Manitoba Committee Hansard — 24 November 1988 (PUNR Committee, Sitting 12, 34th Legislature, 1st Session)

34-1-punr12

Manitoba — Debates (Hansard)

MG-8048 First Session - Thirty-Fourth Legislature of the Legislative Assembly of Manitoba STANDING COMMITTEE on PUBLIC UTILITIES and NATURAL RESOURCES 37 Elizabeth 11 Chairman Mr. Parker Burre/1 Constituency of Swan River VOL. XXXVII No. 12 -10 a.m., THURSDAY, NOVEMBER 24, 1988. ISSN 0713-9454 Printed by the Office of the Queens Printer. Province of Manitoba

NAME ALCOCK,Reg ANGUS, John ASHTON, Sieve BURRE�L, Parker CARR,James CARSTAIRS, Sharon CHARLES, Gwen CHEEMA, Gulzar CHORNOP YSKI, William CONNERY, Edward Hon. COWAN,Jay CUMMINGS, Glen, Hon. DERKACH, Leonard, Hon-. DOER,Gary DOWNEY, James Hon. DRIEDGER, Albert, Hon. DRIEDGER, Herold, L DUCHARME, Gerald, Hon. EDWARDS, Paul ENNS,Harry ERNST, Jim, Hon. EVANS, Laurie EVANS, Leonard FILMON, Ga� Hon. FINDLAY, Glen Hon. GAUDRY, Neil GILLESHAMMER, Harold GRAY, Avis HAMMOND, Gerrie HARAPIAK, Harry HARPER, Elijah HELWER, Edward R. HEMPHILL, Maureen KOZAK, Richard, J. LAMOUREUX, Kevin, M.

MALOWAY, Jim MANDRAKE, Ed MANNESS, Clayton, Hon. McCRAE, James Hon. MINENKO, Mark MANITOBA LEGISLATIVE ASSEMBLY Thirty-Fourth Legislature Members, Constituencies and Political Affiliation CONSTITUENCY Os borne St. Norbert Thompson Swan River Fort Rouge River Heights Selkirk Kildonan Burrows Portage la Prairie Churchill Ste. Rose du Lac Roblin-Russell Coricordia Arthur Emerson Niakwa Riel St. James Lakeside Charleswood Fort Garry Brandon East Tuxedo Vir den St.

Boniface Minnedosa Ellice Kirkfield Park The Pas Rupertsland Gimli Logan Transcona lnkster Elm wood Assiniboia Morris Brandon West Seven Oaks MITCHELSON, Bonnie, Hon. River East NEUFELD, Harold, Hon. Rossmere OLESON, Charlotte Hon. Gladstone ORCHARD, Donald Hon. Pembina PANKRATZ, Helmut La Verendrye PATTERSON, Allan Radisson PENNER, Jack, Hon. Rhineland PLOHMAN, John Dauphin PRAZNIK, Darren Lac du Bonnet ROCAN, Denis, Hon. Turtle Mountain ROCH, Gilles Springfield ROSE, Bob St. Vital STORIE, Jerry Flin Flon TAYLOR, Harold Wolseley URUSKI, Bill lnterlake WAS YLYCIA-LEIS, Judy St.

Johns YEO,Iva Sturgeon Creek PARTY LIBERAL LIBERAL NDP PC LIBERAL LIBERAL LIBERAL LIBERAL LIBERAL PC NDP PC PC NDP PC PC LIBERAL PC LIBERAL PC PC LIBERAL NDP PC PC LIBERAL PC LIBERAL PC NDP NDP PC NDP LIBERAL LIBERAL NDP LIBERAL PC PC LIBERAL PC PC PC PC PC LIBERAL PC NDP PC PC LIBERAL LIBERAL NDP LIBERAL NDP NDP LIBERAL

LEGISLATIVE ASSEMBLY OF MANITOBA THE STANDING CO MMITTEE ON PUBLIC UTILITIES AND NATURAL RESOURCES Thursday, November 24, 1988 TIME - 10 a.m. LOCATION - Winnipeg, Manitoba CHAIRMAN - Mr. Parker Burrell (Swan River) ATTENDANCE - QUORUM - 6 Members of the Committee present: Hon . Messr. Neufeld Messrs. Angus, Burrell, Driedger (Niakwa), Enns, Gilleshammer, Harper, Helwer, Roch and Storie APPEARING: Mr. G.H. Beatty -President and Chief Executive Officer Mr. R.B. Brennan -Vice-President, Finance Mr. W.J. Tishinski -Vice-President, Operations Mr. A. B. Ransom -Ch airman, Board of Directors Mr. J. F.

Funnell -General Co unsel and Corporate Secretary Mr. R.O. Lambert -Senior Vice-President, Customer Service and Marketing Ms . L.M. Jolson -Vice-President, Corporate Relations MATTERS UNDER DISCUSSION: Annual Reports of the Manitoba Hydro Electric Board for fiscal years ended March 31, 1987 and March 31, 1988 Mr. Garry Beatty: I would like to deal with a couple of matters before the committee resumes its deliberations this morning. First of all, I want to table responses to questions put by Members at earlier meetings of the committee.

I believe these are in the hands of the Clerk, or about to be, for distribution . *

(1005) In response to questions from two Members of the committee, during the session of October 27, we have available a map showing the distribution of employees of Native ancestry, and tables showing the participation of women and persons of Native ancestry in the Hydro work force. In addition, we have a page which summarizes the demographic assumptions included in the corporation's 1988 load forecast, as requested at the last meeting. 212 Secondly, I would like to advise the committee of a change in the corporation's projection of the net loss for 1988-89.

During my opening presentation at the first meeting of the Public Utilities Committee on October 11, we provided an estimate of the financial im pact of the current low-flow condit ions on the operating results for 1988-89. At that time, I indicated that this was a scenario and it reflected the worst case for 1988-89 and that the corporation was then in the process of making a detailed revision to its Manitoba forecast.

As a result of this review, we now have a revised forecast that indicates a net operating loss of $37 million, instead of the worst-case scenario of $45 million loss that was previously reported to this committee. I emphasize that this is a new estimate, but an estimate nonetheless. The more significant changes included our favourable variances in export revenue and fuel and power purchases, offset by an unfavourable variance resulting from a change in the accounting policy for pension costs, and there were numerous other smaller favourable and unfavourable variances.

If the committee is interested, I could ask our Vice-President of Rnance, Mr. Brennan, to get into that. So, thank you, Mr. Chairman, that concludes the remarks that I wanted to make at this time. Hon . Harold Neufeld (Minister responsible for The Manitoba Hydro Act): Before we go on to today's meeting, I would like to draw attention to an

article which appeared in the November 13 Winnipeg Free Press which quotes Mr. Angus as saying that he "was surprised at the lack of knowledge Hydro officials exhibited about the consequences of the Free Trade Agreement on the utility." Now, I have reread the excerpts from that meeting and it seemed to me that the questions that were posed to the Hydro officials were all answered in full, and I would like to have either Mr. Angus ex plain his comments or I would like to have him withdraw the comments . Mr. John Angus (St .

Norbert): That is a good role reversal tactic and I suspect, when I become the Minister or if I do become the Minister, I would be more than pleased to get into those types of discussions. The statements that were reported in the Free Press were accurate statements that I made out of a

section of a more lengthy discussion I had on the subject and related, Mr. Chairperson, to the ambigu ity and the uncertainty of the policy setters, the decision-making arbitration process of the five to seven years, the Omnibus Bill that was returned to us, that was discussed in the minutes, if I remember correctly. I am going from memory, unfortunately. I had some inquiries from the

Thursday, November 24, 1988 administration and had volunteered or offered to meet with them, either before or after this meeting, to discuss any concerns I had and I would still be prepared to do that. * (1010) lt was not my intention to em barrass or to suggest that they have not done a thorough job but, Mr. Chairperson, I am sure that the Minister will recognize that there is a large degree of uncertainty as to what is going to happen in the dispute settlement mechanism and, whether we like it or not, that uncertainty is there.

I think that it behooves all of us to try and work coilectivGiy to make sure that the Free Trade Agreement that we are now going to be proceeding with does not negatively impact on Manitoba Hydro or any of the citizens of Manitoba, and work cooperatively. If you want to get into a down and out dirty discussion on

interpretation of words, I would be more than pleased to and we can get it out and go through it word by word and find out exactly what strategies you do propose, Mr. Minister, in terms of making the most effective use of the Free Trade Agreement. I do not think it is necessary at this time. Mr. Neufeld: I would just like to add that inasmuch as every question that was asked was answered, if a one-sided comment appears in the paper, i would only like to add that the Member, Mr. Angus , obviously does not have enough knowledge to ask the right questions because every question he asked was answered. Mr.

Angus: Perhaps the Minister would be kind enough to either produce the minutes for me so that I can go through them on a line-by-line basis so we can just interpret or get some accurate information read into the minutes. If that is the type of a process you want to have with this corporation, I think it is absolutely unnecessary. I do not think that it is realistic, but I would certainly be prepared to do it. if you are going to, from the chair, chastise me in relation to a newspaper article, I would be more than pleased to get into the

interpretation. I am going from memory now, I have not seen the written words yet. The minutes I think came out just recently. Which particular-if you will give me just a second, Mr. Chairperson to the Minister, to review the actual words, I would be more than pleased to get into this with you. Mr. Neufeld: I have already said that there is nothing in the minutes of the meeting that indicate a lack of knowledge. I have said that the quote comes from the newspaper and, because there is nothing in the minutes that show a lack of knowledge, that I resent the quote in the newspaper.

I also think that responsible reporting would have the reporter come to the mem bers of the board and ask for a rebuttal. Mr. Angus: Again I am reading as quickly as I can that interchange that we have had that may have led to those commen ts. For the best of my memory, we were talking about who would be determining the 213 proportional sharing between the countries and the agreement.

If I remember correctly, the administration said that they were not sure of how those decisions would be ma de, that they were going to an arb itrary ad hoc type of comm ittee that would be determining and making decisions on these things. I was concerned about the three-year averaging and the continuance of averaging and things of that nature. I think that the administration, and again I am going from memory now, admitied or at least indicated that they were unsure of the events that would be happening. I guess you would like to be able to to write your own newspaper articles.

Unfortunately, it does not work that way. I had some concerns about the lack of us, as a province and us as decision makers and a board, being able to know for certainty what the cause and effect of entering into this agreement was going to be. *

(1015) Mr. Chairperson, if I might say right now, through you to the Minister, it seems even more imp ortant that we identify clearly what the cause and effect and the consequences are going to be of this Free Trade Ag reeme nt. We bette r have our domi noes in line because we are going ahead with it now. There are no more "ifs," "ands," or "buts" so we, through you to the Minister, had better, with as much certainty as we can to give the corporation as much of an advantage as they can to protect the rights of Manitobans, know exactly what is going on. I am afraid, Mr.

Chairperson, that you might have more information as to what is going on because it seems to be a political process in the administration. I think you should be sharing it with the administration. Thank you. Mr. Neufeld: We could carry this on indefinitely but I would suffice to say that I am disappointed that Mr. Angus would ask the reporter to indict Hydro officials on a lack of knowledge when that was not exhibited in the hearings. I would just as soon drop it now and let us get on with the committee hearing. Mr.

Angus: My eyes have just fallen upon one statement that I would like to read into the record and then I will go along with the Minister that this type of public interrogation of the press through a Member of the Official Oppos ition is probably futile. But I would just quote to you from Mr. Funnell's comments on page 168, and it was in relation to the proportionality and cutbacks. He says: "lt is unclear at the present lime how that proportionality provision would be applied. Is it going to be national, regional or local?" He is uncertain. Of course, he is uncertain.

He does not know because it has not been spelled out, and I am uncertain. If I am surprised at the iack of definiti'Je knowledge that they have, it is because nobody has been given any knowledge of the cause and effect of how this thing is going to work. I think, Mr. Chairperson, that we had darned well better find out how it is going to work and it is the Minister's responsibility. So with that, I wili leave it and get on with the business of trying to make sure that this corporation runs as effectively as possible for the citizens of Manitoba. Thank you.

Thursday, November 24, 1988 Mr. Neufeld: I cannot leave it at that. lt was also mentioned that legal opinion has it that we have no cause for concern at Manitoba Hydro. Mr. Jerry Storie (Fiin Flon): I think my colleague from St. Norbert (Mr. Angus) hit the nail on the head in his last remarks. I certainly did not feel, and I understand the umbrage that the Minister takes at the suggestion that Manitoba Hydro officials were not responding appropriately. I think the responses, particularly Mr. Funnell's, were extremely appropriate and right on the mark. I think the unfortunate fact was, and my colleague from St.

Norbert (Mr. Angus) alluded to this, that there is a great deal of uncertainty. There are still questions that remain to be answered and the failure lies with the Minister in not pursuing those questions that remain unanswered to attem pt to get a more precise understanding of what the impact is going to be. I do not think it is good enough to say, well, we will see.

Manitoba Hydro does thorough planning in all other aspects of its operations, and I think we should be doing some thorough planning when it comes to the legal implications, the downstream implications, of the Free Trade Agreement. lt appears that we are going to have this agreement signed and, to the extent that Manitoba Hydro has to be prepared for eventualities, it should be prepared for legal eventualities flowing from the agreement. So the failure, I think, is not with staff at all. lt is with the Minister to ask the appropriate questions that need to be asked.

I am assuming that as a result of comments made in committee and in the Legislature that the Minister will be asking those questions as the year proceeds. I would like to move to another issue that has been quite topical, and that is the question of an aluminum smelter. I am wondering if the Minister could update us on the status of discussions with Alumax. I know the Minister has been quoted as saying that Manitoba has some advantages, and I am wondering if he could outline his position to the committee and what has been said to Alumax with respect to Manitoba's expectation. * (10 20) Mr.

Neufeld: Alumax are awaiting our decision on the rates that Manitoba Hydro is prepared to offer. Alumax have indicated quite clearly that in terms of U.S. funds, 12 mills is what we have to come up with in order to match the rate that has been offered to them by another utility. Twelve mills equates to-in the American funds, it equates to approximately 15 mills in Canadian funds. We at the Manitoba Energy Authority are calculating the benefits from such a smelter. They are calculating also the cost of a 15 mill rate to Hydro, the cost to Manitobans of such a mill rate.

Once we have the benefits and once we have the cost of that rate, we will be able to take that to Cabinet and Cabinet will make the decision as to whether or not we can afford to offer those rates or what rates we can offer. Mr. Storie: I am wondering whether the Minister was able to provide Alumax with another rationale for 214 coming to Manitoba.

I know the Minister had mentioned a couple of things that Manitoba offers in terms of a stable labour force, qualified skilled labour force, whether there are other things that perhaps would be attractive to them that have been mentioned thus far and would perhaps give us an advantage. I know that one of the things that they have said they need is a low, stable energy rate. What else does the Minister consider to be in the mix? Mr. Neufeld: We have discussed numerous issues with Alumax. Alumax have told us that paramount in their decision-making is going to be the Hydro rate.

Until we can come up with a rate that they are able to pay and remain competitive, they are not willing to discuss any other issues. Mr. Storie: To the Minister , Manitoba Hydro has developed a rate strategy. I am assuming it includes the possibility of large energy sales to energy-intensive users. I am wondering whether the Minister could indicate what studies he has seen, what studies have been presented to him to perhaps examine that issue more thoroughly. Is Manitoba Hydro considering offering reduced rates? Mr. Neufeld: I have said repeatedly that Manitoba Hydro cannot offer rates below their cost.

The consumers of Manitoba Hydro should not be asked to bear the burden of any loss on Hydro sales to a large user. If there is to be a cost to bring an industry into Manitoba, that cost must be borne by all the taxpayers of Manitoba because they are the end benefactors from such an industry locating in Manitoba. I will stick with that statement that Manitoba Hydro will not sell below its cost. Any subsidy, if you like, would have to come from the Manitoba Government. Cabinet will make that decision. Mr.

Storie: What the Minister actually has said is that Manitoba Hydro has a published rate and that published rate, Manitobans believe, repr esents the cost to Manitoba Hydro of supplying that kind of power to that particular entity. My question was, is it possible, does Manitoba Hydro have studies which would show that reduced rates are possible even while still maintaining the integrity as far as the Act goes, and that is the Act requires to sell power at cost? * (10 25) Mr. Neufeld: You can make any number of assumptions in arriving at a rate that can be offered.

The only assumption that we can in reality make is, will that cost the Manitoba consumers any money in terms of higher rates? That is the only assumption we make when we attempt to fulfil! our mandate of bringing Manitoba secure hydro at the lowest possible rates. Mr. Storie: Just a more specific question, is the Minister aware of any study that Manitoba Hydro has conducted which would indicate that a reduced rate could be offered to an aluminum smelter specifically to provide

Thursday, November 24, 19 88 an incentive which would still be beneficial to Manitoba Hydro? Mr. Neufeld: To my knowledge, I have seen all the papers that had been produced by Manitoba Hydro with respect to hydro rates and rates that may be offered to an aluminum smelter. In the end, the decision has to be made by Cabinet whether or not that rate can be or should be offered to a large user if it is to cost the Manitoba consumer higher rates. I recognize that Mr. Storie refers to potential profits from sales of hydro, exports sales from hydro to be applied directly against an aluminum smelter.

I do not think that is good accounting and I do not think that can be used as a rationale to offer lower rates. The export sales would be there in any event and, inasmuch as they would be there in any event, the consumer of Manitoba Hydro would still have to pay the additional cost. Mr. Storie: I am not clear on the Minister's last remark that Manitoba Hydro would stil l have to pay the additional cost.

If the scenario the Minister just painted were accurate in that export sales were to create profits, and some are, and that they were used to offset incentive rates for a period of time, that would end up being both a net benefit to the ratepayer and a net benefit to the taxpayer if that kind of a structure could work. I am not sure why the Minister would be reluctant to say that would be beneficial to everyone concerned. Mr.

Neufeld: The export sales are there regardless of whether or not we attract a large user, so we have to take the hydro rates before the user comes to Manitoba and compare that to the hydro rates after the user comes to Manitoba. As such, there would be an increase, if that hydro indeed is to be sold to the large user at less than cost. Mr. Storie: Perhaps the Minister can explain a little more what he means by the export sales would be there regardless . Clearly, you have to go out and look for export sales, you have to negotiate them, and then you have to find a way to supply the power.

This Minister has said that he is not as enamoured with the idea of export sales that require the construction of additional infrastructure. What export sales does the Minister expect to be there anyway? Mr. Neufeld: lt is not a matter of what I expect, Mr. Chairman, it is what the users in other provinces or other countries are prepared to buy and at what cost they are prepared to buy it.

I am not sure I understand the question particularly, but it seems to me that if we can find a buyer who is prepared to pay our incremental costs of new generation, we would gladly sell and export that electricity. lt, in my view, will be difficult to find in our trading area and our market area a buyer who will be prepared to pay the incr emental cost of new generation from the Nelson River or from the Burntwood River. Mr.

Storie: We have been over this ground several times and I think the Minister and I are going to disagree, finally, on whether it makes more sense to have the kinds of negotiations that have gone on previously, and 215 I hope are still continuing with groups like Northern States Power and the Upper Mississippi Power Group, because in the final analysis the Minister and I both know that if some of the costs are not offset by export sales then they are going to be paid for by Manitobans and Manitoba ratepayers. * (1030) lt seems to me the Minister is quickly boxing us into a situation where Manitoba ratepayers are going to be left with no other options because export sales are not being pursued vigorously.

The market, in effect, to the extent there is a market in the mid-western states or in the northwestern states, is going to be assumed by someone else and we are going to be left without. I do not think that is a good strategy. I am wondering if all of this is leading to the inevitable that the negotiations that were ongoing with Ontario, with Upper Mississipi, with Northern States, with other groups are being wound down. Are those negotiations actually still continuing? Mr.

Neufeld: Discussions are continuing, but I think we have to keep in mind that with the cost of new generation of hydro-electric power, we have to be careful that we do not sell the power for too long a period of time. We cannot generate the power as we need it. We have to generate the power in bumps.

If we can sell on a firm sale basis the excess from year to year, it would be an advantageous sale but, if we have to sell for a long period of time and that will use up the new generation and we have to go on to another generation, it may not be a good deal because then we have to consider the cost of the next generation in order to arrive at a profit or loss of the sale. In other words, if we sell from Limestone and if that sale causes us to build Conawapa earlier than might otherwise be needed, then we have to consider the cost of Conawapa as the cost of the Northern States Power sale.

If we do, it will come up as a loss and not as a profit. Mr. Storie: lt is an interesting way to look at it, but I do not think -(Interjection)-The Minister and I are going to disagree again because in the end result, I think, in the projections of Manitoba Hydro, we are going to require additional generating capacity at some point in any event. The Minister has made his point and I have made mine. I think it is a regressive policy. I think it is backward looking and not forward looking, but be that as it may. I would like to turn to another issue, Mr. Chairperson.

The decision is being made or will be made in the next couple of years whether to proceed with Wuskwatim or another generating station. I would like the Minister's understanding of the process that is going to be involved, regardless of which generating station goes ahead, in terms of renegotiating a collective agreement, the Burntwood Collective Agreement with the Allied Hydro Council. I am wondering if the Minister could indicate whether he supports the provisions in that agreement whic h provi de for Native prefere nce, northern preference, in terms of hiring. Will that be a condition of any new agreement? Mr.

Neufeld: Before I answer the question that Mr. Storie just asked, I would like to answer some of his

Thursday, November 24, 1988 pream ble. Ina smuch as he believes that our app roach to export sales are regressive, I should point out to the comm ittee tha t the expor t sales pol icy followed by the former Government has resulted in an increase from'83, in hydro rates to '87, of 40 percent and will requir e an incr ease from '87 to '93, in order to meet the cost of Limestone, of a further 27 percent.

When you consider tha t is approxim ately a total 70 percent incr ease at a tim e when infla tion rates are probab ly running at 3 percent and 4 percent, and when you consider further tha t only 40 percent of the hydro costs are su bject to infla tion, the other 60 percent being capita l and are fix ed, then the cost of our expor t sales, if tha t is the reason for the incr eased generatio n, have been extremely high to the Manitoba cons umer.

As far as the qu estion on the buil din g on the Burntwo od, tha t is being stud ied , and as I ha d mention ed at the last meeting, until we have answers to all the optio ns, we will not be in a position to mak e a decisio n. When we can finish the stud ies, then we will make a decision and at tha t tim e the deci sion on any ag reements will be taken. Mr. Storie: The Minister mi ssed the question. The question was not wha t is the decision going to be in terms of which station.

The cu rrent construc tion at Limestone goes forward on the basis of a coll ectiv e agreement tha t is sign ed between the Allied Hydro Cou ncil and Manitoba Hydro . That agreement has provi sions in it for no rthern pr eference, Na ti ve preference, in terms of hir ing. My question was, I guess, does the Minister, in princip le, suppor t tha t kind of claus e in the collective agreement, or are we li kely to see impr ovements in th ose pr ovisions for northern people, par ticula rly Native people? Is the Minister comm itted to tha t kind of pol icy? Mr.

Neufeld: I would think tha t will be a decision made by the Government and not by the Minister. I person ally would like to see an impr ovement but it would depend on the circums tances of the da y . I am not a believer in the quota system, but I do believe that by monitoring we can get all the results tha t we would like to ach ieve. Mr. Storie: I appr ecia te tha t the Minister is reluctant to answer on behalf of his colleagues.

I guess the questio n is then, the agr eement eventually is going to be sig ned by Manitoba Hydro, and the chairman is here tod ay, and the negotiating team for the Allied Hydro Council. In princip le, does the Minister support that? I thi nk tha t there are many people in northern Manitoba, certainly many groups, who have a sign ificant interest in the outcome of tha t negotia tion proc ess. Wha t we need is a comm itment from the Minister tha t th ings are not go ing to deterio rate.

There have been tremendous imp rovements in terms of the em ployment and the tr aining of norther n people from the days of the Long Sp ruce Generating Sta tion and Limesto ne. We want to know, I gu ess, that those impr ovements and the access tha t nor thern people have to training and empl oyment as a result of these projects is going to imp rove and not deterio rate. I am wanting the Minister to ind icate, becaus e he will have some say in presenting dir ection to Cabi net, 216 what his impr essions are goi ng to be and what his lik ely pol icy is go ing to be when it comes to th ose issu es. Mr.

Neufeld: I have alr eady said I would like to see an imp rovement but I think the key to Mr. Storie's question is negotiati on. If I make a commitment here tod ay, tha t does away with the negotiat ion process, I should think . Mr. Storie: I recognize tha t this is part of a negotiatio n process but certainly Government policy, Government dir ection, partic ularly when giv en to Manitoba Hydro who are going to be do ing the negotiations mor e di rectly, is impor tant. lt is fundamental.

I ho pe before that process starts tha t the Minis ter has a pol icy in pl ace and tha t will in itself be open to public dis cussio n. Mr. Neufeld: Again, Mr. Storie mentio ns Government pol icy and I hope he does not expect me to enuncia te Government policy here tod ay. I have already said l would lik e to see an imp rovement and we will be taking tha t up with Cab inet at the appropria te ti me. Until such a ti me, I do not think tha t I should make a statement. * (10 40) Mr. Elijah Harper (Rupertsland): I just want to continue on this .

Maybe the Minister can advis e us on the policy, whether there has been any change of pol icy on the affirmative action in terms of carrying out this preference in the Nelson-Bu rntwood collective agreement? Has there been any dis cussio n at all to review it or to change it within the Government or within the Manitoba Hydro? Mr. Neufeld: There has been no change of poli cy. As we appr oach the next construc tion program , there will be dis cussions and there will be negotia tions and there will be decisions taken. There will be a polic y adopted.

I would not expect tha t polic y to be too dif ferent from the one it is toda y but th at wil l be a ma tter of governmenta l decision. Mr. Harper: Does tha t mean the Minis ter is saying this policy will continu e to be a prior ity with the Government and ensure Nativ e people are part of this proc ess? In our term, I think we have mana ged to ma ke that comm itment to ensur e Na tiv e people were hir ed. Ensuring tha t commitm ent, we proceeded to establ ish a Limestone Training Agency which was to ensure qua lifi ed northern and Nativ e people were trai ned to work on the Hydro develop ment.

Is tha t comm itment going to be there when the negotia tion start s? Mr. Neufeld: We have not chang ed the commi tment of Government in any way since we took office. I would not expect there will be changes, at least not before any negotiations take place. I would expect, as I said earlier , personally to see them cont inue. I am not in the positio n to speak for Cabin et or the Government. Mr.

Harper: As a Minister responsible for Manitoba Hydro and certainly as Minis ter of the Government, I would expect the Minister to consult with the Nativ e commu nities, particular ly the Nor thern Fl ood commu niti es to ensur e there is continual involv ement

Thur sday, November 24, 19 88 and continual obligatio ns by Hydro to involve the Nativ e people and th ose communit ies. Would the Minister make th at commitment to ensure consultati ons or meetings are held with tho se people? Mr. Neufeld: I can assure Mr. Harper tha t negotia tions and dis cussio ns will continue with the northern people. Mr. Chairman: Jus t before, Mr. Driedger . . . Mr. Herold Driedger: Did you say ju st before? Mr. Chairman: No, I was look ing right at you . You are the critic , are you not? I am jus t gett ing things sorted out here. Mr.

Herold Driedger: I have a few questions I would like to follow al ong, actually the line of questioning tha t was started by Mr. Storie, we know new generating capac ity is eventually going to be requi red. We know it is going to end up prov iding a great, as the Minister said, a bump or lump of energy which then essentia lly will be excess to the actual needs of Manitoba . We know this energy, from what the Minister has said, will be offered for export sale if it is surpl us to our needs for a certain length of ti me. We also know some of the risks this entails.

Also, which is on the record, I beli eve if export sales are tied, go too tong, then new generating capacity may have to be advanced such as Conawapa, if that is the decision tha t is to be made for the next generating capacity , will be requir ed about 10 years sooner tha n it would be had there not been an export sale. Rather tha n looking at tha t aspect, let us take a look at someth ing tha t is also on the record .

I am not sure now which particular date it was but the Minister mentione d it migh t be possi ble to sati sfy the requi rements, the energy requir ements of an alu minum smelter such as the one th at has been talked about with the Alu ma x deal, without requiring new generating capacity . Would someo ne, perha ps the Minis ter or the Hydro representativ es here explain to me how tha t wou ld be done? Mr.

Neufeld: I can tell you generally ther e will be some options we will have to explore and th ose optio ns, I ind icated before, could be therma l power, th ose could be purch ases, those could be perha ps savings in other areas. lt is qu ite possi ble we may have to accelerate Conawapa or another generation but before we did that we would explore all the optio ns. For further details I would ask Mr. Beatty if he has anythi ng to ad d. Mr.

Beatty: Yes, with respect to our load forecast, domestic load forecast which is key, and existing export sale commitme nts, we do expect we will requir e next new generation in 19 99 and we are keeping our optio ns open at this point. Our load forecast does incorpo rate an estima te of major uncertain load and assigns a like liho od of major customers requiri ng large ju mps in their servi ce, so we do build into our load forecast tha t kind of estimate.

What we do not include in our lo ad foreca st though is 217 an Alu ma x type of developme nt, some thing as signifi cant as tha t, that requi res 300 to 400 megawatts. Our pla nni ng simp ly cannot inco rpora te tha t kind of mega develo pment.

If, in the case of, as the Minister has pointed out, the existing forecast with its provisio ns for major uncertain load, as I have said, incl udes mo st of the high probabi lity deve lopme nts, there are certai n cir cums tances we can foresee, as the Minister has indic ated, where we would go with a sm all plant or perhaps even be able to work with extended thermal life in the case of a forecast developing on the low side. I think the main point is, if we had a major new development such as Alu max tha t is not contemplated, tha t would force the large plant, no doub t about that. Mr.

Heroid Driedger: Obviously if a ma jor energy intensive industry were to locate in Manitoba, this would then have to be factored as now a firm requir ement in your load forecasting. lt wou ld actually then from th at point on be one of the, I guess, users you would have to fact or in all the ti me. Wha t effect would that have? I know we have talked about lead ti mes and we have had reports about lead time s.

Wha t act ual effect, if we have a major energy user such as a user of 300 to 400 mega watts, regard less of wha t kind of user tha t is, would tha t have on you r antici pated need sched ule for, say, a plant like Cona wapa? Would you still have the 19 99 in- service date? Mr. Beatty: Yes, it would depend on tha t major new develo pment's timing and requir ements.

I suppo se if it came early enough, it would not only force Cona wapa but would perhaps sug gest we would have to advance it perhaps a year if we could, but really that is speculative and we jus t have to see wha t was the timi ng of the develo per and take tha t into acco unt Mr. Heroic:!

Driedger: I thi nk we have been ski rting very carefu lly in this round of hearings whether the next generating capacity would be Wuskwatim , or Conawapa or some other, although generally I think we have looked at the sm aller plant, Wuskwa tim , or Conawapa , the larger plant, as being the two like ly options for new generating capacity . * (1 050) If I just may go back a lit tle bit to the Pu blic Utility Board hearings tha t were jus t held with respect to Manitoba Hyd ro, I think at tha t time there was a rather definit ive, at least referenced-now mi nd you, this was in the pu blished mat erial.

This comme nt may not be now true about some of the material that was presented in evidence, but there seemed to be a fairly definitiv e stateme nt tha t the next generating capacity would be Conawapa and not Wuskwatim . Now, I guess about seven or eight months later, we are now talk ing in terms of whether it cou ld be one or the other, not necessarily because we do not -1 guess what I am asking is, how come? Wh at is the change in position with respect to this particular generating capacity? Mr. Beatty: Basic ally, no change in position but our rep resentat iv e, the executive rep resent ative at the

Thursday, November 24, 1988 Public Utility Board hearings was Mr. Brennan, our Chief Fina ncia l Officer and I wonder if you would like to hear him comment on tha t? Mr. Bob Brennan (Vice President - Finance): I think at tha t tim e we point ed out we were spending money to attempt to protect the in-service date of both opti ons. One thing I could add to that, the base forecast did incl ude some thin g as the next sou rce of generation which was Cona wapa . But we were spending money to pro tect both optio ns. Mr.

Herold Driedger: Also at that tim e, I think the Pu blic Utility Board referred to the fact Hydro had, I gu ess, deferred the decision regard ing the in-service date of the next generating capacity from 19 97 to 19 99. I guess the question I am ask ing is, what caus ed this deferral decision to be made? Mr. Beatty: 1t was based on our load forecast, chang es in our load forecast.

I think at the tim e the Pub lic Utilities Board was dis cussing ma terial which had been � · pr esented to this comm ittee , the Pub lic Utilities Comm ittee in 19 86, at which tim e we were tal king about, I think at tha t tim e, had presented informa tion tha t indic ated, based on that load forecast, tha t we were contempla ting 19 97. 1n the su bsequent tim e period , we had two new forecasts which confi rmed 19 99. Mr.

Herold Driedger: I realize this load forecast ing is a very hi ghl y sensitiv e art, and I think the word "art" should be util ized here because I do not think it is a scienc e yet, because things chang e. I know you have referenced Mr. Beatty several ti mes in your own remarks, cau tioning tha t we do not read too much into some of the things we ask because the answer may sugg est some thing which is not true, sim ply because it is taken out of context with a whole bunch of other thing s and I appr eciate tha t.

With load forecas ting-and I suppo se what I am actually trying to establish in this line of questioning is whether or not we make a decision in Manitoba with the next generating capacity which will enhance internal use of Hydro as opp osed to having to com mit to long term export sales to sort of offset the costs of the next generating capacity which sug gests if we can actua lly establish or have an energy-int ensive user establish in Manitoba which, with the mul tip lier effect of not only jobs but all the other things tha t occurr ed becaus e of the economic spin -off, prob ably would be of mor e benefit to Manitoba than if we were to sit down and say, okay, we are going to develop a station and simp ly export the excess capacity .

I sup pose in a left-handed sor t of way tha t comes around to the question again Mr. Storie started, which is the lin e of questioning which tr ied to pin down whether or not the negotiations with the potential hig hly intensive energy user are proceeding ap ace and wh atever the Governm ent is putting on the ta ble to try and encou rage this to happ en.

The Minister referenced the fact, if the energy users such as Al uma x does locate in Manitoba and if the hydro rates that are going to be negoti ated with tha t energy user are of such a natur e tha t they are going to be lower than the actual costs to the corpor ation 218 for tha t particular class ific ation, tha t difference will be borne by a subsidy by the general taxpayer as op posed to the rate base, if I understand your comment s corr ectly. Mr. Neuleld: Tha t is corr ect. Mr.

Herold Driedger: In the development of the strategy tha t you are proceed ing with, and I know you have to negotia te with the federal Governm ent for some kind of contributing costs, how much of the actual cost and again I recognize we are entering the realm of negotia tion and you might not be able to giv e this informa tion out. How much of the particular costs you are considering that have to be subsid ized are being made up by the transpo rtation component as opposed to sim ply the energy component? Mr.

Neuleld: Accord ing to Al uma x, the transpor tation costs dif ferentia l, Manitoba and Quebec, equates to 3 mill s U. S. funds. Mr. Herold Driedger: These questions are ju st for clarifica tion again; 3 mi lls? That is 3 mills per kilowa tt? Mr. Neuleld: lt would be .3 cents a kilowatt hour. Mr. Herold Driedger: And that is ess entia lly the dif ference tha t Alumax would requir e in the rate tha t is charged to it so its loca tion cl oser to the seaboard could be offset?

Essentia lly this .3 cents per kilowatt hour will satis fy the fact we in Manitoba are in the centre of the conti nent and have transpor tation costs both ways. Mr. Neuleld: Accord ing to Alumax, some wher e between 3 mi lls and 4 mi lls which would be .3 cents and .4 cents U.S. funds is the freight di fferentia l tha t would have to be made up through hydro rates. Mr.

Herold Driedger: I understand also in some of the pu blished material, now whether this was in th e newspapers or whether it has been actu ally referenced in Hans ard , the 1.2 cent per kilo watt hour U.S. tha t Aluma x is talking about publi cly is to be tied to the futur e cost of aluminum so that, should the alu minum mar ket collapse, then I would imagin e with tha t stat ement alon e the rate they expected to be ch arged should be dropping considerably . Am I corr ect in that? Mr.

Neufeld: They have ind icated in other jur isdic tions they have a rate tha t is tied to the pric e of al uminum and they would be prepared in our instanc e to accept one. There would be a ceiling and there would be a floor to the al uminum pric e. The rate of 1.2 U.S. funds is one tha t is tied to the expected pric e of alu minum into the futur e. Mr.

Herold Driedger: There was a brief artic le in the Globe and Mail the other day with respect to the strength of the compan ies that are actually invo lved in al uminum produc tion, sug gests at this mom ent in time there are debt ratios and their cred it ratings are quite good. They actually reference the fact tha t near-te rm mar ket outlooks are favoura ble. They susp ect tha t the pricing will deterio rate relatively quic kly.

Thursday, November 24, 19 88 in your negotia tions with Alu max, and I know again we have to talk ab out windows of oppor tunit y, wha t kind of forecasts are they mak ing for, i sup pose if they loca te here, a lon g-term comm itment so tha t we do not have a situation where they may come in and like Bric kman in Nova Scotia, I believe it was , come in, establish a plant and leave, declar e bankru ptcy . Ess entially we ar e left ho lding the ba g. In your negotia tions, what kind of commit ments are you getting tha t will actually mak e this of a lon g-term benefit to Manitoba ? *

(1100) Mr. Neufeld: The Brickman Compa ny in Nova Scotia built the plant with subs tantia lly Government funds. Alu ma x woul d be coming into Manitoba with approxima tely $1 billion in Canadian funds of their own money. I think that is a commit ment enough for me. Mr. Herold Driedger: Wha t kind of comm itment would Manitoba have to make? You are talking about a subsidy under write for rate struc tur e. You are talk ing about tha t probabl y you will have to mak e some tax concessions. You will probab ly have to make some transpor tation concessions.

And very li kely, als o, we are going to have to get the federal Government involved to make another taxpa yer contribu tion. I cannot visua lize a numb er th at big. I can vis ua liz e a perc enta ge thoug h. What percentage would they be prep ared to put up front ? Wha t percentage would the collective Governments of Manito ba and Canad a have to contri bu te? Mr. Neufeld: Until the rate issue is settled, there will be no negotiations on tha t score. Alumax have ind icated until we settle the rate issue, nothing else wil l proceed.

As far as the transporta tion issue is concerned, 3 mi lls is wha t is on the ta ble from them . So there will no additional requests for transpor tation di fferential. Mr. Herold Driedger: I find th at last state ment rat her hard to accept. That .3 cents is probably based on cu rrent energy costs. Once the anticipa ted energy cost increases occur again, I am sur e tha t there will be an increasingly high transpor tation component tha t would have to be bu ilt in, with tha t, we may have to open up the negotiation aga in. I was act ually going to come back at another part of the question.

The-1 jus t momenta rily lost my train of thought talk ing about transporta tio n. Derailed in mids tream, as the Member for Chu rch ill (Mr. Cow an) says. You menti oned that Alu ma x req uir es, wa nts gua ranteed before they can do any mor e negotiat ion the rate struc tur e. Does that not actually lock in your flexibili ty in the futur e? If other things start coming along which actually escalate in cost , will this not be an inhi bitor on the kind of gu arant ees a Government might wish or the contribution a Governm ent might have to ma ke? Mr.

Neufeld: The negotia tions, as far as they have gone, refer to a long- term hydro rate and the hydro rate would start at 1.5 mi lls Cana dian. That is their wish. From there, it would -i nflat ion would obvio usly 219 have to escalate them. The other thing, transpo rtatio n would not have an effect on them. The negotiations, befor e Alumax locates in Manitoba or any othe r jurisdic tion, for tha t matter, would hinge on initia lly hydro rates and it may, after the hydro rates have been settled, issue on other items like tax concessions. Tha t would be the same in any ju risdic tion.

Once they have settled and they are opera ting under the terms of a cont ract, under the terms of an agreement, those details wil l not be chang ed. The concessions would not chang e as inflat ion escalates pric es. The ini tia l agr eement would dic tate and there would be a length to tha t ag reement as well. Mr. Herold Driedger: I understand tha t I guess in Alu max's quest for a loca tion, they are lo oking at a variety of sites, several of them, as we have mention ed, in Cana da, where we can understand the kind of comp etition we have to face. There is one competit or.

I am just wonderi ng if you can enlig hten us a little bit as to the kind of things that Manitoba has to put on the ta ble which might put a smelter in our provinc e consi derably at risk, and tha t is Venezuela where: (

a) you do not have the same kind of environme ntal leg islat ion; (

b) you do not have the same kind of labour costs; (

c) you have a port facility close to the sou rce of generation; and (

d) you have a much larger generating capacity than we actually have here and actually all the surplus at this moment in time.- (Int erjection) - A better cl im ate as well . The Member for Chur ch ill (Mr. Cow an) mentions better cl ima te, so the workers do not have to heat their own hom es. All of these things prob ably are something that will have to be overcome in our negotiations. Will this signif icant ly cause the negotiations to be not put at risk but rather to make the Manitoba offer a lit tle bit less econom ically defensi ble? Mr. Neufeld: And (e), Mr. Driedg er, is proximity to the raw material. Mr.

Herold Driedger: Yes, I though t I had referenced tha t with my transporta tion comm ents earlier. Mr. Neufeld: We also know tha t the hydro costs are going to be substa ntia lly lower than even the 1.5 mi lls in Venezuela if they decide to locate there. We can not concern ours elves with wha t Venezuela has prepared to offer. we know we cannot possibl y com pete with that.

We have to come up with the best offer we can calculate and that, as I have said earlier in today's meeting, will be one in wh ich benefits mu st at least equal or probab ly exceed the costs to some extent so tha t there is an economic reason for bringi ng a large smelter into Manitoba.

Tha t is my answer but ! would lik e to also add th at the questions that are being asked now have mor e to do with the Manitoba Energy Auth ority and if we are going to pass both at the same tim e, we could prepar e to answer th ose questions now if we are goi ng to pass both the Manitoba Energy Authority and the Manitoba Hydro at the same tim e. The Chairman ind icates tha t some of the people who may have the answers to the quest ions are not here at this time. As long as we can, we will.

Thursday , Novemb er 24, 19 88 Mr. Angus: lt surpris es me tha t you do not have the staff here. I have never seen such an army of staff. Do not take offence, please. I do not intend to get off on thE:fwrong fbot:TMre are-a lot of people in the room. lt sur pris es me that they do not have the people here who might be able to an swer tha t but it is a dif ferent area. An Honourable Member: We are not deali ng with the other areas here. Mr. Angus: lt is a di fferent area. I understand tha t. My questions will be di rected mor e to the operat ion of a large corpora tion.

Agai n, I am somewhat unfamiliar with the proc ess of reviewi ng annua l statements at this level and this man ner. I am mo re fam iliar with doing them at a board level. While I appreciate my colleag ue's interest in the mega projects and the pot ential mega projects and lon g-t erm planning, I am equally concerned with the annua l operation of the board . � " (11 10 ) I have gone through the annual stat ement and there are a couple of questions that may have been addressed and ma y not have been. I apolog ize if they have.

Some of the questions are related to the stat ements, some of them relate to policies of the board in relat ion to an audit comm ittee, if you have one or do not have one-labour negotiations, wha t the state of affairs of labour negotia tions are with in the corpo rat ion, union agreement settl ements, things of tha t sure. So, Mr. Chair person, if th ose questions are in order at this

part icular tim e, I would like to proc eed. Mr. Chairman: Proceed. Mr. Angus: Thank you very much. On the last p age, Operating Sta ti stics, Manitoba Hydro-E lect ric Board , I am a little confused and I am sure there is a reasonable expl anation about this, but I notic e that the Manitoba Hydro System buys back from the Unit ed States close to half of what we sell to the United States in terms of energy. Under Energy Pur chas ed, we have a figur e that is 10 70-1 am not sur e what tha t is indic ativ e of and then down lowe r we have Energy Sold -1 gu ess that is kwhs of 2308 .

I am curious as to wha t sort of a conv oluted agreement have we go t into tha t puts us into a position of buying back a produc t we are selling to them and what sort of prices we buy it back at. Maybe an overview of that, Mr. Chair perso n, by you, by the Minister or by wh oever is designa ted for the

part iculars of this would enlight en me. Mr. Brennan: I gu ess it ind icates the dr ought year which was in 19 88. We do repurch ase energy for resale. In addition to that, we do have some agreement whereby we have agreed to sell them sur plus hydraulic energy, being Ameri cans, and somebody else can giv e you the details of the actual agr eement, but th ose are the ones in place now. In the case of last year, of cou rse, we did have energy sho rtages. So if we could purch ase energy either to resell back in prime ti mes, im port it overnight and then 220 sell it back in a day, we would do that.

In addition to that, if the power we could purch ase was cheap er than burning our therma l plants, we would do tha t as well. Mr. Angus: I appr eciate the overview, and so tha t I ab solutely understand it, let me try and paraph rase it and feed it back so tha t we can avoid any confusion of

interpretation, if you like. We have entered into an agreement. We sell a certain amount of product to a customer. We find ou rselves in a shor tage situation of needing mor e of our power tha n we can comfor tab ly supply , or find it mor e economic al to buy it back from the people tha t we have sold it to in order to feed our own needs. Is that it? Mr. Brennan: Tha t is corr ect. Tha t would only happen in a low-flow year, of course, of any consequence. Mr.

Angus: I notic e tha t from 19 79 to 19 88, we have not had any of th ose low-flow years, or the other conclusion you might arriv e at is tha t there has been no ag reement in place for reciproc al services , I gather. Agai n, my words, not yours. Mr. Brennan: I guess in 19 80,'8 1, '82, and I am not sure of the exact time, we were pur chasing some energy at tha t point. I do kno w there was a low-flow condition.

We did have new generation tha t came in in the late Seventies tha t proba bly helped us in the case of those low flows so we prob ably did not have to purcha se as much, but there would have been some in tha t period. Mr. Angus: May I inquir e as to the rate at which we buy and sell? Mr. Chai rperson , I am agai n not trying to em barr ass anybody but it would certa inl y be emba rrass ing if we wer e buying this back at an investment tha t is high er than wha t we have sold it to them for because of agr eements. I hope tha t is not the case and I am sure it is not.

Maybe the board would prefer to answer instead of the ad min istra tion. What are the financial arrangements in relat ion to this shari ng of energy? Mr. Beatt y: Mr. Chairman, let me in troduc e our opera tions vic e-pr esident ju st down at the end, Will Tishinski. I think he could provide a summ ary for us tha t would clarify the vicissitudes of pric e in interrupti ble sales which I think is what the Member is gett ing at here. Mr. Chairman: Mr. Tis hins ki-o r did you want to ask a specific question? Mr. Angus: Mr. Chai rperson, I ju st want to make it absol utely clear I am not sure what that word Mr.

Beatty used means, so he has put words in my mouth that said tha t is what I mean, and I do not know if that is wha t I mean or not. Mr. Beatty: I am sor ry. What I meant is I under stood the Member to be mo re concerned with spot sales, with interrupti ble sales as opposed to firm sales under a contr act which produc e a much hi gher pric e. Mr. Angus: Mr. Chai rperson , jus t so we understan d clearly, I recog nize it is a very com pli cated pri cing

Thu rsday , November 24, 19 88 structur e. Breaking it down into fairly sim ple terms, I see we are buying back approxima tely half the energy we are selling to the United Sta tes becaus e of the dr ought circums tances. I appreci ate that. Wh at I would li ke to find out as best or as near as possi ble is whether we are trad ing dollars. Again I would hate to find out we are selling it for $1 and buying it back for $1. 25 for any reason, as an example. Tha t is jus t an exam ple. Mr.

Neufeld: I would jus t like to point out to the commit tee it is true in 19 88 because of a low water year app roxima tely half of wha t we sold to the United States was purcha sed back. If Mr. Angus looks back to 19 87, it was 7,004 to no sold and no purcha ses. This happe ns in low water years, and I will let Mr. Tish inksi now answer the question. Mr. Angus: Mr. Chai rperson, if I may ju st for a moment , I appreciate wha t the Minister has said and I look back to the years tha t were identified as 19 81 , 19 82 as other low-flow years.

I am sure the dr ought and the com ing to power and the changing of the board, and the tremendous sales to the United States and the buy backs from the United States is nothing mor e than a coincid ence. I am jus t trying to find out why sudd enly we got so much this year and now it becomes imp ortant, Mr. Chair person, what the terms are. When it was a minor amount of back and forth becaus e of cir cu mstanc es, it was not sig nificant but there is a consid erable amount of power being traded and I would jus t lik e to get a bit mor e of an explana tion about it. Mr.

Will Tishinski (Vice Presi dent-Operations): Mr. Chai rman, once again I would lik e to perhaps repeat one of the things Mr. Brennan had mentioned because it certai nly ties in very closely with what I am going to say.

That is Manitoba Hydro because it is a hydro system and has reservoirs, we have the facility of being able to im por t power from outside ut ilities during the off peak hours which is usu ally the night ti me, and serve our load during tha t period of tim e and conserve water, shut down our own plants during the night tim e and conserve water this way. lt is also imp ortant to reali ze the price of power depends very much on the tim e of day. lt is generally understood in the utility busin ess daytim e power is always pric ed hi gher than nig httime power, so we are in the happy position tha t we can buy nigh ttime power at lower prices than wha t we would have to pay during the daytime.

Now I am going to get to answering your question as to wha t the pric es are. There are many stat istics here, but perhaps the most relevant one might be what has happened in the mo st recent seven mont hs in the curr ent fiscal year. Up to the period of Octob er 31, 19 88-t his is seven months for the curr ent fiscal year we have purcha sed 1. 2 billion kil owatt hour s of energy at a unit pric e of 16 .7 mil ls.

Now, during the same period we have sold .83 bill ion kilowatt hour s at a uni t pric e of 26. 4 mi lls , so our selling pric e-a nd of cou rse I should also mention tha t mo st of our sales are concentrated during the on- peak or daytime hour s. Mr. Angus: Thank you very much, Mr. Chai rperso n, for tha t explana tion. If I have got it rig ht, we have sold .83 billi on and we have bought back 1. 2 bill ion, is that- 221 * ( 11 20) Mr. Tishinski: Those numb ers are correct , yes. Mr. Angus: There is a shor tfall in what we sold and what we bought.

Where do we buy the surpl us, li ke who manufact ures the surplus, if you lik e? Mr. Tishinski: Part of our ag reement is tha t during dr ought periods we do not have to deliver surplus power, but we can buy up to 1. 5 bil lion kilo watt hour s per year from our American neigh bour s, so this is all done in acco rdanc e with the agr eements tha t we have struck up with the utilities. Mr. Angus: Mr. Chairp erson, again because being unfamil iar with the corpora tion and the intric acies of the financ e of the corpor ation, I do not want to get on any thinn er ic e than I appear to be on tod ay.

No netheless, I am going to persist in wha t I hope will be laym an's la ngua ge. Are we buying this back at less than the cost of producing it? Is tha t a reasonab le assu mption ? Mr. Tishinski: The production of hydro power- well, let me answer it this way. We curr ently have a blend of hydro power and therma l power so if we start placing hydro power the production costs are really qu ite low, say, in the vicin ity of 2 mills,

whereas thermal power can range anywher e from 20 mills to 30 mi lls. So I really cannot answer.y our question in a very definitive way. Mr. Ch airman: The Honou ra ble Minist er ha s a comment. Mr. Neufeld: I would lik e to add to that, that ina smuch as when we are buying power nobody gets laid off and our cap ital costs have not changed , so to pric e it wou ld be very dif ficult . I shou ld add though tha t, as Mr. Tishinski has ment ioned, when we buy power, we are storing water and tha t is very im portant in a low water year. Our reservoirs are very, very low right now, as Mr.

Fraser mentioned the last meeting, and it is not as im portant how much we have to buy. lt is how much water we can stor e for our own futur e needs. Mr . Angus: Do we tr ade in American do llars or Canadian dollars, or do we sell in Canadian dollars and buy in American dollars? Wha t is the relationship there? Mr. Tishinski: All transa ctio ns are in U.S. dol lar s on th e Am erican ma rket, becaus e we trade with Sask atchewan and Ontario as well. Tha t is why you dif ferentia te. East and west in Canad ian do llars, north and south it is in Americ an dolla rs. Mr.

Angus: Then may I ask the question, wha t effect a rising American dollar has on the revenues of the corpora tion? Mr. Tishinski: If we are sell ing and if the Canad ian dollar is lower vis-a-vis the American dol lar, then tha t is a benefit to us. If we are buying, of cou rse, the reverse is the case.

Thu rsday , November 24, 19 88 Mr. Angus: Ju st so tha t I am clear, if we are selling and the Canad ian do llar is low, then it is to our advantage. If we are buying from the Americ ans and the Canad ian dollar is hig her, then it is not as good an advantage. I want to make sur e tha t I am clear on this. Mr. Bren nan: We attempt to match our-it is a li ttle more di fficult in a low-flow year but in average-flow years we attempt to match our American revenue with our debt costs, so that any fluctuatio ns one way or the other will be mi tiga ted . Mr.

Angus: Agai n, I am only a layman at this board , but let me see if I under stand it absolute ly accurately tha t you have a certain amount of Ameri can borro wing tha t you have done in American dollars, and any Americ an revenue you generate you tend to pay off that ind ebtedness in the United States. Mr. Bren nan: That is what we try to mat ch. Mr. Angus: You try to match that, equalize that, which is a reasonable poli cy. Mr. Bren nan: Yes. Mr. Angu s: Could you jus t advis e me of the effect of the cont ract that you have, either the chairman of the board or the Minister or wh oever wants to do it?

I am not sing ling out anybody . Wha t is the impa ct of a low flow year and the cont ract that you have for recip rocal sales, buying back and for th, and the obvi ous ly strengt hening dollar? Are we losing mon ey, gu ys? That is my question. Have we made some bad decisions in the past and, through a wh ole bunch of unfort unate circums tances, are we findi ng ou rselves bei ng negativ ely im pacted, and how much? Mr.

Brennan : Clear ly, the fact tha t we have some Am erican revenue that is not there hur ts us regardless, and probab ly the big gest conc ern is not the foreign exchange at all. lt is the fact we do not have hyd raulic energy to sell, period, and that is the biggest contributor . That is by far the bigge st concern, jus t not having energy to sell. Tha t is the big gest cost and the big gest concern to us. Mr. Angus: I appreciate that, Mr. Chai rperson .

If I may be perm itted a facetious remark, always ch alle nging the system in a lighthe arted fashion, you r desi gnated speaker has impr oved his political performa nce by ska ting around the meat of the quest ion. The question was, what is the im pact of the rising dol lar? lt has gone from 79 to 78 to 83, 82, 83. We are tal king about a quantum leap if contracts have been negotia ted at old pric es. Mr. Brennan: If we at tempt to ma tch our Americ an revenue with our outgoi ng cash flow, there is no impa ct Mr. Angu s: I see, ok ay, tha t is lair . Thank you . Mr. Chairma n: The Minister has a comme nt .

Mr. lll eufeld: I would jus t like to add tha t inasmuch as the dollar has gone up in 19 88 and ina smuch as 222 we are now a net expo rter, we have in effect gained then, have we not? I wo uld also like to mention that this points out the good relatio nship we have with the North ern States people and others, which is unlike the relatio nsh ip tha t has been sugg ested we sh ould have when they run short of power. Mr. Angus: Mr. Chai rperson, I thank the Minis ter for those remarks.

Is it my und erstand ing tha t we would if we cou ld supp ly mor e power to the No rthern States, they would like to be able to acq uir e more power from us? Is tha t a reasonable assu mp tio n? Can I ascertain tha t in my remarks? Mr. Brennan: I have only experienced it once in the history that I have been associated with Manitoba Hydro where we have ever had to spill on a plant tha t had the capacity to produc e it. Tha t was in the high flow years of '86-87 for a shor t period of time. Ord inari ly, we do sell everything we have been generating. Mr.

Angus: I app reciate tho se comme nts because the figur es glared out from the report. I felt there might have been a footnote explana tio n as to that As I said before, it is a quantum leap. Another question, Mr. Chai rperson, this perhaps is a politic al question to either the appoi nted chairman of the board or the Minister. lt has to do with the Win ni peg Hydro sys tem. Is there any ant ici pated tak eover of the Winn ipeg Hydro system ? Mr. Neufeld: If there is, I have not heard of it Mr. Angus: Okay, tha t is fair, it is reasonable and qui te an asset run fai rly effectively. They have a good pla nt there.

I think it is a reasona ble questio n to ask . The City of Winn ipeg officials have often felt there might be some interest in the provincia l Government . So if you do not have a policy in tha t area, I will leave it unt il you do. I am sure we will find out about it at tha t lime. I would like to mo ve to whether or not the board has some form of an audit commit tee tha t is linked to the board and reports di rectly to the board that does not only meet regular ly and not only provide s financia l audits but perhaps does operationa l aud its. If there is one, perhaps I could jus t get a bit of an explanat ion. •

(1130) Mr. Ransom: Yes, we do have an audit comm ittee. it is chair ed at the mo ment by one of our board mem bers, Mr. Curtis, who is the Deputy Minis ter of Fina nce for the province as well. The audit comm ittee will be increasing its activities in terms of cooperation with the internal audit commit tee recently established within the corpor ation. I do not thi nk I cou ld ph rase it that we wou ld be doing operational aud its as far as the aud it commit tee of the board is concerned, but we do intend to step up the act ivity back and forth between the audit commit tee of the board and the internal audit comm ittee of mana gement established by ma nagement.

Thursday, November 24, 1988 Mr. Angus: I appreciate that. Whether or not they do operation audits and/or whatever label they decide to give to them, the audit committees that I have had the fortune to work with on the boards I have served on in the past have been providing value for investment analysis, if you like. They were almost autonomous and indep endent to the executive committee of the boards that said, you have spent this kind of money.

This is what you expect to be able to get and these are the actual results which make the board aware and allow them to make corrective actions and/or take steps that will improve the working relationships and the effectiveness of the corporation. Is it the intent to have the security of the Hydro, and has the committee been given any mandate in terms of reporting in that nature , Mr. Ransom , to you? Operational audits tend to garner up a picture of an individual standing there with a stopwatch and making sure everybody is doing their job effectively . That is not what I have in mind .

What I have in mind is making sure the board is being made aware on a regular basis they are getting value for investment on all fronts. Mr. Ransom: It is a good point Mr. Angus raises . have the sense the board and the audit committee need to increase the work they are doing to have a greater understanding of the actual operations of the corporation, not that the board should be in a position to interject into the actual management of th e corporation. Now there is a line to be tread there .

But I think the board and our committee could stand to have some greater understanding of it, and that is why we intend to increase the amoun t of cooperation that takes place at interplay between the Audit Committe e and the Internal Audit Committee. Mr. Angus: I recognize that there is a relative ly new board in place and perhaps those questions would be better asked a yea r f rom now as to the effectiveness of an Audit Committee , and it may even show up in an annual report of this nature next year. So I will leav e that until then.

I would like to move into labour relations, if possibl e, and again fully recognize that this is a delicate area that you do not want to put yourself in a posi tion of negotiating in pub lic on at least some issues. Howe ver, there are some glaring things in the report that is published that are outstanding and I think should be addressed in whatever fashion the board wishes t o take. The expenses of labour , wages in any system, are often the largest expense that they have so it is one that is very importa nt to make sure that it is accounted fo r.

The questions concern an outstanding CUPE agreemen t tha t apparen tiy has been outstanding sinc e December 23 , 1987 , where tha t is at -now it may have been settled by now , I do not kno w. I wond er if it has been settle d, if i can get an explanation on that , and then perhaps we could just start with an overview of the circumstances. Then we can get into the specific s. Mr. Beatty: Just brief ly, we have settled wit h CUPE . It is a new _three- year ~gr eement . Jo the first year, it is 223 worth 3 percent and , in the second year, 3 percent , with a cost-of-living allowance in the third .

There is built into that in addi tion in the first year, maintaining - one-hal f of 1 percen t in benefits . - ~ ·· We have two other bargaining units , I might just add : the International Brotherhood of Electrical Workers , and the settlement there was virtually identical with some slight changes -(Inte rjection)- That was also a three year agreement and, as I said , the settlement was very similar . We have a third assoc iation, which is a bargaining unit of Manitoba Hydro staff and supervisory employees with whom we also settled on the basis of a three-year agreement.

Again that was 3, 3, and COLA with very slightly different benefit improvements . Mr. Angus: The board has obviously allowed a cushion somewhere for settlements in their financial statements . That is fairly standard procedure . Mr. Beatty: Perhap s I could ask Mr. Brennan to comment on the provisions for-the total provision, perhaps , I think would be good enough , would it? Mr. Angus: Yes. Mr. Brennan: In the case of the actual annual report, it only reflects actual expend itures, not projection s. But all our projections include a forecasted increase in all costs, includ ing labour costs. Mr.

Angus: Let me just see if I have got it straight, then . The AMHSSC , is it, wh ich was a three -year agreement in March '88 , that was settled? An Honourabl e Memi>e, , in Aµrii of '88. yes. Mr. Angus: It was settle d for three years in April of '88 and that was a 3 percent, 3 percent CO LA with .5 percent benefits in the firs t year. CUPE has also been settled, backda ted as of Decem ber 23, 1987, and that is a three -year agree ment with similar arrangements , and the IBEW is May 25 , 1988.

That has bee n settled as well and has the sam e t ype of arran gemen t, and the supervisory grou p has been offe red a comparable packag e. Mr. Brennan: The supervi sory qrouo is the AMHSSE group . M r. Ang u2: So th at is that. May i ask, Mr. Chairpers on, agai n I want to cast my net wide enc ..igh to make sure that I get all the information l · ,3 :-1t. Are the re any othe r union groups tha t are being negotiated or settlement s th at nee d to be finali zed at thi s stage ? Mr. Beatty: No. Mr. -Chairma ». thos e are our three barqainin9 unit s. Mr.

Angus: Ag ain, throug h you to the ooli cy makers, is th ere an early° reti rement polic y in place at the i'vianiioba Hyd ro and/or an opportun ity for st aff members to consieie r eariy retir ement ? en g p

Thur sday, November 24, 19 88 Mr. Chairma n: Mr. Brennan. * (1 14 0) Mr. Angus: Mr. Chai rperson, I think tha t perhaps is a policy question. If I ma y be permi tted to di rect it at the chairman? Mr. Beatty: No, we have not a program of tha t kind. There are perhaps from time to time very unu sual circums tanc es but we do not have a general program and we have not found it necessary to have such a program . Mr. Cha irman: The Minister has a comment. Mr. Neufeld: I would like to say tha t we do have a program for retirement at age 55 with a certain amount of service.

I do believe tha t there is one in existence for that, is th ere not? Mr. Beatty: Yes, Mr. Chairman, but I was not really descri bing tha t or I would not really include tha t as an early retirement program, but it is avai lable. Mr. Angus: Now I would like to, as smoothly as possi ble, and without any rancour move into the area of free trade, be a gl utton for pun ishment, Mr. Chai rperson.

I would like some ind ication from the mem bers of the adminis tration of the board of the actions tha t they intend to take to reduce any potential negativ e im pact , my words, to ensure tha t Manitoba Hydro Corpora tion is not and will not be adversely affected and tha t they are taking wha tever posi tive act ion they need to, to ensure tha t we are making the mo st. Tha t is what it is intended to be, a lon g-term arrangeme nt- Mr.

Chairman: Is this going to be a long-d rawn -out thing because you have had the floor for twice the amount of time as the Opposition Parties and if you would like to come back a bit later? Mr. Angus: Mr. Ch airperson, if you wou ld li ke, sure, I can get my files- Mr. Chairman: I am trying to dis tri bute the time, equally so. Mr. Angus: I appr eciate that. Did you want to ask some questions? Mr. Chairman: I am going to recog nize Mr. Enns, who has been trying to get my eye for some time and then we will go on to . . . . Mr.

Angus: Let me assure the mem bers of the media th at you are in no way sheltering the Minister or the ad minis tration from these penetrating questions on free trade. Mr. Chairman: Tha t is qui te accu rate, thank you. Mr. Harry Enns (La keside): Thank you, Mr. Chairman, I certainly do not want to take up the time of the commit tee to exam ine Hydro at any length on this or 224 any other matters. Members of the comm ittee will recogn ize I do have the privilege and opportun ity to do so in another for um.

But I am sure the Chai rman and the Minister will recog nize that I have, on occasion, a continuing need to have some things pla ced before this commit tee and recorded for posterity and for my constituents. I would li ke to rais e ju st one such issue that has been a concern to a number of rnY constituents and indeed other rural people in Manitoba. Manitoba Hydro is, of course, a su bsta ntial landlord. I refer specifically to the land acq uir ed by Manitoba Hydro in the pu rchase of rig ht-of -way for the construction of their transm ission li nes.

The cons tituenc y of Lakeside is particularly affected in tha t the major li nes from the North cut di agonally through my li nes and my constitu ency and, of course, Dorsey is located in my constituenc y. This ma tter has been raised with me on several occasi ons some time ago. My understanding, and I am really seeking confirmation from Manitoba Hydro, tha t basic pol icy is not changing or contem plating being change d .

My understand ing is tha t havi ng acq ui red tha t land some years ago, in some instances, back in the Sixtie s and the early Seventies with Hydro retai ning, of course, the fu ll access to service of the se line s, the und erstanding with the lando wners was that they wou ld continue to be able to farm the properties, and in every way as a recompense, I sup pose, for havin g to dodge the poles with their large equi pment forever in their lif etime and their suc cessors that, in effect, Manitoba Hydro sought no other im position on the lando wners affected at tha t time.

My dir ect question is, does Manitoba Hydro view these land holdings as some future sou rce of revenue? I rais e this is sue par ticularly because it is my unde rstan ding that in the last year of this arrangement there is an attempt being made to formal ize this arrangement by way of lease. That rais es the spectre on the part of many of the affected lando wners even though, in the first instance at this instance, there is no sugges tion from Manitoba Hydro tha t rentals will be ch arged for this land.

Bu t my concern is, as expr essed to my constituents, tha t down the future, will Manitoba Hydro view this land as a future source of revenue? Mr. Beatty: Beside me is Mr. John Funnel!, our General Cou nsel. Mr. Enns' ·conC:ern· falls within his area of responsibil ity. I think he would be best to comment on this. Mr. John Fun nel! (General Cou nsel and Corporate Secretary): Let me assure you tha t the pol icy has not chan ged but, yes, you are correct in sayi ng that we have been planning to obtain leases. The leases we are talking about are at a nominal. They are stated $1 but we are not even ask ing for that.

But the purpose is to enable us to know who the lando wners are along there and, as they change from time to time, we keep a record of them because otherwise it becomes difficu lt. The people who we originally dealt with 20 years ago, many of them have di ed or sold. We get correspondence from people, we do not know who they are, but if we have a system - permit, lease, call it what you like-

Thu rsd ay, Novemb er 24, 19 88 but a system of kno wing who is authori zed and who is not authori zed to use our property. If I cou ld add to that, one of the problems tha t we encounter, Mr. Enns, is unauth oriz ed use of lands by people who jus t come along and dump stuff, who want to do thi ngs there. If we have no record of who is autho rized , it becomes equall y di fficult to know who is not autho rized . Mr. Enns: I am satis fied th at was, in fact, the case. However, I am not sure tha t Manitoba Hydro fully app reciates even what seems to be a reasonable solution to the problem jus t described by Mr.

Funnel l, the impl ications tha t can have on a lando wner, and how the lando wner views that, who was told , at the time the land was taken , tha t this would in no way affect his other land. I am sugges ting to you tha t the possibili ty does arise. Some of these farmers are now retiring. They are in the process of thinking about selling the land to another farmer, or passing it on down through their sons. These blocks of land run dia gonally through their qu arter sections, half sections and do affect the saleabilit y, if I ma y say, of the entire parcel .

If some additional compl icat ions are put in the way of tha t sale of land as a result of havi ng to deal with a thir d party, namely , Manitoba Hydro, and the tr ansferring of the leasehold rights of tha t particular strip of land tha t cuts through this farmer's land. Mr. Chairman, I am satisfied jus t havi ng made a commitm ent tha t I made to a numb er of const ituents of mine tha t I wou ld raise this ma tter with Manitoba Hydro at a public forum, tha t I can pu rsue this matter more dir ectly on another occa sion. Thank you for this opportun ity, Mr. Chairman. Mr.

Harry Harapiak (The Pas): I am going to be a bit paro chial in my questioning as wel l. There are some items tha t have been on the minds of many of my constituents and I said tha t I would raise these as well. I gu ess the fi rst area tha t I would like to raise is the area of Cormorant, where this com muni ty was not consi dered as a com mun ity tha t should be gett ing compensation when the Grand Rapids forebay was first being built.

There was a study tha t was carried out in 19 60 by the United States Department of Fish and Wildli fe Service and the Manitoba Department of Mines and Natural Resou rces which showed tha t there would be negativ e im pacts to the Cormor ant Lake and Tom Lam b Wildl ife Management Area. lt has sho wed tha t sinc e the Grand Rapids forebay was built tha t there have been negative effects to the agricultur al base in the com mun ity and the wild rice production has been affected and their fish ing has been, although at ti mes more profitable, it has been affected as well. • (1 15 0) There was a comm ittee th at was struck on which there was representation from the Department of Energy and Mines and the Depart ment of Natural Resou rces and the com mun ity of Cormorant and the Department of Northern Affairs, which dealt with this problem .

There 225 were several options they looked at but I gu ess the mo st fea sible one was to put a pumping station in between the north and south Moose Lakes. I am won dering if there has been any dis cussion with Manitoba Hydro to see if they would be willing to partici pate in dis cussions th at are going on to addr ess this problem. Mr. Beatty: Well, I guess we would be willing to dis cuss, Mr. Chairman, but this is an issue that has been led by the province and we have not, so far as I know, so far been involved . I believe tha t is cor rect. Mr. Ransom: Mr.

Harap iak, I, as chairman of the board -a nd I am sur e tha t others recognize tha t when the Grand Rapids forebay flood ing took place that there was not this sort of agreement in pla ce tha t is in pla ce with respect to the Churchiii-Ne lson developments. I believe, and I will certa inly be recom mending to my coll eagues on the board that Manitoba Hydro has some ongoing social respo nsi bili ty with respect to wha t has taken pla ce ther e. We have had an appr oach from Ducks Unlimi ted with respect to tryi ng to deal with the problem th at you mention .

I have encour aged Ducks Unlim ited to put forward their propo sal and we would look at ways of deal ing with their pro posal. We would look at ways of how we mig ht inv olv e some of the local people in extending a line, for instance , if we need to extend a line for pumping pur poses. So, in principle, it is certainly my intention tha t we will look at ways of trying to do some thing there, but we have not been dealing with the specifics yet. Mr. Harapiak: I am pleased with tha t response.

I guess the project that is being put forward by Ducks Unlim ited would not only help the com muni ty of Cormorant but it wou ld also help the entire Tom Lamb area and would help the communi ty of Moose Lake which is looking at some agricultural produc tion.

I think if that project were to go ahead , and I recog nize it would be a long term project, it would take many years to comp lete, but I think if there was coopera tion between Manitoba Hydro, and the y are not looking for compensa tion but wha t the y are looking for is some economic dev elopment which I think can be taken into consideration and loo ked at in a coopera tiv e app roach and it could be accommo dated. So I am pleased with the chairman 's comme nts on that. There is one other area that I wanted to raise and tha t is the Grand Rapids hatche ry.

When that was built, it was the unde rstanding of the commun ity members at Grand Rapids tha t it was being put in pla ce because of the negative effect that the dam wou ld have on the spawn ing area for the pic kerel in tha t area. Si nce that time, the Department of Natu ral Resources who have operated the hatcher y have run into some financial di fficulties, as all departments have, and they have come up with a proposal to shut down the opera tions of the hatch ery during the winter months. There has been some damage in the hatcher y at Grand Rapids because of the fact tha t it was clos ed down.

There was some frost dama ge to the area.

Thurs day, November 24, 19 88 I think tha t if Manitoba Hydro recogn ized the impa ct they have had on tha t commun ity and the im pact they have had on the fish ing, they would look positively at suppor ting the operating costs of the fish hatchery because I think, in talking to the fishermen in the area, th ey have had to go a greater and gr eater di stance to get their li mits. In this past year, they have had to go approxima tely 50 mi les on Lake Winnip eg before they were able to get their catches and it seems they are going out further every year.

So I think that there has been a loss of the spawn ing areas, and I wou ld ho pe tha t Manitoba Hydro would look at suppor ting the opera ting costs of that fish hatch ery in Grand Rapids which wou ld help impr ove the lot of the fishermen in that area. Mr. Beatty: The corporation last met formally with Natural Resou rces to di scuss the fish hatcher y back in October of '87.

At tha t time, we asked Natural Resou rces to explain the basis for the Hydro contribution to the hatch ery, the adverse effects in the North general ly, contr actual obl igations which flo wed from earlier ag reements between Natural Resou rces and Manitoba Hydro, and they ag reed to look into this and to form ula te a propo sal . lt is my understa nding that we have not as yet received one but I ga ther it will arr ive soon. So we perhaps will be inv olved . Mr. Harapiak: There is one other area tha t I would like to touch on br iefly.

What seems to have been a di fficulty with the trap pers and the fishermen in the Cedar Lake area is the whole qu est ion of commu nica ting when there is going to be a heavy dr aw do wn on water which will cause a decline in the ice level. I gu ess when they set their nets and set their traps and if there is a call for heavy produc tion, then the water level dr ops and there is a loss of nets and loss of traps. I am not sure if it is possi ble to set up a better system.

I guess maybe your notic es are qui te short sometimes when there is a heavy need for heavy generation, but I wou ld hope tha t there cou ld be some communic at ions worked out with the trappers' associa tion and the fishermen 's assoc iation so they can have more warn ing as to when the water levels are going to be dr opped. Mr. Beatty: I think we certai nly try to do everything we can to commun icate. Someti mes it is not as good as it ought to be, as it has been pointed out to us on one or two occa sions. I wonder if I could ju st speak to the general problem. I wonder if I could call on Mr. Tish inski. Mr.

Tishinski: Mr. Chairman, maybe I can only respond in a general way. The way we are set up is tha t our superintend ents at the power plants are gi ven the responsi bil ity of commun icating with the local residents vis -a-vis operation of the reservoir. I know tha t at Grand Rapids, our superintendent is in contact with the fishermen 's co-o p at Grand Rapids. The operation of the reservoir at Grand Rapids is usually qu ite predictable. We pond during the summertime and we draw down during the wintertime. This kind of operation .is made known to the fishermen 's co-op.

If 226 there is some thing tha t is qui te specific and of a lo cal ized nature, I do not know tha t I cou ld comment any more other than find out wha t it is and then we could add ress it on a specific basis. Mr. Harap iak: I jus t wanted to add that th e superintendent at Grand Rapids has been very involved in the communi ty an d there ha s been good commun ications with Mr. Miller. There are still instances when there are trappers, especially in the spring of the year, who are affected.

So maybe it is better that I deal with each specific case on an indi vidual basis rather than take the time up of the commit tee in this man ner. Mr. Harper: I would lik e to ask the Minister about the northeast hydro line going into Cross Lake, Red Suc ker and Garden Hill. For some time, we have been working on the issue. I remember way back 10 years ago when I was a chie f trying to get a hydro lin e to the communi "ty, in to th ose areas, and I kn ow we had made a comm itment to pr oceed with that.

We had been negotia ting with the federal Government to cost share on the building of the hydro lin e. * (1 200) The Minister responsi ble at the time, Mr. Paras iuk, had written a letter -1 think it was in Nov ember of '86-to try to convince the federal Minister of India n Affairs to cost share or make a commitment to the building of tha t line. He further wrote in 19 87, in April, to try and get a response by June so tha t we ma y proc eed to building of tha t line in the fall of '87. We did receive a response, not a defin ite response in terms of any commitm ents. I know when Mr.

Storie was the Minister respo nsible, he tried to get the federal Government to make a comm itment but we were not succ essful. I know tha t this Government has made a comm itment in their Throne Speech for a bui lding of tha t line. I know the capital costs are enormous and we were ready to proceed. Can the Minister adv ise us wha t status th at northeast hydro line is in? Mr. Neufeld: As you cor rectly say, the decisi on will be that of the federal Government. lt ma y be only a coincid ence, but Mr. Lam bert is meeting this afternoon with the federal representatives. Mr.

Harper: I know tha t we have been meeting with the federal representatives on num erous occasions but we do not seem to get the commit ment from the Government of Canada, which is the federal Minister of Indi an Affairs. I was wondering whether tha t will be discus sed this afternoon. I know the capital costs are going to be much hig her tha n antici pated and I am jus t wondering whether these di scu ssions will be part of the di scussions this afternoon, the comm itment from the federal Government, and also wha t the costs are going to be. Mr.

Neufeld : I should think that the commi tment, when it comes, will come from the federal Cabi net or from the federal Minister of Indian and No rthern Affairs. I do not think ttia t the federal representative wi ll be in a position to make any comm itment this afternoon,

Thu rsday, November 24, 19 88 although I could be mi staken on tha t, but tha t wou ld be my opinion. Mr. Ralph Lambert (Senior Vice-President-C ustomer Service and Marketing): If I might ju st comment, in my telephone dis cussion yesterd ay, in setting up the meeting for tod ay, we did not dis cuss exactly what we were going to talk about, but it was my sense that it would be a continuation of a di scus sion that we had back in Ju ne, I believe, in which we were attem pting to deal with this question of cost sharing. I am not sur e but tha t is my sense of what we will talk about this afternoon. Mr.

Harper: Are th ere any kind of costs being antici pated now what the previo us-like I know we anticip ated about $50 million to $60 mi llion for the capital costs. Wha t is the projected cost going to be? Has tha t gone up? Mr. Lambert: Specifically , I cannot tell you what the exact num ber would be but the numb er tha t we had been using, I belie ve it was 53 million. Tha t numb er is alr eady a couple of years old, so it will be going up if for no other reason but escala tion. Mr. Harper: I know tha t we had antici pated tha t this line will be built or at least be in the construction stage.

Every year that the year go es by, we are losing mon ey. There have been stu di es done and I think by building this line the sooner the better. I know tha t the provincial Government and Hydro will be in a better position if they have that line built in terms of subsidizing the rates that are being offered in th ose communi ties through diesel-power generating stations. Also, I find it very di fficult for the federal Government not to partici pate because it is in their interests to lower the costs.

I do not have the figu res in front of me but, over a period of time, there is going to be a million dol lars saved. I was jus t wondering whether this Minister has written a letter to the Minister of Ind ian Affairs to encourage him to com e to this agreement as soon as possi ble. Mr. Neufeld: As you know, we had an election earlier this week and the Minister of In di an Affai rs will undoub tedly be re-exam ining the pro posed line and will be in contact with us. I am sur e tha t the Premier (Mr. Filmon) has and will again be in contact with the Prime Minister on this very matter. Mr.

Harper: I am just tryi ng to make the point that every year tha t we lose building our line, I know the best time would have been in fall usual ly, so I would antici pate that if there is a go ahead on building this line tha t the arrangement should be made now in terms of antici pation maybe next fal l. Every year tha t goes by, we are losing mill ions of dolla rs. I hope the officials here wou ld try to convince the officials from the Hydro Department of Indi an Affa irs to come to their senses in terms of making thi s a reality as soon as possible.

I hope the Minister, the Chairman and mem bers of the board can see tha t this is a very economic al -if you look at it for econom ics and over tim e, it is goin g to 227 be a cost-sa ving endeavour. I ju st want to conti nue on the- Mr. Cha irman: Okay. Mr. Harper: One of the other thi ngs tha t we dis cu ssed was the proposal -t o the north east is the involv ement of the Nativ e people in terms of being involv ed in the construc tion, the line cutti ng. I will have to refresh my memo ry.

The line was pro posed from Kelsey, I bel ieve, into thos e areas and I hope the Manitoba Hydr o consid ered tha t the Nativ e people wou ld be inv ol ved in part of this whole exercise of construc tion and line cutting and th at Native people would be involv ed. Would tha t be the Minister's priority to ensure tha t Nati ve people are emplo yed and trained on this construction of this li ne? Mr. Neuleld: All the information I have seen on the propo sed line and the dis cussions we ha ve held sug gests tha t we will be giving a prio rity to the Nat ive people in the cleari ng. Mr.

Harper: Wha t is Hydro's position in terms of cost shari ng? Wha t is the rat io being negotia ted with the federal Govern ment? Mr. Neufeld: For details, I will turn you over to Mr. Lambert. Mr. Lam bert: I think tha t remains to be seen. I think we are in a point of di scus sion with the federal Government. We recog nize tha t the bulk of the benefits accrue to the federal Government in terms of fut ure savings and, as a result, we believe that they have to be very heavily inv olv ed in the contributions. I think it will have to wait and see how the dis cussions go. Mr.

Harper: I know that the federal Government has an enormous amoun t of responsi bili ty in this area becaus e it is predomi nantly Treaty Indi an people in th ose communiti es, and is it the Hydro's position tha t they wou ld be prov iding the capital costs initially once they reached ag reement or is tha t to be determ ined, negot iated wi th the Depart ment of Indian Affairs? Mr.

Lamb ert: In the position paper tha t we ha d developed , I gu ess it is a year and a half or a year or so ago, we had incorpo rated in that a numb er of principl es and one of them was tha t Manitoba Hydro would essentially finance the line and it wou ld be paid for through the su rcharge on electricity rates over a period of time, as a result of the savi ngs tha t the agencies wou ld get as a result of the line being in pla ce. I might add that incorpor ated in tha t document also was a provision for the involv ement of the com munit ies in the work of building the line.

We are opera ting and work ing in line with that document. Mr. Harp er: My final question to the Minis ter, can convince the Minister to work on this and try to get the federal Government on side as soon as possible on this, becaus e I think it is essential for economic reasons and health reasons, and particularly in that area. I think tha t needs to be look ed on right away.

Thur sday, November 24, 1988 Mr. Neufeld : I can assure Mr. Harper that it has a priority and we will be pursuing it with the federal Government and the Ministers involved. Mr. Enns: Do you want to pass the report? Mr. Angus: Not yet, Harry, thanks. Not too long though. Mr. Chairman: We have promised Mr. Angus some time on his free trade, so- Mr. Angus: Do you want me to repeat the question? Mr. Chairman: Yes, please. * (12 10) Mr. Angus: Well, without fear of contradicting what was written down two pages prior, I would just like to Mr.

Chairperson, the thrust of my question is to find out what plans the board has or the corporation has to participate actively in the process of the Free Trade Agreement that is imminent to ensure that we get the best for Manitobans and do not get left out in any way. lt is a legitimate question, Mr. Chairperson. I recognize that it is very new in the agreement, that Parliament is going to be called back and things of that nature, but it just seems to me with some of the ambiguity in relation to the dispute settlement mechanism that it is important that we have at least a player at the table at different levels.

Perhaps the board could share with me what their intentions are in this regard. M r. Rans om: Mr. Chairman, we recognize the potential impact of the agreement. We recognized that some months ago and the process that was put in place at that time was to bring together people from Hydro, from the Energy Authority, from Industry, Trade and Tourism, from Energy and Mines. The group was asked to examine all of the arguments that were in place for and against, particularly those that were contrary to the agreement that said that it would have adverse impact on Hydro.

We asked that those arguments be examined very carefu lly and that management would come to a conclusion, as best they could, as to the potential impact of the agreement. Management concluded that there would be very little impact on Manitoba Hydro and, so long as the agreement had not been passed, then that was sufficient for me as chairman of the board and sufficient for the board.

Now that it appears that the agreement will be passed, then I will be asking the management of Hydro to glean through the legal opinions that we have, all of the resea rch that has been done and make recommendations to the board as to any specific actions that we should take, be those req uiring any changes in the way that our contracts are worded, or any possible changes in legislation that might be req uired. So all I can say to Mr. Angus at the moment is that is the way we have proceeded to this point, that is the way we intend to proceed from here on. 228 Mr. Angus: Thank you , Mr.

Ch airperson, and I appreciate Mr. Ransom's answer. With one proviso, it seems to be a sound strategy and again just let me paraphrase so that we are talking the same language. You are going to ask those people who are in the best position to influence a decision to prepare a report to the board on the cause and effect and the various steps that you can take and then you will be making some judgments. Th ose judgme nts will depend on the results you get back in. Let us not exclude, Mr.

Chairperson, if I can be permitted to advise some sort of a watchdog or a lobbying association in the American system to-a first alert system, if you like, in relation to being aware of protectionism legislation as an example that may be mounted by strong lobby groups, as the mem bers of the administration alluded to. The coal lobby is one that they specifically alluded to but there are a number of others that can begin actions that we should certainly be on guard of. The one proviso that I would suggest to Mr. Ransom is that the agreement is going to be signed and in effect the 1st of January 1989.

Any legislative changes-those are his words-that are required, perhaps you can put those on, as the Americans say "the fast track" and bring those back to this House so that we can-if they are required, I do not want to find out in the next Session that it is too late to bring in legislation that we should have brought in this Session. Again, let me absolutely and and positively identify that it is not defeatist type legislation that I am looking for.

That battle has been fought and lost, and I am looking now for protectionism type of legislation that will allow Manitoban Hydro to continue to function with the sovereignty rights that we have been assured are there and with the decision-making capacity that we want to maintain for future generations of Manitobans. With that proviso, I cannot do anything to make you bring the legislation changes back in but, if there are any, I would urge you to bring them in as quickly as possible. Mr. Ransom: We take those comments very seriously, Mr.

Angus, because we recognize that the board and the mana gement of Hydro are going to be held responsible for action or the lack thereof with respect to the impact of this agreement on the future of Manitoba Hydro. Therefore, you can be assured that we wi ll be examining all of the possible steps that we might take with great care, just as we examined, without restriction, the potential impact of the agreement on us while the debate was still taking place. Mr. Angus: Thank you, Mr. Chairperson. I have no further questions. Mr. Chairman: Mr. Storie or Mr. Harapiak. Who wants Mr.

Harapiak: I would jus t put the question of how long we are going to be going, because it appears that there are still several questions to be asked and we will not be completing today. Should comm ittee rise?

Thu rsday , Novem ber 24, 1988 Mr. Chairman: Well, tha t is up to the committee. Did you want to take a crack at completing tod ay, or di d you ... Mr. Storie: I do not think we will be able to com plete tod ay. I have a num ber of questions on affirma tiv e action , and I have a couple of comments on ma tters raised by Mr. Angus, but I think it would be unfai r to have this many staff return for another meeting.

I think the issues tha t I intend to rais e-a nd I think there is agreement perhaps tha t we would limit it to northern issues during the next meeting. lt could perhaps be done before the 12: 30 dead line next time, but clearly we will not be able to finish tod ay. Mr. Neufeld: The question has been rais ed, should we bring the MEA in at the same time so we could deal with both those reports. I think we have dealt with a substantial amount of the MEA questions alr eady. We might be able to fin ish them both in the next session. Mr.

Storie: Well, I am not sur e how MEA is going to be brought in anymor e, because I ga ther it is now part of the Department of Energy and Mines or it is funde d by them. I do not know whether it is brought in separately for the com mit tee, or whether it is part of the Energy and Mines Estima tes debate. I am not certain of that.

That, I think , is still a ma tter for the House Leaders to determ ine in terms of the timing of the next commit tee and whether it would be appropria te if MEA is scheduled before the commit tee. lt would make sense, obvious ly, if we can do it and 1 can only sugge st I will take that und er advisement and perhaps my col league from Ni akwa (Mr. Herold Driedger) will do the same and rais e it with our House leaders.

A couple of question on the affi rma tive action, the num bers tha t were passed out some what earl ier this morning are qui te instructiv e, and I am wonderi ng whether -a nd forg ive me if I mi ssed a couple of sessions and perhaps these questions were asked Manitoba Hydro has establis hed a qu ota or at least a target for each of the emplo yee job categ ory groups when it comes to affirmativ e action, specifically with respect to women , abor igina ls and the hand icapped . Ms. Linda Jolson (Vice President-Corporate Relation): No, we have not. * (12 20) Mr.

Storie: I guess to the Minister then, Manitoba Hydro has not establ ished any clear objectiv es for itself. I am relying on the Minister, I guess, to determine what the best cou rse of action is but it seems to me, unless you set objectives, unless you esta blish a firm num ber, a target, either in terms of percentage or in terms of actual num bers, it seems to be there is an in-built reluctance or inabili ty for organ izations to accom plish, in any effective way, our goals. The Minister had said earlier that he was not in favo ur of quo tas.

I am wondering how the Minister intends to reach at least a minimum ob jective. I am assu min g a minimum objective wou ld be to have visible mino rities, Nati ves, 229 women represent at least their respective proportions in the popula ti on. Is tha t an objective? Have we set any goals for ou rselves? Mr. Ransom: Si nce this is a matter of board polic y, the way tha t the board has app roached it is tha t we have sim ply left in pla ce the pol icy tha t was in pla ce by the previous board . I am sur e tha t Mr. Storie would be fami liar with th ose policies.

The way tha t we are appr oaching it is tha t we want to see how tho se polic ies were working and how well th ose objectiv es were being met. Then any act ion tha t we take, any change in pol icy will be in an effort to impr ove the performance of the program. lt wou ld be too early to sug gest right now exact ly what chan ges might be recom mended becaus e they have not progre ssed to tha t point in eval uation yet. Mr. Storie: I appr eciate tha t and I appr eciate tha t there has been no change to the poli cy.

I think, unfor tuna tely, the pol icy tha t was im plemented and took some time to im plement or to develop, I should say, has not been as su ccessful as we would like. I think tha t is clear. If 1 you look at the numb ers, it is qui te clear tha t even in terms of some minimum standard of acceptabil ity we have fa iled. I am not laying the blame at the feet of Manitoba Hydro or the board or anyone else. I am simp ly sayi ng tha t while our goal, I think, was laudable and we establ ished a pol icy that we thought would take us there, we did not succeed.

We have no people of Native ancestry in the executive branch. We have very, very few, .2 percent in engineering and engi neering support. I know Manitoba Hydro has done some things to impr ove tha t, but it seems to me there is a gr eat lik eli hood of us either not proceed ing, impr ovi ng the cir cums tances. There is even a possi bil ity of us falling back unless we impr ove the poli cy, unless we try and giv e it mor e structure. That is why I asked about the question of quota or establishing some target numb ers.

I am wonderi ng, if we ju st looked at Manitoba Hydro specifical ly and the job categor ies tha t were described and have been identified , whether the Minister could tell us wha t his minimum objectiv es are for the next ' four years or the next five years for Manitoba Hydro. Do we not have any? Does the Minister not think that simply wait ing to see how effective the policy is, does he feel tha t is an acceptable management deci sion? Mr. Neufeld: First of al l, I wou ld like to say tha t the setting of qu otas is, in effect, reverse di scri mi nation. I am not in favo ur of sett ing of quo tas.

This is a matter of mon itori ng, it is a matter of educa tion, and it is a ma tter of the board coming back to the Cabi net or to the Minister with its recommenda tion for the changes that they see should be made. lt is not a matter of the Minister di ctating to the board as to the quo tas tha t should be instal led. Mr. Storie: I am not sugg esting that the Minister has to dic tate. I certain ly do no t accept the Minister's sugge stion that establishing a quo ta or a goal is reverse dis cri mi nation. I ha ve had this discussion with other Members of the front bench of this Gov ernment who

Thur sday, November 24, 19 88 do not seem to understand what affirmative action is. The fact of the matter is that you are still talking about hiring qualified people. The only distinction is, if that person falls within an affi rmative action group or category, they receive preference in hiring. lt seems to me a minimum objective to say that, given their rough proportions in the general population, it should be reflected in the pers onnel of Manitoba Hydro. Is something even that minimum not within the scope of the Minister's action? Mr. Ran som: would like to jus t point out, Mr.

Chairman, some of the concerns that I have and the questions that I think have to be answered before we can set our targets or our goals, or however you want to characterize them. Mr. Storie, for instance, made reference to the fact that there were no Native people in the executive level ol Manitoba Hydro. The reason for that of course goes back a long way, that the people who are in the executive have a certain number of years, would guess, probably 15 to 20 years of technical experience in the corporation.

So to simply look at a situation and say there are no Native people there is because we do not have an Affirmative Action Program, that may be but it is not because there is no! an Affirmative Action Program at the executive level. it is because there was not one 20 years ago at the lower technical level.

To simply say that there are 6 percent or 7 percent of visible minorities in Manitoba and that, therefore, we should have 6 percent or 7 percent of visible minorities in our work force, I think has some technical weak nesses to it in that the visible minorities tend to be concentrated in an area where Manitoba Hydro does not have very many employees. I think you wou ld agree that there tends to be more visible minorities in the City of Winnipeg than in the rural areas, but yet Hydro's distribution system is in the rural areas and the City of Winnipeg is served by Winnipeg Hydro.

So there is a danger, in my view, in putting too much weight on the figures and not enough weight on simply trying to remove barriers that are in place to prevent people from moving into our work force. So I would have to say that we simply have not had an opportunity yet to giv e enough attention to know how well the system is fu nctiot)ing now. If Mr. S!orie says he believes the system that is in place has failed, then that is certainly some thing that we have to take into consideration as well.

But it is not a question of a lack of commitment to seeing some of these things take place. lt is a question of how we can best achieve that, and that is still being addressed by the board. Until we have a chance to make informed decisions on policy changes, then the corporation will pursue the objectives that are in place. Ms. Jo!son would like to add something. Ms. Jolson: I would like to draw your attention to the increase in the percentage of women in the professional engineering category. lt has gone up to 6.5 percent.

The Dean of Engineering from the Univ ersity of Manitoba tells us that there are approximately 7 percent 230 women enrolled in the Faculty of Engineering at this time. So I think that indicates that overall we have done quite well in a very short period of time in recruiting female engineers into the work force of Manitoba Hydro. We deliberately set about and we had a bursary program that encouraged, that awarded a specific sum of money and sent information about that out to the high schools. So I think that indicates that one measure we used was effective. !'.llr. Stor ie: Mr.

Chai rpers on, I app recia te those comme nts both from the chairperson and from Ms. Jolson, and I did not intend to sugge st that progress had not been made. We have not come as far as we should and my feeling generally is that unless you set some more specific goals-management by objectives, in other words you say, this is where we are going to be in two years or five years, tends to lead to a greater degree of certainty in the bureaucracy about what we are doing and how we are going to achieve it than saying, this is our objective, period, to be a fair employer.

Obviously, once you have met your objective, then you can re-evaluate whether it is necessary to change your practice. * (1230) ! appreciate the comments made the chairman about the fact !hat there are many of people here on behalf of Manitoba Hydro today who have 20 years of experience but the fact is that, for example, in the clerical area in 1988, although we have achieved some improvement from .4 percent aboriginal employment to 1985 !o 1. 9 percent, clearly it does not take 20 years of experience to become a clerical staff in Manitoba Hydro. in the City of Winnipeg, there are 10 percent or 15 percent of the population, possibly as high as 10 or 15 percent, is of Native ancestryo Th ere is a category where clearly it does not require 20 years of experience.

So in those areas, can we say iet us have 5 percent of Manitoba Hydro employees over the next three years employed from this category, because Manitoba Hydro clearly can find those people, provide some training, support lt is much less expensive than training the professional staff at Manitoba Hydro. So there are some areas, it seems to me, where objectives can be set up and achieved more easily than in others, and I appreciate that.

My experience tells me that in departments in Manitoba Hydro, and this is no reflection on personnel, hiring takes place on the basis of qualifications and you need an MBA to gel into this area or a degree in social sciences. Those are often interes ting requirements, but they are not necessarily absolute prerequ isites. They tend to exc lu de people when perhaps other measures could be used to encourage the hiring of affirmative action groups.

So there are sometimes systemic problems that inevitably lead to the hiring of people who have different life experiences and come to Hydro with perhaps the necessary skills but not obviously the necessary skills. I just think that it is important to have targets so that everybody can say this is what we are shooting for and how close are we getting. Mr. Chairman: Did you want to make a final comment, Mr. Ransom, the hour being 12:30 p.m.?

Thursday, November 24, 1988 Mr. Ransom: No. Mr. Chairman: The hour being 12 :30, committee rise. COM MITTEE ROSE AT: 12 :30 p.m. 231

Document details

Collection	Manitoba — Debates (Hansard)
Citation	34-1-punr12
Type	hansard
Volume / chapter	34th 1st hansardpdf punr12.pdf
Language	en
Format	pdf
Source	PROVINCIAL
Identifier	05f46f37bbe80243d4f389bad60246b55be4142c

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