective when we deal with natural gas we're dealing with the int erest costs or th e Capital costs associ ated with natural gas distri bution and the int er­ est rate factor in terms of making that more or less economic depending upon the particular project that one looks at and you're also looking at what has in the past been unpredictable supply.

So, we do have more unpredictable factors in dealing with natural gas than we do when we're dealing with electricity. So, if one takes the long-run view, as I said to Mr. Kovnats, of a plant that will last for 10 0 years and one takes a look at that over a period of time, I personally do see electricity being economic for home heating, especially if people insulate their homes in a much better man ner. MR.

ORCHARD : Well, that may well be, but are not those costs relative because we're getting down to a ba sic com parison of energy and energy is expressed in BTUs and I think in terms of BTU content per dollar, natural gas today and for quite some time appears to be a good buy in comparison to electricity to generate heat and if you talk super-efficient or super-energy efficient homes, it's all relative. The gas furnace will st ill be your cheap est source, because if you're going to use less electricity, you're going to use less natural gas.

In rural areas, certainly, there is a disadvantage in that there may not be a distribution system for natural gas, but in new subdivisio ns, for instance, the natural gas pip e is probably at the end of one street, as is the electricity and infrastructure costs are going to cost both Mani toba Hydro and a gas provider money to provide the infrastructure for delivery of either energy source to a new subdivision and with some of the downstream imp lications of the next plant at 40 to 50 mills and $20,000 per unit of installed cost, assuming com pletion. in 19 88 in Li mestone, it does make the whole considera tion of a wholesale conversion or a promotion of conversion to electricity for space heat

Thursday, 13 May, 1982 as a question mark item as poi nted out by the Mem ber for lnkster. MR. PARASIUK: Sure, the member has quoted from an add ress I made. lt certa inly wasn't my intention to induce people converting from natural gas to electric­ ity. What I was trying to do was lay out long-term options with a broad brush.

I do sti ll think that in the long-term future electricity for home heating can, in fact, be viable, but that is in the long-term future and if the mem ber has read more into it, or if I didn't express myself well enough in that add ress, cert ainly it's not our intenti on, cert ainly not the government's inten­ tion, it cert ainly hasn't been Hydro's intention in my discussions with them to try and raise and set of false expectations with respect to converting from existing or easily accessible natural gas to hydro-electricity. MR. CHAIRM AN: Mr. Blachford. MR. BLACHFORD: May I just say a word here.

I think it should be recognized that we have a couple of mov­ ing targets in this conversa tion. If you get a super insulated home, I believe that Mr. Scott was saying that you can heat them with 4 or 6 kilowatts instead of the 10 kilowatts I was spea king about, that makes a difference. The same saving would, of course, be the case if you were heating it with gas, but you also have the rising efficiency in gas furnaces, which is also a factor in this thing too. So, it's a movi ng target and I think the mem ber has the right idea. MR. ORCHARD: A question to the President.

When he was discussing, and I found it very intrig uing the mills on various plants, in new construction possibly up in the 40 to 50 mill range. Now, if we're considering export of hydro-electricity and trying to penetrate say a Nebraska ma rket or the Saskatchewan Alberta market, are not our on-line costs in Mani toba relative to what the on-line costs say of Alberta would be to develop coal fired or Nebraska to develop nuclear? Li ke, are we not st ill in a position where the next power plant built, we can do it for as low an on-line cost as any jurisdiction in North America or is that not correct? MR.

BLACHFOR D: Again, this is another moving target, If you take levelized costs over the depreciated life of a hydro plant and com pare that with the costs of the fuel and construction of a thermal plant, even though it sits on top of a coal mine as they do in Alberta and in certain parts of North Dakota, the hydro power will be lower, but in the initial years when you're hit with the full cost of the total construc tion, it costs very much more comp ared to these areas. But at the end of the life of the thermal plant, the hydro power will be costing less.

So, it depends where you want to pick and how you set the thing up and also how you set the financing up. MR. ORCHARD: So, then right now if you were mak­ ing a comparison between hydro generation and say thermal generation and nuclear generation for Mani­ toba, is there any other option to consider then than hydro? Are thermal and nuclear for Ma nitoba not as cost efficient as say Li mestone on the Nelson River? 69 MR. BLACHFORD: The hydro option is the best one.

Nuclear costs, I'm thinking about a Candu reactor, is not far off the cost of hydro itself, but it is lower, but then you have the cost of the nuclear fuel, which of course is more than the cost of water. I would say the cost of thermal for Man itoba is certa inly out of the question for the time being. MR. ORCHARD: I found my other couple of ques­ tions, and once again to the President, this gets back into our topic of grain drying. Grain drying now prim ­ arily uses either propane or natural gas for the heat source and there are electric heat source dryers on the market but with conventional resistance heating.

They haven't even come close. But there are dryers being developed in the U.S. which are micr owave dry­ ers for grain and apparently they are getting into some pretty incredible efficiencies. Would the Man itoba Hydro consider as the tech­ nology develops and I believe there are prototypes of these on the market, although I haven't had that con­ firmed yet, but would Mani toba Hydro consider put­ ting in one of these micr owave grain dryers in, say, the corn area where there's a pretty intensive use of grain drying? Once again, I'm thinking of Pem bina Consti­ tuency naturally.

Would Hydro consider put ting one of these facilities in on a test basis because if micr o­ wave drying ever became the feasible tec hnology, it could be an incredible cost saving to our producers in Mani toba with our electric source and with all the, you know, benefits of keeping energy costs in-province rather than extra-prov incial? MR. BLACHFORD: I think we mi ght look into assist­ ing in this. lt seems to me though there are other agencies that are more suited to doing an experiment of this kind. MR.

ORCHARD: Well, I will certa inly pursue that with the other agency, namely the Min ister, as well as Mani toba Hydro because the concept certai nly is intriguing of a mi crowave dryer for any kind of grains that are being produced in Mani toba. That's all the questions I have right now, Mr. Chairman. MR. CHAIR MAN: Mr. Ransom. MR. A. BRIAN RANSOM (Turtle Mountain): Mr.

Cha irman, I understand from the com ments that were made the first day the comm ittee met that the neces­ sity for Hydro to recommend a rate increase arises from chan ges in the rate of inflation since 19 79, changes in int erest rate and low water, but I believe even with average water levels that Mr. McKean advised us that it sti ll would be necessary to recom­ mend that rate increases. Could Mr. McKean and Mr.

Blachford supply us with information as to how much the revenues have been reduced or how much the costs have been increased sinc e 19 79 by low water, by high er int erest rates, by high er inflation rates? Mr. Chairman, I don't necessarily need the information im mediately, just if it's pos sible to get that information in the next day or so because the comm ittee I'm sure is going to be meeting again on Tuesday.

Thursday, 13 May, 1982 MR. CHAIRMAN: Mr. Blachford. MR. BLACHFORD: I believe if the mem ber could be specific about what he'd like, we could certainly have it avai lable. MR. RANSOM: Well, Mr. Chairman, ther·e were pro­ jections made in 19 79 as to revenues that were going to arise as a conseq uence of certain flows and certain sales. The as sumptions were based on certain pro­ jected interest rates and rates of inflation. There hav e been chan ges from the predictions with respect t o water flows and with respect to inflation and with respect to interest.

I want to know how much has revenue been reduced by low water flows and how much have expenses been increased by inflation and by interest rates that vary from those that were assumed to be the case in 19 79? MR. BLACHFORD: Yes, fine, we'll provide that as soon as we can. MR. RANSOM: Thank you. Some general questions, Mr. Chair man, perhaps even hypothetical questi ons.

If Hydr o was enteri ng into a long-term contract with a potential user within the province that would require the construction of a new generating facility, would it be likely that Hydro would want to have negotiated the price for that in advance? MR. BLACHFORD: I think depending on the load and the circumstances, we would certainly want to know where we started; we would cert ainly want to know where we were going before we'd make a comm itment. MR.

RANSOM: I assume tha t any company, any bus­ iness entering into an agreement would also want to know in advance what they could expect their price of power to be and that, ther efore given the answer tha t Mr. Blachford has given, and what I would ass ume to be the position of any large user of Hydro, in fact, tha t would be something that would be est abli shed in advance, at least for an extended period of time. I believe in the case of lnco back a few decades ago, it was a 20-year agreement that was entered into? MR . BLACHFORD: Yes, I expect that's the case. MR.

RANSOM: Another general question which would want to confirm that my underst anding is cor­ rect on the basis of some of the discussion that's taken place, that if there was to be a large scale user of power in Mani toba that required construction of another facility, that would increase the general sys­ tem rates? MR. BLACHFORD: If no special provision was made to circumvent this, this would certa inly be the case. MR. RANSOM: What migh t Mr. Blachford mean by a special conditi on? MR. BLACHFORD: Such as payi ng the marginal rate if that were determined to be the case. MR.

RANSOM: Would that be a probabil ity that a 70 large user would end up being faced with that kind of requirement? For instance, what will the rate be tha t HBM&S is going to be paying now as a consequence of the new arrangements between Saskatchewan, Ma nitoba and HBM& S? MR. BLACHFORD: I believe it would depend on the circumstances, the user, certai nly also the view of the province, but in the case of HBM& S specifically, their rate which the y are payi ng is based on the standard published rates.

There are slight mod ifications for their par ticular circumstances but their basic charge is based on the standard rates. MR. RANSOM: Would most potential users of power then, looking at Man itoba, be safe to assume that they could expect power at those standard published rates or is there some level of volume of use where Hydr o would say to a potential user that no, you can't expect to get power at system rates and that you would have to have a specially negotiated arrangment? MR. CHAI RM AN: Mr. Blachford. MR.

BLACHFORD: I would say that each case has to be looked at separately and the circumstances consi­ dered. I don't believe there is a blanket answer to that query. MR. RANSOM: I am not quite clear then just at what point that a new potential user of power within the province has to expect that they would be required to negotiate something beyond the rates that other heavy users of power are now getting within the pro­ vi nce. Is it possi ble to clarify at what point that might come about? MR. BLACHFORD: I think that is the prob lem.

There is no clear point to where you would say, this is this way and that is that way. You would have to look at the circumstances of the consumer and, agai n, what the province would like to do. MR. RANSOM: I am not sure that is an entirely satis­ factory answer, but I guess it is one that we will have to accept for the moment. A couple of other questions then, Mr.

Ch ai rman, reference was made in the dis­ cussion on Tuesday to the potential agreement with Alcan and the possi bility that the province might want to require the power station to be put back into public ownership for some other purpose after a period of, say, 35 years. I was just wondering what circumstan­ ces the Min ister might foresee that would come about, assuming that with Alcan, if they were here, they would have a plant in place, they would be employing hundreds of people and generating economic activ­ ity?

We have heard today that the facility doesn't really want to promo te Hydro for home heating purposes. I am just wondering what kind of circumstances might be visualized that would require it to be taken back. MR. CHAIR MAN: Mr. Min ister. MR. PARASIUK: If we ta lk over a 35 or a 50 or a 65 year period which is the period cont emplated by the Alcan Agreement, one could envisage a situation

Thursday, 13 May, 1982 where we don't have any more petr oleum. One can envisage a situation 65 years from now where we don't have any more natural gas and Hydro has said, when they hook up people's homes that they will provide firm power to them as long as that home shall exist. What happ ens if the consumer of Mani toba cannot get oil or can not get natural gas and no other technology has been developed? That is the situation that could develop. Japane se compan ies are developing some alterna­ tive tec hnologies for processing aluminum. I think that is embryonic at this particular stage.

Tha t is what the Jap anese Consul informed us recently, but over a 35-year period they may in fact develop some new te ch nologies for smelting aluminum, which may in fact require very much less power. So, it may turn out that in 35 years Alcan itself may want to possibly have a smelter elsewhere or any other company may want to have a smelter elsewhere, because we do have a transportation disadvantage relative to the markets.

So, that may be a circumstance. lt is just that I can im agine the possibil ity of circum­ stances 35 or 50 or 65 years from now whereby for one reason or another, either the company or the province may indeed want the plant, especially the province, at that stage there could be a very major dis agreement as to what the buy back for that par ticular power plant or portion of it would be. Those are possibilities that I think should be considered. MR. RANSOM: Mr.

Chairman, I am assu ming that if there is no oil and there is no gas and there are no alternatives to that, 35 years from now, that it is going to be a rather sticky wicket for everybody involved and this par ticular problem migh t at the time seem rather small relative to the ones that we would face in general in the economic structure of the country and indeed the world under those circumstances.

Reference has been made from time to time con­ cerning the cost of Li mestone and how it would escal­ ate over a period of time and I believe it was said that looking at the present projection of being required by 1992 that the cost would be appr oxima tely $3 billion. Is that calculated cost of $3 billion then based upon the inflation figures that were presented to us on Tuesday? MR. BLACHFORD: Yes, they are. MR. RANSOM: Mr.

Chairman, we frequently hear it argued that it would be better to build a facility when the price is lower, because the cost is $2 billion now or would have been 1. 5 billion, if it had been done two or thr ee years ago, because of that lower cost it would be better to have built it earlier. I am assuming also then that Hydr o would also be looking at the same interest rates that they have projected as appear on the sheet with the inflation projections. Would it not be true then, Mr.

Blachford, that the cost would in fact be greater, the carr ying char ges would be greater over that period of time than the inflated costs of the power dam? MR. BLACHFORD: If we ass ume, for example, that we build it in 1988 and the price is $2 billion, if we were able to borrow money to build it at the rate of 15 71 percent, we would have to have additional revenue to pay that 15 percent and it would amount to $300 mil­ lion per year. Tha t is th ree-quarters of what Hydr o's revenues were in 1981-82.

The power involved in Li mestone would be about 7 billion kilowatt hours and this com pares with appr oxima tely the 21 billion ki lo­ watt hours you would get from the current whole sys­ tem. So, for a thir d of the output, you would require the same amount of money again, th ree-quarters of the amount of money agai n. This is the order of mag­ nitude of the numbers that we have to look at. From this, I think it can be seen very clearly that you would have to get a lot of money in order to do that and it would have to come from somewhere. MR.

RANSOM: So, given that there are no projected additional revenues then, the argu ment makes no sense at all that just because the dollar cost today is lower, that we should proceed to build it because it is going to cost more in the future. MR. BL ACHFORD: Tha t would appear to be correct, yes. MR. RANSOM: So, Mr. Chairman, then it follows that Mr. Mc Kean's comment made on Tuesday and he said, I guess one of the best things from a financial point of view that's happ ened to us in the last two or th ree years is that our Capital spending has been at an all time low. I take it then from that statement, Mr.

Chairman, that it would certainly not have been wise to proceed with the construction of another generat­ ing station during that period of ti me. MR. BLACHFORD: That is correct, from the point of view of the consumer, that's correct. MR. RANSOM: Could I have an updated figure on how much money has been paid out to sta blilize the rates to this point, what's the cumulative amount that the government has paid on the rate stabilization? MR. BLACHFORD: An approximation, $76 million. MR. RANSOM: To the end of March, 1982. MR. BLAC HFORD: Yes, to the end of March, 1982. MR. RANSOM: Mr.

Chairman, I will have quite a numb er of other general questions for Tuesday after I've had a chanc e to review the Hans ard, the trans­ cri pts of the commit tee proceedings of Tuesday and today. I would prefer to leave those until Tuesday. I have one brief question that I might place at the moment, and that has to do with the lines that are being put in, the plan to be put into the commun ities on the east side of Lake Winnip eg. Is the decision to put tho se lines in based on the economics of the situa tion?

Is it cheaper to have the lines in than it is to generate the power by oil or is the decision based on some other factor? MR. BLACHFORD: lt is an economic decision as far as Hydr o is concerned. The Federal Government has comm itted itself to pay half of the cost of these lines and this is enough money to get back our investment.

Thursday, 13 May, 1982 lt is enough money that we will be even with the alternative of supplying diesel wit hin, I believe, five years. After that the general consumer will be gaining on the matter. MR. RANSOM: Is it because the Federal Government is putting up some of that money that i hey are in charge of the line clearing? MR. BLAC HFORD: No, this is part of, I guess it's Hydro policy to have the line clearing done by the person for whom the line is being put in. We also did this in the case of a recreational area -(l nterjection)­ Grindstone Point, yes.

This was done for these people who they were comm itted to clear the rig ht-of-way. We are doing the same thing for Jackhead and it will be done for the com munities on the east side of Lake Winnipeg also. MR. CHAIR MAN: Mr. Ransom. Are there any further questions? Mr. Orchard. MR. ORCH ARD : When the President indic ated the selling price of U.S., Saskatchewan, Ontario power, was that an average price over the year? MR. BLA CHFORD : The mill price cited was averaged for the year, yes. MR.

ORCHARD : Do you have the - I know at least with the Uni ted States, there is buy back, we buy it back -d o you have average prices of the pur chases of power from those three jurisdic tions if any? MR. BLAC HFORD : We don't have them with us cur­ rently, Sir, but we can get them for you. MR. ORCH ARD: Fi ne. My colleague, Mr. Ransom, brought up an interest ing series of questions on the power into remote communities particu larly, where they're on die sel generation right now. I believe they're all diesel generation in the remote Native com munities in east of Lake Winnipeg and in No rth­ ern Man itoba. MR.

BLA CHFORD: Yes, they are. MR. ORCHARD: Now, we spend a fair bit of money on diesel fuel because the landed cost up there of diesel fuel is quite high because of winter road, etc ., etc., and I ran into an

article in the Janua ry 19 82 Energy Maga­ zine which really fascina ted me. There is an inventor by the name of Davis, I guess it is, who has been prototy ping a wat ermill similar to these vertical axis windmills only for water generation for small point generation considerations. He's talking in the neigh­ bourhood of five kilowatt and a prototype of even a ten megawatt type generator, and the Federal Govern­ ment, I might add, is interested in this concept and are putting in National Research Council funding to test the feasi bility of it.

Has the system any information as to whether these are a feasible thing now, par ticula rly for a remote communities, because running lines to tho se com­ munities has to be terri bly expensive to a lot of them.

Most of them if you follow the map, are located on 72 rivers which flow rather significant amounts of water and I am wondering if that migh t be an alterna te to consider vis-a-vis the installation of fairly expensive trans mi ssion lines to set them up on local generation with water power using some of the technology this fellow has, and I suppose equally attractive using some of the National Research Council mo ney that they seem to have lots of if you're in the right area. Has Hydro given any consi deration to these? MR. BLAC HFORD: We follow closely the develop­ ments in the hydro-electric development.

I am not aware of the one that you are citing, Mr. Orchard, but I'll find out. Regarding the communities in general in the east side of Lake Winnip eg over in God's Lake and Island Lake area, we have made quite an extensive st udy of this area and we've studied the supplying and building of water power sources as known now, as comp ared with supplying these areas with transmis­ sion and it is st ill cheaper to install the tr ansm ission to supply these areas than it is to build a water power. MR .

ORCH ARD: Rig ht, I would assume that the water power that has been st udied to install would be the conventional dam generator system and not - this prototype that this chap has is a freesta nding unit that doesn't require dams or anyth ing, it basically sits in free-moving water and generates electricity. This inventor has suggested it is an excellent alternative in the Bay of Fundy to harness the tides for instance, without having to go to the retention system.

From that stan dpoi nt, in reading the article, the installed cost is very attractive com pared to the conventional damming and conventional turbin e te ch nology. MR. BLA CHFORD: We will iook into this. lt was stan­ dard instal lation that we were looking at. I should point out that when Hydro undertakes to supply a com munity, it is firm power. I do n't think that just thr owing a unit into a stream is going to necessarily supply firm power, but it depends on the circumstan­ ces. it's just one of the thi ngs you have to look at. MR.

ORCHARD: Certainly, I apprecia te that the Hydro's commit ment is to firm power, but in all of these areas the system does have diesel generation capacity which I suppose could back up this kind of a water system if it was economic to allow Hydr o to maintain that firm power commi tment. MR. BLACHFORD: That's a possibil ity. MR. CHAIRMAN: Mr. Minis ter. MR. PARASIUK: Maybe I could just add on what the mem ber has said. I've been int erested in this area myself.

Some of the people that I've talked to have indica ted some of this type of tec hnology, a new type of technology has generally been applied in warm clima tes and they haven't had the problem of icing. That's the one thing that they've raised with me and I know that Hydro has been looking at what's called a low head or no head type of generation, but the icing seems to be a problem. MR. CHAIRMAN: Mr. Lyon.

Thursday, 13 May, 1982 HON. STERLING LYON (Charleswood ): Mr. Chair ­ man, to the president, we've been led to believe that in recent weeks or months that there has been allegedly added emp hasis put upon the negotiations that Mani ­ toba Hydro has been carry ing on for some time now for power sales in the Un ited States. First of all, Mr. Chairman, could the President tell me who from Mani ­ toba Hydro is heading up th ose negotiations. Are they being conducted on a utilit y-to -utility basis? Is ther e government participation in them and if so, who are the governmental people? MR.

BLACHFORD: In the case of Wisconsin and the Western Area Power Admin istrati on, these are being spearheaded by Hydro with the appr oval of the Elect­ ric Energy Marketing Comm ittee and the General Manager of Corp orate Planning is heading these up, Mr. Jarvis. MR. LYON: The Energy Planning Commi ttee con­ sists of whom? MR. BLACHFORD: Mr. Ellison, Mr. Cherniack, myself, Mr. Patey; that's all, I think that's the number. MR. CHAIRMAN: Mr. Lyon, they've asked me to have you move a little closer to the mi ke, their having diffi­ culty picking you up for Ha nsard. Mr. Lyon. MR.

LYON: What seemed to be the main im pediments with respect to the Mandan negotiations, anyth ing that is new in the last six mo nths that we haven't heard of, other than the court action, I suppose? MR. BLACHFORD: Not in general terms, Mr. Lyon. The NP PD people are sti ll wrangling with South Dakota. As I said earlier this morning, they expect in the next few weeks to put in their submission for a corridor - that's wrong - the route for the transmis­ sion line in North Dakota. MR.

LYON: So then we're still faced as we have been for some years with the transmission right-of-way problem which is, of course, beyond our jurisdiction or persuasive powers with in the Un ited States. Does there appear to be any hope in the esti mation of the President, Mr. Chairman, of a reasonably early resolu­ tion of this problem in the Un ited States? MR. BLACHFORD: I really have no basis for knowing, except that I can point this out, that the Nebraska Public Power District has indic ated in their Annual Report that they are looking at Man dan as being their next source of substitute for generation.

They are also spending relatively large sums of money on their activities in all th ree states in order to further this objective, so I have some confidence that they fully expect that they are going to get their line routing and permission to build that line. MR. LYON: So in effect. ther e's been no change in that situation in the last six months from what it was previous? MR. BLAC HFORD : Not basically, Sir, no. 73 MR. LYON: What about the Wiscon sin area group that you've been negotiating with for some ti me? Has there been any sig nificant change in that negotiation? MR. BLA CHFORD : No significant chan ge.

We have furthered the process. Along about February, we got a signed Letter of In tent from, I believe it's six or nine utilities that are in on this study for Wisconsin and currently, we are just setting up the basis for th is study to see what, in fact, will be st udied to arrive at a good conclusion. MR. LYON: Mr. Chairman, did this Letter of In tent represent a culmination of the previous negotiations that have been going on now, well to my knowledge, for at least thr ee or four years? MR.

BLACHFORD: Yes, that's correct. lt was a letter that was ba sically agreed to last fall. lt seemed to take about two or thr ee months to get all of the signatu res in Wisconsin for this. MR. LYON: Mr. Chairman, are ther e any other initia­ tives being pursued in the United States with respect to the export of Man itoba power to any other jurisdictions? MR. BLACHFORD: Yes, we are looking again at the idea of se lling power to the Western Area Power Adminis tration. it's being conducted on more or less the same basis as the Wisconsin area.

There are also some other prospects down the road in Nebraska as a result of the Mandan Line and also we can start to look at the circumstances after 19 92 when our current comm itments with Northern States Power on this 500 kV line have been fulfilled. MR. LYON: Could you give us some additional infor­ mation on the Western Area Power route that he just mentioned? MR. BLA CHFORD: I believe, Mr . Cha irman, this probably should come from the province. They are conducting the negotiation. Are you spea king about WAPA or the Western Inter-Tie. MR. LYON: The western states. MR. BLACHFORD: The western states.

As I say, this is approximately the same basis as Wisconsin. Ini tially, we haven't looked at any fixed quantity of power to sell to them. General thoughts have been 1 ,000 meg­ awatts, but this can vary. We haven't really got into it, Mr. Chairman. MR. LYON: So, really the state of negotiations with respect to the expor t of power to the Un ited States is in very much the same situation with some incremen­ tal im provements that one would expect now as they were, say, six months or even a year ago? MR. BLAC HFORD: Yes, that's a fair sta tement. MR. LYON: I don't think I have anyth ing more at the moment, Mr.

Chairman.

Thursday, 13 May, 1982 MR. CHAIRMAN: Mr. Min ister. MR. PARASIUK: Yes, I would like to ask the Chair ­ man if, in fact, it was not the request of the Provinc ial Government that the negotiations with WAPA be car­ ried out and is it not true that ther e has been a meeting in Denver at the urging of the Min ister to proceed on thi s basis and that there are the possibilities of 1, 000 megawatts going into Bismarck? MR. CHAIRM AN: Mr. Cherniack. MR. CHERNI ACK: Yes, Mr.

Chairman, the WAPA negotiations were brought to a stop sometime ago; I can't put a date on it at the moment, because of the In ter-Tie negotiations. lt having been felt, and I am just reporting what I was to ld, that there was no use looking into the WAPA whi lst the Inter-Tie was a first objective. We were asked to reopen discussions with WAPA and we did.

There is a meeting in Denver and there has been subsequent discussions reopening, not negotiations yet, but the indication of the desira­ bility of studying the advantages on both sides and as a result of that meeting in Denver which took place, I think, in March, thereabouts, there was a renewed agreement being discussed. I think the dead line was May 15 th and there were also discussions for the stu­ dies to go forward. MR. CHAIRM AN: If there are no further questions, I believe we will call it 12 :30. Mr. Orchard. MR. ORCHARD: Just one other question, if I migh t.

Are there any ongoing economic studies or feasi bility studies, cost benefit studies by Mani toba Hydro in terms of delivering hydro-electric power to Churchill rather than leave them on diesel generation? MR. CHAIR MAN: Mr. Blachford. MR. BLA CHFORD: Yes, we have a study looking at this. The study has been completed and it is now in the hands of the provincial people to see what funding might be organ ized in order to make this economic as far as Hydro is concerned. MR.

ORCHARD: I assume from the President's remark that if there is, say, no assistance from Ottawa in the off-oil program or something sim ilar that the econom­ ics of construction of the line and delivery of the power for the demand is not economic from Hydro's standpoint at this present time ? MR. BLACHFORD: That is correct. lt is not economic for Hydro to assume the whole cost of the line for Churchill. MR. ORCH ARD: Is there a great deal of difference in Capital cost, in Capital contribution from other than Hydr o, to make that delivery of power to Churchill economic? MR.

BLACHFORD : Yes, it is a considerable contribu­ tion and in fact, we have requested that the contribu­ tion be almost the total cost. The reason forth is is that 74 there doesn't seem to be any firm belief that Churchill will remain a viable thing for Hydro to supply after spending $25 to $30 million to build a line up there and that is why we have asked for the total cost. MR. ORCH ARD: The President, I assume, is indi cat­ ing that there is always the constant cloud of doubt over the future viabil ity of Churchill as a grain port which I assume is the major reason for being.

Is tha t the kind of question mark that is on the horizon for future ... ? MR. BL ACHFORD: Yes, that is one of them and I believe, since the study was started the Forces' base either cut down their activities or ceased them alto­ gether. I am not sure where that stands. MR. OR CHARD: Yes, they were elimi nated as was the majority of the function at the rocket range and a number of other areas.

If a comm itment from the Fed­ eral Ports Authority was forthc oming that Ch urchill was going to be a grain term inal, a grain export port, for the next 30 or 40 years, would that change the economi cs of providin g a Hydro line and the Capital costs of a Hydro line into Churchill? MR. BL ACHFORD: I think we would go back and have a look at it and see if we could scale down our requirements. Mr. Ch airman, if I may, to Mr.

Orchard's question regarding the cost of energy purchased from the U.S., in the fiscal year just ended, it appears that the total purchases averaged 10 .2 mills per kilowatt hour plus exchange. Thi s is in U.S. dollars, so it is more than that. To go with that, we should say that any time these purcha ses are made in a year such as we have just passed through, when these purchases were not required to supply the Man itoba load, we always made about 4 mills per kilowatt hour by purch asing and then selling them back. That has been the name of the game .

The purchases were not to supply the Mani­ toba load; the purchases were to make money. MR. ORCHARD: There were no purchases from either Saskatchewan or Ontario of significance then? MR. BLACHFORD : Yes, there were some from Sas­ katchewan and they cost 7.4 mi lls. lt was not very much energy. MR. ORCHA RD: None from Ontario? MR. BL ACHFORD: None from Ontario, no. MR. ORCHARD: Thank you. MR. CHAIRM AN: The hour is 12 :30. Commi ttee will rise. We will meet again on Tuesday, May 18 at 10 :00 a. m. Commit tee rise