ISSN 0542-5492 First Session - Thirty-Second Legislature of the Legislative Assembly of Manitoba STANDING COMMITTEE on PUBLIC UTILITIES AND NATURAL RESOURCES 31 Elizabeth 11 Chairman Mr. Harry M. Harapiak Constituency of The Pas VOL. XXX No. 5- 10:00 a.m., TUESDAY, 18 MAY, 1982. Printed by the Office of the Queens Printer. Province of Manitoba

MANITOBA LEGISLATIVE ASSEMBLY Thirty-Second Legislature Members, Constituencies and Political Affiliation Name ADAM, Hon. A.R. (Pete) ANSTETT, Andy ASHTON, Steve BANMAN, Robert (Bob) SLAKE, Davld Ri (Dave) BROWN, Arnold BUCKLASCHUK, John M. CARROLL, Q.C., Henry N. CORRIN, Brian COWAN, Hon. Jay DESJARDINS, Hon. Laurent DODICK, Doreen DOERN, Russell DOLIN, Mary Beth DOWNEY, James E. DRIEDGER, Albert ENNS, Harry EVANS, Hon. Leonard S. EYLER,Phll FILMON, Gary FOX, Peter GOURLAY, D.M. (Doug) GRAHAM, Harry HAMMOND, Gerrie HARAPIAK, Harry M. HARPER, Elijah HEMPHILL, Hon. Maureen HYDE, Lloyd JOHNSTON, J.

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

Rose Springfield Thompson La Verendrye Minnedosa Rhineland Gimli Brandon West Ell ice Churchill St. Boniface Aiel Elmwood Kildonan Arthur Emerson Lakeside Brandon East River East Tuxedo Concordia Swan River Virden Kirkfield Park The Pas Rupertsland Logan Portage la Prairie Sturgeon Creek Seven Oaks Niakwa Radisson Charleswood St. James St. Johns Morris Roblin-Russell St. Norbert Assiniboia Gladstone Pembina Selkirk Transcona Fort Rouge Wolseley Dauphin Turtle Mountain Burrows Rossmere lnkster Fort Garry Os borne River Heights Flin Flon lnterlake Lac du Bonnet St.

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LEGISLATIVE ASSEMBLY OF MANITOBA THE STANDING COMMITTEE ON PUBLIC UTILITIES AND NATURAL RESOURCES Tuesday, 18 May, 1982 Tuesday, 18 May, 1982 Time -10:00 a.m. CHAIRMAN, Mr. Harry M. Harapiak (The Pas) MR. CHAIRM AN: Call the Comm ittee to order. We have a qu orum. We're on Public Utilities and Natural Res our ces. We're considering the An nual Report of the Manitoba Hydro-Electric Board. I believe there was a few questions asked at the last meeting at which Mr. Cherniack has the answers for, so we'll start with him. Mr. Cherniack. MR. S. CHERNI ACK (Chairman of the Board): Mr. Chairman, I think it was Mr.

Rans om in both cases, but certainly in one case, he asked for a breakdown of the change in the estima tion of this cu rrent year from the '79 forecast and the 19 81 forecast broken down as it was affected by low water and/or hig her inflation and/or higher interest rates. Mr. Blachf ord has that. I think it was again Mr. Ransom who asked about the effect of the dating for the Limestone generation and Mr. Blachford has a chart for that. If you like, Mr. Ch airman, we can do it now or any ­ time that suit s the Comm ittee. MR. CHAIRM AN: I believe we should give the answers now. Is that agreeable? Mr. Ransom? MR.

A. B. RANSOM: Yes, I think that would be a good idea, Mr. Chairman. I believe my request the other day though was for the difference between the projections that were made in '79 and the projections that have subsequently been made, not ju st deal ing with one specific year. MR. S. CHER NIACK: Well, it was prepared for one year. Do you have others? Well, it was prepared ju st for the one year but it was tha t difference that Mr. Ransom asked but it's only for the one year. MR. CHAIRM AN: Mr. Blachford. MR. L.D. BLACHF ORD (President and Chief Execu­ tive Officer): May I ask Mr.

McK ean, he has a projec­ tion of these figur es to put on the board. MR. CHAJRMAN: Mr. McKean. MR. A.K. McKEAN (Assistant General Manager of Finance): I've prepared this answer, I gu ess along which I though t was your qu estion, Mr. Ransom. We'll see whether we have come clo se to answering it. First of all, what I'm sho wing here- back in February of 19 79, there was a projection prepared by our department and the top line shows what we projected would be our results at the time of the rate freeze and assumin g tha t the debt, the risk would be tu rned over to the prov ince.

You'll notice on tha t top line, we're sho wing '79 to '83. These are in mill ions of dol lars. In 75 '79 we predicted that we have an excess of revenue of $4 1. 7 million and then $5.4, $1 9.8, $24.5 and then $1 4.7. The next line below we're showi ng actually what happened in those three years actually. You'll notice in '79, $45 .7 was the actual results. In 19 80 was sign ifi­ cantly better than had been predicted mainly because of water conditions and of $45.6 million. In 19 81, we lost $1 6.3 millio n. Again, that $1 6.3 mi l­ lion was primarily a result of drough t conditions.

No w there will be a numb er of other things that entered into it but certainly as far as 19 81 , 16 .3 was the result of drough t conditions. In 19 82, the year we ju st finished, you'll notice we show tha t on the bottom line as a prediction because we didn't have the final figur es at this point and still haven't got exact final figur es. We're predicting a loss of $27.8 milli on and Mr.

Blachford, in his open ing remarks, com mented on the fact that in that year the drough t conditions cost us somewhere in the neigh­ bou rhood of $40 to $50 mill ion and therefore the main difference in that year of '81- 82 again was primarily drough t conditions. Now '82-83 are both predictions for the futur e and you'll notice that we originally predicted that we would make $14.7 million and we are now predicting that we'll lose $22.7 million.

I felt that was probably the biggest year that you want an explanation for because tha t spread is the main reason why the recom menda­ tion was made for a rate increase at this point of time rather than a conti nuation of the freeze as menti oned earlier. My colle ague and myself sat down in the last two or three days and tried to com pare those two estima tes.

Now I will hedge to a degree in saying that when you comp are estima tes that are prepared four years apart there are many things that go to make up the differ­ ence and it is very difficul t to exactly tape it down to one definite cause but we made an attempt and wha t I want to sho w now, and it might even help for discus­ sion pu rposes, I have some copies to hand around. I don't kno w whether I have enough copies made to take care of the whole Comm ittee but I'll ju st wait un til those are distributed.

I'll perhaps pinpoint the note at the bottom first, that the causes of the deterioration are based to a large extent, on judgme nt following a review of the two estimates, therefore they can only be considered to be a reasonable estima te. There are many reasons when you look at changes between estimates made four years ago apart, but my col league and myself are ready to say that in our opinion this is a reasonable estimate of the reasons for the change.

Now you will notice at the top we're ju st recapping the fact that in 19 79 we made a forecast of a $14.7 milli on excess of revenue and we are now predicting a loss of $22.7 milli on, or a chang e of $37.4 million in that period. Our caus es of deterioration: No. 1, water condi­ tions. We say the cause is nil in this case because both the se predictions are based upon an estimate of aver­ age water condition s and therefore there should be no

Tuesday, 18 May, 1982 reason for the spread caused by water condi tions in this case. Now that doesn't mean that we'll not have a difference because of water conditions but the actual conditions will be different Now in our opinion, the increase in interest cost due to higher interest rates than assumed in the origi nal forecast, has caused the deterioration of 14 .4 million.

This is based upon the fact tha t we were predicting over this period of interest rates of less than 10 per­ cent and in actual fact we, last year, had interest rates of approximately 18 percent and the year we're going into, we're predicting 15 percent So that reason, we think, has caused deteriorat ion of $14 .4 milli on. The increase in operating and admins trative expenses mostly due to higher escalation than assumed in the original forecast, we estimate has cost $15 .5 million of deterioration.

Again, this is the fact that we were pre­ dicting inflation rates and costs of between 6 and 7 percent back in 19 79 and we have defin itely expe­ rienced much higher rates of inflation in this period than that The third reason, increase in water rentals due to increase in rates of this assu med in original forecast; there was a su bstantial increase in water rental rates two years ago and we estimate that cost $6 million. We also think tha t we have reduced our estima tes of what we expect to get from extra provincial revenue.

Extra provincial revenue has not escala ted in price as much as we predicted back in 19 79. I think there has been some discussion of this before the Comm ittee, but in general our neighbour s have brought on new genera­ tion and although we are qu ite satisfied that the rates we're getting are very su bstantial, they have not escalated in price as much as we predicted back in 19 78-79 and we are estima ting that that has caused a deterioration of approximately $1 1 million. Total those up - they come to $46.9 million.

We also think that the estimate of net savings due to lower growth in Manitoba load than assumed the orig­ inal forecast has saved us $9.5 mill ion. Now, that is probably one that you might qu estion. Two things have happened with reduced load growth.

One is that which we have not sold in Manitoba we have sold extraprovinc ially for satisfactory prices but in addi­ tion to tha t our amount of construction of distribution lines and sub transmission lines throughout the prov­ ince have been su bstantially decreased in vol ume due to that reduced load growth, and our estima te is that the reduced load growth has actual ly caused a saving in this period. We take that $9.5 million away and the total is $37.4 million.

Again, I admit tha t it is arrived at based upon a good deal of judg ment by myself and my col league, but in our opinion, this is a reasonable estimate of what has accounted for the deteriorating condition today as com pared to one that was prepared four years ago. I do n't kn ow, Mr. Ra nsom, whether that has answered your qu estion, but that was what we have done so far. MR. A.B. RANSOM: That's very interesting in forma­ tion, Mr.

Chairman, I ju st wanted to clarify then tha t forth is year at least that on the 14 .4 mill ion that comes about as a result of a change of close to 5 percent in interest rate from what was being used as a basis of prediction in 79 and what is now being used. 76 MR. A.K. McKEAN: That is correct but it's accu mula ­ tion. We had borrowed money last year at a higher rate than predicted back in 19 79 and those costs continue on to this year so it's an accu mula tion of borrowings at higher rates than estima ted over the last two or th ree years.

But in actual fact the main increase in borrow­ ing has been in the last, I'd say 12 months, I think up till -I don't kno w when the big take-off took off in high er interest rates - but it wasn't in the first year. I think the most su bstantial increase has actually been in the last 12 to 15 months. MR. A. B. RANSOM: Then is Hydro essentially lock ed into that now even if general interest rates were to drop by 2 or 3 percent, that this is some thing that ... MR. A.K.

McKEAN: Wel l, there was a certain amount of lo ng-term borrowing done in the last 12 months -I haven't got the figur e right handy with me - but I know there was two issues, at least, that were long er­ term issues that were - I'll ju st check on that, Mr. Ransom - for instance, in the last 12 months we have borrowed approximately $10 0 mil lion in long-term issues. I think one of the issues was in New York and one was a roll-over of a borrowing in Switzerland.

Now, those issues are charged to Man itoba Hydro at the Canadian equ ivalent at the time of the borrowing but they are lon ger-term issues and certainly those interest rates will stay with us until the maturity of the issues. No w as far as the shor ter-term borrowings, they are borrowed on the short-term market and certainly if interest rates went down and we fina nced them they would automatically go down too. But, that $10 0 mil ­ lion, I think the Swiss issue was a 10 year issue and the New York issue, I think also was 10 years if I'm not mistaken, I haven't got the details with me right handy. MR. A.B.

RANSOM: I believe those were charged back to Hydr o at approxima tely 17 percent? MR. A.K. McKEAN: I haven't got the figur e handy with me but it was in that neighb ourho od, Mr. Ransom. MR. A.B. RANSOM: I ju st wanted to determ ine in general terms, Mr.

Chairman, what would happen now if interest rates were to decline again, if they went back to the level that they were in 19 79 when the projection was made, to what extent would Hyd ro's projection go back to wha t it was in 79, has it now escalated irrevocably by a qu arter, a half, or ju st give any rough indication of what would happen if the rates dropped agai n? MR. A.K.

McKEAN: We did give an estima te on, I think, last Tuesday showing what the effect on our operating accoun t would be, a plus or minus 2 percent in interest in escalation. 1t was not a sign ificant drop in the operating because our borrowings have not been su bstantia l in the last two or th ree years mainly because our capital construction has been not at as high a level as we've had in the earlier years but there would be some drop and it was shown. I haven't got the figur e exactly here, Mr. Rans om, but it would cer­ tainly im prove the situation if the interest rates drop.

I think we also showed the first day what assump tions

Tuesday, 18 May, 1982 we were making on interest rates for the next five years and we actually were predicting a drop in inter­ est rates. Again, I could maybe show you what we were predicting. MR. A.B. RANSOM: On the inflation item then, I pre­ sume that's basically what the $1 5.5 mi llion is. MR. A.K. McKEAN: The $15 .5 milli on is the inflation, wage settlements, everyth ing we purch ase from an operating point of view. MR. A. B. RANSOM: And that comes about as approx­ imately a 5 to 6 percentage point increase in inflation from what had been assumed in 19 79? MR. A.K. McKEAN: Yes, with gradual increase, Mr.

Ransom. In other words, I gue ss the past year our ass ump tion has been somewhe re in the neigh bour­ hood of 12 percent

whereas back in 19 78-79 we were estimating 6 or 7 percent over the whole period that we have in ques tion. MR. CHAIRM AN: Mr. Filmon. MR. G. FIL MON: Mr. Chairman, un der the last item that says: "Reduc ed Extra Provincial Revenue due to Decrease in Selling Prices to Assumed Prices in Orig­ inal Forecast," what contracts or what agreements do those decreases in sellin g prices arise from? MR. A.K. McKEAN: They're not any contracts. Practi­ cally all our sales now are based upon surplus sales.

The last contract we've had of a firm nature was with Ontario and the main part of that contract ended in April this year although there is small firm contracts during the sum mer for the next couple of years. But this is an estimate of what we expect to be able to sell on the open market, our surplus generation, to our neigh bours. Now this is not a decrease in estim ate; it is a decrease in escalation that we had expected.

In other words we had expected that these sel ling prices would have increased back in 19 78-79 but in the inter­ val there has been a good deal of new thermal, rela­ tively cheap thermal, generation that has been brought into operation by our neighb ours south of us and also Saskatchewan and as a result we are not estima ting that the extra provincial sales will escalate in price as much as we were back in 19 78-79. MR. G. FILM ON: Well then, Mr. McKean, are you say­ ing that the price is based on the equ ivalent cost of thermal generation in these market areas to which we're selling? MR. A.K. McKEAN: Yes.

In most cases our sales con­ sist of sellin g off surpl uses to utili ties who have a surplus themselves. Our neighbours have not got a shortage of power; they have a surplus of generation; but a good deal of that surplus of generation is ther­ mal generation and therefore our sel ling price is very much geared to the savings that they can rea lize in fuel costs. MR. G. FILMON: Could Mr. McKean identify who 77 these neigh bours are to whom we are sellin g? MR. A.K. McKEAN: Yes, we sel l to Saskatchewan Power west of us, we sell to Ontario Hydro east of us and south we have three lines.

We have one going to Gra nd Forks and that is owned by Northern States Power, Otter Tail Power and Mincota Power and we have a line that goes to Dulu th which is owned by Minnesota Power and Light and we have a line that goes to Min neapolis which is owned by No rthern States Power. Our market is governed by dealing with the utilities who you are interconnected with, although in some cases those util ities migh t be resel ling that power to other utili ties. But we have to sell our power to the util ities that are interconnected with Manitoba Hydro. MR. G. FILMON: So Mr.

McKean is saying that in many cases - because I find it rather interesting that these people are buying surplus power from us when presu mably they already have surplus generating capacity - they're buying from us and reselling it at a mark up or at a profit, is that it? MR. A.K. McKEAN: In most cases they are buying it and not using their own generation. I think the numb er one use is to enable them not to use their own ge nera­ tion and the savings to them is in fuel. MR. G. FILM ON: Well, in that case then, are they buying it cheaper from us than it would cost them to generate themselves? MR. A.K.

McKEAN: Oh yes, because if they did not they would keep using their own fuel. They're not short of fuel and therefore our market price is limited; it cannot be higher than their cost of alternate genera­ tion or they'll use their own alternate generation. MR. G. FILMON: Mr. Chairman, I wonde r then, how are these agreements on price arrived at? Are they on a year basis? Is there some sliding scale? What's it related to? In other words, how do you arrive at the price so that it doesn't meet what your expectations had been in the past? Was there not a formula struck when the lines were built or ... MR. A.K.

McKEAN: Most of the sales are on an inter­ rup tible basis and are actual ly negotiated day-by-day or week-by-week. Now, there's a certain numb er of transactions that were related to those lines. They are relatively mino r in total selling of extraprovincial sales. I migh t say, the sales are interruptible to the degree that if, for some reason, we need it ourselves in Man itoba, automatically those sales would be cut off.

For instance, if we have any troubles in Ma nitoba the first supply of power that is cut off is those exports and as a result, these are very signif icant in maintain ing the security of power to the Mani toba cus to mer. But these sales are generally arrived at on a daily and a weekly and a monthl y basis, based upon the individ­ ual loads that are going on in our neighbou rs' and what type of generation that they would be generating if they did not get power from Manitoba Hydro. MR. G. FILMON: In other words, they tell us what

Tuesday, 18 May, 1982 price they are willing to pay? MR. A.K. McKEAN: Well, it's a buying and selling situa tion. We tell them the price that we're willing to sell at because quit e often the price they're willing to pay is not as high as we're willing to sell at, in which case we don't sell it. We can store the water in our reservoirs. MR. G. FILMON: I'm aware of that and that's why I'm asking the question. Then what is the average price that we've been selling it at, say, this year? MR. A.K. McKEAN: I think we, on the first day, we gave that figur e out.

I think we can get tha t - 58.8 mi lls was the overall average of sales on our extraprovincial. MR. G. FILMON: Does that tend to be high er or lower in our sales to the U.S.? MR. A.K. McKEAN: Can I ju st get tha t sheet tha t we had the first day? I think it's fair to say the U.S. price was the hig hest but I'll ju st ... Yeah, I have the sheet we made reference to the first day. For the year that we've ju st finished, Ontario average was 14 .6 mi lls, the Saskatchewan average was 20.3 mill s; it was the high ­ est. The U.S. average was 15 .8 mills and the com po­ site of all those was 15 .4 mills.

You mu st take into consideration that the price var­ ies tremendously whether you're selling in the middle of winter, or whether you're sel ling to a system that is turning off expensive thermal. But those are the fig­ ures for last year. Now that was a drought year. If we had an average flow year, those returns would proba­ bly tend to reduce. MR. G. FILMON: In a drough t year they'd tend to reduce, did you say? MR. A.K. McKEAN: No, in an average water year, they would tend to reduce from these results, because these results are based upon the year we ju st finished which I would classify as a drough t year.

MR. G. FILM ON: So in other words, we hold out for a greater price when we have less water and vice versa when we have more water. MR. A.K. McKEAN: Oh, very much so, because we certainly will not sell at a price that's lower than we might later have to bur n coal in our own generators to . MR. G. FILM ON: Who paid for the original capital cost of these three transmission lines? MR. A.K. McKEAN: Man itoba Hydr o paid for part of a line to the border. MR. G. FILM ON: Man itoba Hydr o paid for the which line to the border? MR. A.K. McKEAN: All three lines.

Ma nitob a Hydro owns the line to the U.S. border and the utilit ies I mentioned financed the lines from the border to either Grand Forks in one case. Dulu th in another case and 78 Minneapolis in the other case. MR. G. FILMON: Mr. Chairman, what portion of the costs of these transmission lines between Winnipeg and these three load centres would it work out to, tha t Man itoba Hydro paid? Is it close to 50 percent of the original Capital cost? MR. A.K. McKEAN: I'm doing some guessing here, Mr. Filmon. The Grand Forks line, I would gu ess tha t the border's about half way.

In the case of the Duluth line there would be more in the U.S. and in the case of the Minneapolis line there would be cons iderably more in the U.S. Now, I haven't got the mi leages with me, but generally the percentage would be dependent upon the amount of distance between the border and the eventual destination, and Winn ipeg to the border. MR. G. FILM ON: When we were making the decision to construct those lines, a pretty major Capital investment involved, there mu st have been some assum ed rate of return on that investment at the time of construc tion.

Why was there no firm way of fixing the rate of return with our American customers? When you're talking in terms of hun dreds of mill ions of dol­ lars of investment, and I assume it's in that order of ma gnitude, was it not in Man itoba's interest to assure some rate of return on that investment? MR. A.K. McKEAN: I say yes, and the rate of return in my opinion would be very high.

In each case, there was a numb er of transactions that went into building the line in order to cover the cost from both parties' point of view, but those transactions are relatively mi nor com pared to the main flow of power, of surplus power that can take place which is on a nonfirm basis and which will vary conside rably depen ding upon whether we have high or low water conditions. For instance, the Minneapolis line is a good exam­ ple.

Nor thern States Power are guar anteed a qu ant ity of surplus power at their displacement, at a price based upon their displacement fuel, before we can sell surplus to any other util ity in the U.S. In addition to tha t, the line was ju stif ied on a sum mer -winter exchange of capacity which is strictly a return summ er and winter. ln addition to that, NSP does buy firm, 200 megawatts from us in the sum mer months which they pay us for. But in total, that is a relatively minor part of the total transactions of the interruptible sales.

Our big volume of interruptible sales are related to the fact tha t we have a surplus and which we market to whoever will pay us the best price on a daily, weekly and monthly basis. I' ve covered very generally, that contract. it's a long contract, Mr. Filmon, and I haven't got the details right with me, but I think I covered mo st of the factors tha t were includ ed in it. MR. G.

FILM ON: Are there opportunities to sell power beyond the markets that we've identified in Duluth, in Min neapolis, Grand Forks utilizing these trans mis ­ sion lines that are in place; in other words, to transmit it beyond to util ities in Wisconsin, Ch icago and so on? MR. CHAIRMAN: Mr. Cherniack.

Tuesday, 18 May, 1982 MR. S. CHER NIAC K: Mr. Chair man, I wonder if I could respond to Mr. Film on's questions in the lay­ man's terms that I've learned in recent months? Firstly, I und erstand that because we have surplus power for sale, it can only be sold on an interruptible basis, otherwise it might turn out to be shor t for us when we need it so that there are no gu ar·antees as to our se lling it or being compel led to sell it except for the small amount mentioned from Mr. McK ean.

Never­ thele ss, these interruptible sales, I unde rstand, are a su bstantial benefit to Manitoba Hydr o and definitely do ju stify the expenditure on the three lines referred to, lead ing to the south. As I un derstand it, a great benefit is that sales take place daily and nig htly. In fact, it was described to me- and I want to pass this on to Mr.

Film on and want to be corrected by the experts if my impression is wrong - that because thermal and especially nuc lear production of energy canno t be turned off and on as easily can hydro-electric power, the surplus that occurs in the United States at night is some thing that we can use and we can buy at nig hts.

The power that they're generating because they can't help it, they can't jus t turn off their plant from generat­ ing but at night we can indeed tur n off our water supply and build up our water reservoir which makes it valuable to us for use in the day time when there's a demand in the States for power and we can sell power to them in the day time following the night when we bought power at a lower rate. We can sell it at a higher rate by tur ning on the tap in the reservoir which we had built up during the night.

Now, this relationship also occurs as between sum mer and winter because our big gest use is in the winter

whereas because mainl y of air conditioning I'm told, the Un ited States' bigger use is in the summ er and again , we can take advantage of their surplus production in the winter to our benefit and use that in order to store up more water.

Now, the last que stion as to whether or not it's possible to increase sales and make more definite sales, we've already referred to the fact that negotia­ tions are now taki ng place with Wisco nsin; that nego­ tiations are well advanced in with Nebr aska and the MAND AN and are awaiti ng approval in the United States of their buildin g their part of the line and that we re-open negotiations with WAPA, the Western Area Power Administra tion, which is a government agency and whose negotia tions with hydro were cut off sometime ago as reported by the former Chair man of Hydro, they were cut off from further negotiations.

I can qu ote from a letter that Mr. Kristjanson sent or del ivered to Mr. Paras hin where he said: "This study" -t hat's the WAPA study - "has been deferred pend­ ing the outcome of discussions related to a proposed Western In ter-Tie." On the instructions or request of the government, we've re-opened those discussions and I was down in Duluth with Mr. Jar vis and Mr.

Ga rry and we were there discussing the possibil ity in the lo ng-range of selling firm power for a limited period of time, even to the extent of bringing another plant in operation much sooner on the basis of firm power to be·sold to them, of cour se, at a beneficial price to us and in such a way tha t they will have advanced the mo ney for the con­ struction long ahead of our need. So tha t is a renewed negotiation which is ju st renewed in the last month or 79 two and we hope some thing may come of it. You never can tell. But those are the efforts we've made up to date.

There's also the poss ibility that WAPA cou ld help us in the m id-western area because being a federal gov­ ernment agency, they have more power, more rights to extend lines through the States than do the States them selves and they can bypass certain requi rements, so that there's a possibi lity that WAPA will give us greater opportunities to sell in the States. That is what I consider a layman' s report. I' d ask Mr. Bl achford if he would for a moment jus t tell me if I'm wrong in any respect and to correct me, please. MR. L.D. BLACHFORD: it's a very good overview, Mr. Ch erniack. MR. CHAIRMA N: Mr. Filmon.

MR. G. FILMON: The 500 Kv transmis sion line con­ nection with Nor thern States Power, that is the one that termi nates in Min neapolis? Is that correct? MR. L.D. BLACHFORD: Yes it is. MR. G. FILMON: Can that transmis sion line be util­ ized for sel ling power beyond Minneapolis to markets say in Wisconsin, Illi nois or wherever? MR. L.D. BLACHFORD: lt is conceivable that it could be. However, the line is into the Northern States Power Company and they allege tha t this line is loaded as far as they're concerned on most occasions. MR. G. FILMON: You say they al lege.

Does that mean that Man itoba Hydro's not convinced that that line is loaded in most instances? MR. L.D. BLACHFORD: We don't have their numb er so we can't say that it is co rrect or not cor rect exactly. MR. G. FI LMON: Wha t else is being transmit ted on that line other than power from Man itoba Hydr o? MR. L.D. BLACHFORD: I believe there's a con nection point some place between here and Minneapolis where they can do transac tions on the line indepen­ dent of Manitoba. MR. G.

FILM ON: That con nection, is it used to trans­ mit power from No rthern States elsewhere or for them to purchase power to bring into their system? MR. L.D. BLACHFORD: I think it can work both ways. MR. G. FILMON: Which way does it generally work? MR. L.D. BLACHFORD: I'm afraid I have no idea. MR. G. FILMON: So in other words the agreement really precludes us from utilizing the transmission line that we have paid a fairly substantial amount for, to transmit power beyond the load centre in Minneapo­ lis?

In other words, if we were looking at markets beyond Minneapol is, we would have to cons ider the construction of an entirely new transmission line?

Tuesday, 18 May, 1982 MR. L.D. BLACHFORD: Or else we wou ld have to have the concu rrence of Northern States Power in transm itting the power over their portion of the li ne. MR. G. FILM ON: Was this possibil ity not thought of at all in the early '70s when the transaction developed or evolved? MR. L.D. BLACHFORD: I really don't kno w what the base parameters were at the time it was struck. Ho w­ ever, the portion of the line that was in Manitoba was certainly seen to be a beneficial line to have even un der the circums tances or in the way the contr act was written. MR. G.

FI LMON: Does it ap pear as though we're going to be held at ransom by Northern States Power in order for us to be able to transmit power beyond their load centres to other potential customer s? MR. L.D. BLACHFORD: I don't think we can ans wer that one with any certainty one way or the other. The only thing we can say is that in order to do indepen­ dent transactions over the line, we have to have the concur rence of Northern States Power. MR. G. FILM ON: If we were renegotia ting this agree­ ment would this be the type of agreement we'd coun­ tenance this time around? MR. L.D.

BLACHFORD: I really can't give you an answer to that either without knowing all of the cir­ cu mstances that might sur round such a negotia tion. I think it would depend on what the circu mstances were at the time. lt would certainly go and endeavo ur to get everything you could for the Manitoba consumer. MR. CHAIR MAN: Mr. Minister. HON. W. PARASI UK: Could I ju st get clarifica tion from Mr. Filmon on this point? We haven't really dis­ cussed deta ils of a couple of pending negotiations but the intent with respect to the Western In ter-tie is tha t it'll be owned by Saskatchewan Power in Saskatche­ wan.

It'll be owned by the Alb ert Govern ment in Alb erta. That seems to have been the way in which inter-ties have been developed for that portion within another province. The line is owned by that province or by the util ity in that province. MR. G.

FI LMON: I think that's an un derstandable situa tion but it would seem to me that if we were going into the Western Inter-tie and we did not protect our ­ selves to the extent that we would have the right to transmit energy beyond Saskatchewan into Alb erta without Saskatchewan's concu rrence at a later date, if that wasn't part of the original agreement we'd be in a terribly weak position to have such an inter-tie con­ stru cted with tremendous capital investment in Man itoba's end both in terms of the transmission facil­ ities and in fact the generation fac ilities and then find that at some futur e time Saskatchewan could say: "Well you ·can't transmi t power into Al berta unl ess we get some thing for it and we negotiate it later." Su rely that would ha ve to be all par t of the original negotiations. 80 MR.

CHAIR MAN: Mr. Minister. HON. W. PARA SIUK: In fact, that is some thing that I think we'll take un der consideration in determ ining whether the negotiations to date have enabled Mani­ toba to sel l power through to B.C. or into Montana or other places like that, throug h Al berta, and I'm not sur e and I would n't want to com ment on it at this tim e. I can appreciate the concerns of the mem ber and I'll certainly take those concerns un der advisement, both with respect to any type of sale of power to the west of us or any type of sale of power to the south of us or to the east of us. MR. G.

FILMON: Well, I gu ess what I'm saying is that it appears as though that sort of consideration was not taken into ac count in the early '70s when this 500 kV trans mis sion line was constructed to Minneapo lis and that we're now in a bit of a bind of having to bargain from a very weak position, if any position at all, to try and util ize our investment in that transm ission line to service mark ets beyond there and it seems to me to be a rather ridiculous position to be in. MR. CHAIR MAN: Are there any further questions? Mr. Chernia ck. MR. S. CHERN IAK: Mr. Cha irman, on that point, the assu mptions that Mr.

Filmon makes may be correct but they may also not be correct. I'm told that it was a good investment and is proving to be a good invest­ ment for Ma nitoba Hydr o to have built its line to the border. The investment by the jur isdiction or the peo­ ple who have the rights in Minnesota was their invest­ ment and, of course, like anybody makes investments, they expect their return. But since everybody wants to see a profit, no doub t they could be negotiated with and of cour se they'd be entitled to some rental, if nothing else, for the use of their lines, but that's negot­ iab le.

The only und erstan ding I have is that it was and contin ues to be a good investment for Man itoba Hydro. MR. CHAIR MAN: Mr. Filmon. MR. G. FILMON: Mr.

Cha irman, I'll acknowledge the fact that I'm sure the util ity had jus tification in terms of the original investment and is able to jus tify the returns that it is getting on the origi nal investment but there is obviously some expectation that greater returns could be achieved if future developments permitted it and now it appears as though those greater returns are rather limi ted. lt's always nice when you're looking at these things to take a long ­ range view as well as a short-range view of merely paying off the original investment. MR. CHAIR MAN: Mr. Parasiuk. HON. W.

PARASIUK: Again, is the memb er saying that with respect to any futur e developments and the ones that we're negotiating today, that we should ensur e that we have wheel ing rights through, beyond the end point because an inter-tie always can be con­ nected to another province or to another state?

Tuesday, 18 May, 1982 MR. CHAIRMAN: Mr. Orchard. MR. D. ORCHARD: Mr. Chairman. in relative terms. we have the Nor thern States Power Company in which we've got the 500 kV inter-tie. In relative terms, is Northern States Power a market of high electrical cost or mo derate electrical cost in the States or low electrical cost, as say com pared to Wisc ons in. Nebraska or WAPA? MR. CHAIRM AN: Mr. Bla chford. MR. L.D. BLACHFORD: I believe that Northern States Power is probably not the lowest area but neither are they in the hig hest area.

They're sort of on the edge of the coal fields as com pared with the Wisconsin and the Chicago area which were relatively a far distance from them . In the case of WA PA, their costs are very low; they're all hydrauli c and the area that they serve incl udes areas of some great coal fields in the United States. I would think that the com petition for energy sales. electrical sales in that area, would be stiff because of the fact that they sit in such large coal fields. I would venture to gu ess that Minneapolis is not the lowest but also they're not a very high cost area either. MR. D.

ORCHARD : Well then. for instance with Nebraska. is Nebraska in relative terms. is it a more expensive electrical energy area than say. No rthern States Power? MR. L.D. BL ACHFORD: I believe it probably is in an area that has lesser resou rces and therefore the costs are going to be somewha t high er than in Min neapolis. MR. D.

ORCHARD : Well. then would it be fair to say that the Wisconsin area and into the Chicago area, should Man itoba Hydr o either be able to achieve wheeli ng rights on the U.S. portion of the Minneapolis line to get into tha t market. would it be fair to say that returns to Manitoba Hydro could be higher than for sales to No rthern States Power termina ting at Minneapolis? MR. L.D. BL ACHFORD: it seems possible and that indeed is why the effort is being made to see what can be done to supply Manitoba power into that area. MR. D. ORCHARD : But follo wing on Mr.

Film on's qu estions. there might well be the problem of Mani­ toba Hydr o or Manitoba not being able to realize the full potential benefit of that higher priced market in Wisconsin and Chi cago because they would have to utilize the U.S. portion of t he Min neapolis line more or less at the Northern States Power terms. in terms of use of that line for wheeling power through. it might not be tha t Manitoba could achi eve the higher returns and, in fact. that No rthern States Power might be able to take a sizable portion of that increased return because of the fact they own the power line to Minneapolis. MR. L.D.

BL ACHFORD: There's always the possibil­ ity that you could build a separate line down into that area. As I say. it's a possibility. If that were to be the 81 case you'd also have to stack off the price of carrying that transmission line and the added costs tha t it would give to the power before it got into the Chicago or Wisconsin area. MR. D. ORCHARD: I would wonder that the Wiscon­ sin, Chicago area are not al ready inter-tied with Min­ neapolis. Is that not the case that there's presently an inter-tie between those two? MR. L.D.

BLACHFORD: There are some ties between the Minneapolis area and eastern Wisconsin, yes. but they're relatively weak ties. MR. D. ORCHARD: So that. for instance. there wouldn' t be a situation develop right now where Northern States Power could purchase interruptible power from Ma nitoba and wheel it on to Wisconsin and Chicago. There isn't inter-ties of sufficient capac­ ity to make that a profitable middle-man operation for Northern States Power at the present? MR. L.D. BLACHFORD: I think it depends on the qu antities of power you're speaking about.

If you're speaking about large qua ntities of power, 10 00 meg­ awatts or even 500 megawatts, I don't think and I'm sur e there is not. But if you're going to get down to 50 megawatts of power or 25. it's possible that dur ing certain hour s of the day they would be. I don't really know the details of these lines except tha t when we went over to Wisconsin to speak with these folk last fall. they indicated that they did have some lines in there; they were weak tie lines.

Northern States Power had, in fact, asked permission from the Wisconsin people to put in some larger lines in there and they were denied by the State of Wisconsin. MR. D. ORCHARD: The WAPA area, you mentioned that they are primarily hydraulic generation now. and in relative terms a more economical area than most that we could achieve an inter-tie with, and also that they're in the area of some fairly massive coalfields which I assume would make coal thermal generation an attractive alterna tive to their present hydraulic capacity.

Does this mean that the WAPA area might not return to Manitoba Hydro sufficient returns on power suppli ed through any interconnect that might be established to offset. say. the 40 to 50 mill on-line costs of the next station on the Nelson River? MR. L.D. BLACHFORD: I'd have to get down to the neg otiation on this; I should clarify first that WAPA does not have any thermal gen eration. I was referring to the general area that WAPA operates in and serves. I say 'serves.' they don' t serve all of the area that they operate in.

Again, in answer to your question, that could well turn out to be the case that you cou ldn't sell it for enough to ju stify building anything more on the Nelson River. it still has to be seen. MR. D. ORCHARD: A couple of qu estions on a differ­ ent topic. At present coming down from the Nelson River, I believe we've got an AC con nection 230,000 volt and we've also got the DC transm ission line. Now. those two lines bring down power from Kelsey, Kettle and Long Spruce at the present and also Jenpeg.

Tuesday, 18 May, 1982 What is the excess capacity in those lines? In other words. when Limestome come s on stream is there sufficient transmission capacity to ship Limestone production on either/or of those two existing lines? MR. L.D. BLACHFORD: If Lime stone were added to the system without any increase in generation as of now. the capacity of the high voltage DC lines would ju st be sufficient to carry the Limestone load. That is forgetting about the 230 kV lines which do not have much capacity over that distance.

But, you wouldn' t have any spare capacity on the line for outages. for accidents, for specific or eme rgency mai ntenance during the peak load on the system. MR. D. ORCH ARD : So tha t. is it fair for me to con­ clude from that, with construction of Limestone the DC line will be at capacity? MR. L.D. BL ACHFORD: If we buil t Limestone and did not do any more on the AC-DC lines they would be at capacity, yes. MR. D. ORCHARD: Wo uld it be in the system plan­ ning with Limestone coming on stream to make, shall we say, insur ance capacity available on the AC-DC then? MR. L.D.

BLACHFORD: No, the expansion is being done on the HVDC lines - high voltage direct current lines - and, in fact, work on that has already begun. MR. D. ORCHARD: That's on the existing line? MR. L.D. BLACHFORD: Tha t's on the existing high voltage direct cur rent transmis sion lines, yes. The line you see going across the cou ntryside stays the same, but this involves addition at both at Hen day and at Dorsey in order to increase the capacity of the line. MR. D. ORCHARD: As we proceed further down the Nelson River. I think there's - what is it, two mor e locations after Limestone of about 110 0 megawatts each?

If and when those come on stream, does that mean a parallel ing of the high voltage DC line? MR. L.D. BLACHFORD: Yes, more capacity will be requir ed from the Nelson River down to the load cen­ tre, wherever that load centre may be. MR. D. ORCHARD: What would be the Manitoba Hydro's cho ice? Would they parallel another DC line, has that been satisfactory? Or would, in fact, they go to 500 kV AC/DC line? MR. L.D. BLACHFORD: No, we'll be paralleling the DC lines not necessarily physically, but electrically there'd be HVDC lines coming down from the Nelson River to Southern Man itoba. MR. D.

ORCHARD: No w, I don' t have tha t great an und erstanding of the DC transmission, but I under­ stand that to del iver a certain amount of power a DC line in Capital cost is mor e expensive than, say, an AC/DC line because of your conversion at both ends to DC and then back AC/DC. 82 MR. CHAIRM AN: Mr. Paras iuk. HON. W. PARASIUK: A point of order, Mr. Chairman. I think this had been raised in the past two meetings and we're into the third meeting right now.

If , for any reason, the Opposition would like to recess for a while, or if they would like to poss ibly take my com­ mitm ent that if they're waiting for the Leader of the Opposition to come and raise questons, I'd be pre­ pared to go through the Annual Report and leave time available for him on the last page or whatever through the cour se of the next hour -and-a-half to ensur e that he has an opportun ity to raise questions. But I think to, in a sense, go over all the ground that we've gone over for the last two meetings, Mr.

Cha irman, I think hasn't generally been the practice in the past and I think we should try and move along. We have had, as I said, the two-and-a-half sessions. MR. D. ORCHARD: Wel l, Mr. Chairman, I'm sure the Minister will bear with me.

I only have another couple of qu estions on the AC line; I posed these questions when I was at Long Spruce last year and at that time there seemed to be an im pression given to me by Hydro people that AC/DC migh t be a potential line now because of cur rent Capital cost figur es - a mov­ ing target, shall we say - and I'd appreciate having the most current information that's available. So the capital cost of paral leling that DC line, even though that's rising theoretically qu ite rapidly, it still represents at the present analysis the most economic way to get additional power down from the Nelson River. MR.

L.D. BLACHFORD: Yes, the expansion that's being done on the lines now is the cheapest way because it's simp ly an addition to what is already there and obviousl y it's cheaper, for two reasons: one, it builds on what is already there, and secondly, Hydro tied in contracts a numb er of years ago when Bi-Pole Two was first beg un and this machi nery is cheaper than it would be if you went out and bough t it again.

Now, on the proposed Western In ter-Tie, the idea there is that it'll be built in such a way that a third high voltage direct cu rrent transmission line will be brough t down within hailing distance, shall we say, of South­ ern Manit oba where it can be used in the future. This line is still the only way to supply the loads we're tal king about supplying to Saskachewan and Al berta: (

a) it is seen to be cheaper and (

b) it helps the inter-tie planning for the conti nent and for Canada. When additional transmission is required from the Nelson River down to Southern Man itoba, of course, it'll be looked at again to be sur e that the DC, direct­ cur rent method of tran mission is still cheaper and if it's not, some thing else will be conside red. We can go to 500 kV or you can go to 750 kV as they've done in the Province of Quebec. MR. D. ORCHARD : What's the efficiency of the two methods of transmission in terms of loss in transmis ­ sion; ac is less efficient than the de direct? MR. L.D.

BLACHFORD: If you have the same amount of amp eres on the line, the direct cur rent is more efficient than the alterna ting cu rrent. That is, if you

Tuesday, 18 May, 1982 have a given set of circu mstances. If, when you go to look at the whole scheme, you have to determine you're tal king about in fact 735 kv or 500 kv and now you're tal king about 10 00 kv in the direct-current line. All of these things come into play. But, just taking the line losses thems elves, the direct-current losses of the same amount of am peres is more efficient. MR. D. ORCHARD : And by a sign ificantly greater efficiency to ju stify the additiona l capital cost even in today's terms? MR. L.D.

BLACHFORD: That's part of the viabili ty studies and certainly in the case we have now, it is cheaper. MR. D. ORCHARD: Thank you. Has Manitoba Hydr o done a cost an alysis on providing power grid con nec­ tion to the communi ties that are cur rently served by diesel genera tion? I realize there is some con nection to be achieved over the next year or so on some com­ muni ties east of Lake Winnipeg. How many com mu ni­ ties have been consi dered for hookup to the power grid? MR. L.D.

BLACHFORD: On the east side of Lake Winnipeg there are cu rrently five communi ties tha t are incl uded in the scheme that we expect will be and in fact I believe we've already begun. We look at most of these, if not all of them periodic ally. That is to say all of these locations to see if it's worthwhil e connec ting them to the central system or doing some thing else with them. In that connection, the commun ities well east of Lake Winnip eg in the God's Lake, Is land Lake area, we have looked at that and we've done a pretty com prehensive study on it.

The study shows tha t it's cheaper to con nect that area to the central integ rated system rather than build isola ted hydraulic genera­ tion. Ho wever, it is not at the stage where it's cheaper to do tha t than it is to con tinue burning diesel oil and supplyin g by the diesel met hod. In order to make it econ omic al as far as hydro's customers are con­ cerned, we'd need a very large contribution for that. We'll also have a study to supply the area of Puka taw­ agan and it's a sim ilar kind of case.

I bel ieve, as of a year ago, we required about a $1 million contribution to that scheme in order to mak e it worthwhile to the Manitoba consu mers to connect that communi ty to the central system. MR. D. ORCHARD: Now, I assume that when you are making your cost analysis or your benefit analysis, you'r e assu min g that for instance with Pu katawagan that they would be hooked onto the system with the same system rates tha t are say enjoyed in Thom pson or in Roblin? MR. L.D. BLACHFORD: Tha t is correct, yes. They would be on standard publ ished rates. MR. D.

ORCHARD: Now, have similar cost benefits been done for the other 15 or so diesel generation points as to the feasibili ty of con necting them to the power grid? MR. L.D. BL ACHFORD: These areas are reviewed 83 from time to time and I could n't tell you that all of the rest of them have had specific studies done recently or since their diesels were installed. But, certainly, the most likely ones that would show to be worthwhile connecting to the central system are done periodically. MR. D.

ORCHARD: But, whenever they've been done it appears as if there has to be some sizeable input for construction of the line in order to make those eco­ nomic at system rates. The system canno t put those lines in, finance the capital costs them selves and expect to the del iver power at system rates without substantial negative financial im pact on the system in total? MR. L.D. BLACHFORD: I should say even more nega­ tive financial im pact to the system.

These diesel communit ies- the general residential consu mers­ are already being su bsid ized by the other consu mers on the system because they are being supp lied at the standard rates un der rather constricted circu mstan­ ces. In some of these areas there are consume rs that do not adhere to these constrict ions and they are charged the cost of generating that power in that area. lt is su bstantial in many cases. MR. D. ORCHARD: With con nection, like some of the com mun ities have fairly small service size.

Is it assumed that with connection, say at Puka tawagan as one or God's Lake, that if connection is achieved that consum ption would go up consid erable and that's been even factored into the cost benefit ana lysis of tieing those commu nities into the power grid system? MR. L.D. BLACHFORD: Yes, that's taken into consid­ eration each time one of these studies is made. There has been a pattern shown and I can't tell you exactly what the numb er is but, if my mem ory serves cor­ rectly, you'll find that the cons ump tion per consumer goes up by about four times. MR. D.

ORCHARD: Then, it would be fair to say that right now the connection to most of these communi ­ ties, if not all, where we have diesel generation, is not economical until some arrangement to offset the high capital costs is made with outside mone y coming into Man itoba Hydro to make that connection possible? MR. L.D. BLACHFORD: Yes, and in each of these cases there has to be a capital contribution tha t would jus tify it was far as the system is concerned. MR. D. ORCHARD: The other day I asked a couple of qu estions on Churchill.

Their problem is that the cost of getting a line up there is very sizeable and at present their demand probably woul dn't warrant it if I could be general in the information provided. There's been a recent

article in one of the newspap­ ers that there's some possibili ty of iron ore process­ ing; a iron-ore mine being established, I believe in the Territories and they're looking at Churchill as a poten­ tial site for processing of that iron ore. Has the Hydr o been made aware of this possible new dema nd for power in Chur chill? MR. L.D. BLACHFORD: Not to my kno wledge, no.

Tuesday, 18 May, 1982 MR. D. ORCHARD: Well if, and I realize this is very very futur istic;, but if such a development took place where there was a second major consu mer and I might say more likely a year-round consu mer in the presence of a newly establ ished iron ore processing plant at Chur chill, would that not change fairly signi fi­ cantly the economic s that Hydr o's been faced with in bringing hydro to Chur chill? MR. L.D.

BLACHFORD: Yes, it could change the economic s of the project qui te consi derably depend­ ing on the load and the gu aran tees you would have that they would still be there until such time as you got the investment paid off. Otherwise, the ordi nary Mani­ toba consumer would have to pick up the difference. MR. D.

ORCHARD: I gu ess the gua rantee that that consumer would be there may well be if a comm itment to invest several mi llio ns of dollar s by the minin g comp any to do the process ing in Chur chill, tha t should be a signi ficant enough commi tment to future use to allo w the system to factor that new customer into providing that line, would it not, if a company made a major investment up there? MR. L.D. BLACHFORD: As far as Hydr o is concerned, I would say that it would not. What usuall y happens with minin g comp anies is that they're obliged to pay for a certain part.

In other words, make a capital con­ tribution to the line. If they in fact use the consump ­ tion that jus tifies the construction of the line for the period of time that it takes to write off tha t line, then they get their contribution back. If they don't use tha t power for the period of time tha t is required to write it off, then they don't get their contribution back. MR. D.

ORCHARD: Okay, then is it a fair assu mption then that if this iron ore customer decides to move to Churchill and applies to the Man itoba Hydr o System to put the line in, there would be no doub t that part of their plant investment would be an investment in the line to get system power into Chur chill? MR. L.D. BLACHFORD: Yes, I believe that's a fair assump tion. MR. D.

ORCHARD: There's some consi derab le - and this would be more to the Minister at this stage of the game - the Port of Chur chill has always operated at a disadvantage I believed, in com parison to the seaway system and their power costs are escalating much more rapidly than power costs at similar terminals on the St. Lawrence, at Thu nder Bay and on the St. Law­ rence transfer elevators.

The Min ister mentione d the other day tha t he was in the process of negotiations with the Federal Govern­ ment on the possibili ties of getting tha t line put in through an off-oil negotiation with the Federal Gov­ ernment and some of the programs tha t they've got to take different major oil users off oil and onto renewa­ ble energy sou rces.

I would hope that the Minister can proceed on that fairly qu ickly because Chur chill has al ready had the disadvantage of the Federal Gov ernment removing the forces base, etc., I wou ld n't want them to use the more rapidly esca lati ng electric bill as an excuse to 84 clo se down the Port of Chur chill two or three years from now prior to conclusion of, say, a Federal Gov­ ernment contribution towards putting hydro power into Churchill. HON. W. PARASIUK: I'm proceeding on that basis. MR. D. ORCHARD: That's all for now, Mr. Chairman. MR. CHAIRMAN: Mr. Ransom. MR. A.B. RANSOM: Mr. Chairman, did Mr.

McKean have the answer to another qu estion? lt seemed to me at the start that there was indication that there were ans wers to two que stions? We dealt with one. MR. L.D. BLACHFORD: Yes, I have some overheads here that I believe will help the memb er. lt had to do with the difference between load growths and I have here a 3 percent load growth which was more or less what our estima tes were based on and I also have a 2 percent load growth. These show what it does to the timing of futur e power pla nts, if I could jus t put them on the table.

This one is the 3 percent load grow th. lt sho ws without considering the MANDAN project the lower line labeled "Domestic," the lower curve line is !rend­ ing upward. There's the 3 percent Man itoba load growth by itself without consi dering inter-tie or an aluminum plant or any other major load. You'll see there tha t the - well, let me explain the left hand side - this is in gigaw att hours times 1, 000, and you will see that the capacity of the Manitoba system in 19 80 is about 20 billion kilowatt- hour s. We referred to that figure a couple of sessions ago.

You'll see from this that if we consider only the Manitoba load in this comp uter printout, it shows it coming up about 19 94. I think we said 19 92-93 pre­ viously. At that point where it crosses the 20 billion kilo watt- hour line, is when you wou ld need another power plant and tha t has been shown on here to be Limestone. The next line up shows the added capacity that Limestone puts on the system and you would see from this that the domestic load only, after Limestone you wouldn't require another power plant until some time after the year 2000.

Now, if we had the inter-tie, this shows on there that the inter-tie wou ld mean that you'd need some thing other than what's here on the system already in about 19 88 and if I can ju st point this out here, left is right and right is left here at this point here. If you added an aluminum smelter similar to what Alcan is tal king about here, you would need it in about 19 97 to supp ly both loads, a year or so sooner, '87, I'm sorry. If you had only the aluminum smelter and not the inter-tie, you'd ha veto draw a line some place between this line and that line, it wou ld come up the middle here.

This shows about 19 90 on this load. Now, if we then take a simila r curve and show the 2 percent, you'll see that 19 95 on the domestic load runs out to somewhere arou nd 19 98 and the inter-tie and aluminum, they come about the same place as by design in this case. I think this is along the lines that Mr. Ransom asked the other day.

Tuesday, 18 May, 1982 MR. A. B. RANSOM: I assume that we'll have copies of those? MR. L.D. BLACHFORD: I can give you copies of those, yes. MR. A. B. RANSOM: Wel l, I note that on both of those, Mr. Chair man, without MAND AN at the top, perhaps it's an opportune time to ask the qu estion as to ju st what is happen ing with MANDAN at the moment. I note in Mr. Chernia ck's introd uction that he said it's still in the negotia ting stages but I don't believe tha t we've ... the statement was, Mr.

Chairman, the MANDAN Project is well known and is now still in the negotiat ion stages and in the trial stages in the United States. MR. L.D. BLACHFORD: The formal agreement has not yet been sig ned and therefore it has to be said to be still in negotiation. In the U.S. as the Cha irman said there, it's at the trial stage.

The State of South Dakota denied Nebraska Public Power District permission to cross their territory based on the fact that Nebraska did not prove to South Dakotans that they needed the power in Nebraska; so they've taken this to court in South Dakota and it'll be some months before this is resolved. I believe if they lose in that cour t they can still take it to some federal court. MR. A.B. RANSOM: What is the anticipation then of Hydro or the government as to wha t's going to happen there and when it's going to be concluded, when the power migh t be required? MR. L.D.

BLACHFORD: Nebraska are tal king about the line being com pleted and going into service in 19 88. What the prospects are I really could n't say, but I can tell you that Nebraska is spending very su bstan­ tial sums of money on the studie s on this line and getting permission, etc. They've also annou nced in their Annual Report that thei r next sour ce of power is plan ned to be through the MANDAN line so they're very serious about it. MR. A.B.

RANSOM: The information tha t was given to us a week ago when there were a numb er of sheets distributed that showed the com parison of total revenue to total expense, and rates of inflation versus forecasted rate increases - I assume those did not include any consideration for MANDAN, it was strictly do mestic. MR. L.D. BLACHFORD: I believe what you were given was the base case without any of these large projects and without any appreciable amount of money any­ way in the MANDAN project. There maybe some money in our Esti mates for ongoing stud ies, but not construction costs. MR. CHAIRMAN: Mr. Cherniack. MR .

S. CHERNI ACK: Mr. Chairman, I wonder if I could be perm itted, I have no right to ask a qu estion but I would indicate that it is my im pression and I would like it to be clar ified because I think it's not clear. My impression is that if MANDAN came in 85 place, it would postpone the need for construction because it's not a sale of power in itself, it's an exchange, and my im pression is that the benefit of MANDAN is tha t it will postpone the timing in which we have to bring in new power and, if I'm correct, I think that's a relevant matter to bring forward. I think Mr. Blac hford cou ld clarify. MR. L.D.

BLACHFORD: If I could, Mr. Chair man, I'd ju st like to - it's qu ite easy to illustrate here - this is without MANDAN, and you see the line cross ing there somepl ace around 19 93 or 19 94. No w if we run the same curve with MANDAN, you 'll see it dramatically puts off the requir ement for the next power plant. The same load grow th, but with MAND AN, let's put it back from 19 93-94 up to 19 96 or 19 97 on this printout. This depends on the dome stic load growth and other assump tions that go into making these curves.

But that serves to illus trate what the difference MAND AN will make to futur e construction, or could make. MR. CHAIRMAN: Mr. Lyon. HON. S. LYON: Mr. Chairman, just for verification -when you say next construct ion, you mean next after Limestone. MR. L.D. BLACHFORD: No, including Limestone. HON. S. LYON: We're talking about 19 93 and the graph was premised on the fact that Limestone pre­ sumably would be buil t about 19 88 or thereabouts. MR. L.D. BLACHFORD: If you had an inter-tie. But I'm ju st speaking about domestic load, our base case. HON. S. LYON: The worst scenario. MR. L.D.

BLACHFORD: More or less the worst scena­ rio. ! doub t that the load growth will - well, I don't know - but the load growth cou ld be less than 3 percent, too . MR. CHAIRMAN: Mr. Ransom. MR. A.B. RANSOM: Mr. Chairman, I ju st want to be clear then that the informa tion we were given pre­ viously made no reference to MAN DAN and I assume that the projected requirement date for Limestone of 19 92 made no reference to MANDAN as wel l. MR. L.D. BLACHFORD: Tha t's correct, it hasn't been signed. it's not a comm itted project yet and we just left it out of our base case. MR. A. B.

RANSOM: Then how would the informa tion be affected, the informa tion we were given last week and how would the date of Limestone be affected by the conclusion of the MANDAN Agreement? MR. L.D. BLACHFORD: If MANDAN were inclu ded and nothing else came on the line, and our load growth was 3 percent as projected on that curve, it would seem to say that the requirement for our next plant would be deferred two to four years. We've gen­ erally said two, but this particular set of assu mptions indicates about four.

Tuesday, 18 May, 1982 MR. A.B. RANSOM: So that could mean then that Limestone would not be requ ired until '96 then? MR. L.D. BLA CHFORD: That is possible depending on the assump tions you use. The effect of MANDAN without getting into a specific numb er of years, the effect of MAN DAN considering only the domestic load in Man itoba is to delay the requirement for the next power plant. MR. A.B.

RANSOM: So that based on the assu mp­ tions that we were given last week which included the 3-percent load growth if you simp ly added MANDAN, the concl usion of the MAN DAN Agreement, to all those ass ump tions it wou ld delay the requir ements for Limestone till 19 96. MR. L.D. BLACHFORD: That's correct. lt wou ld delay Limestone to whatever year. MR. A.B. RANSOM: I have a numb er of other ques­ tions tha t I'd lik e to deal with as well, Mr. Chair man, and I thank Mr. Blachf ord for the answers to those qu estions. One fairly simp le que stion, Mr.

Chairman, is tha t how much mo ney would be outs tand ing approxima tely at any one time, on the bills tha t Hydr o has - out and un paid - is it possible to give an approx­ imation on that? MR. L.D. BLA CHFORD: We have these numb ers in our monthly statements. The numb ers I have here are based on Februa ry 28, 19 82; we'll give you Ma rch. In March of 19 81 , there was about $556,000 outsta nding for more than 60 days; at the same date March 31 , 19 82 and on the same basis, there was $592, 000-and-a-few dollar s outst anding. MR. A.B. RANSOM: On another area, when does the present colle ctive agreement expire?

MR. L.D. BLACH FORD: The first collective agree­ ment that expires is the In ternational Brotherhood of Electrical Workers. lt expires, I believe, in the first week of Jun e this year; next month. MR. A. B. RANSOM: Is that the one that would include the greatest numb er of emplo yees? I believe we were given information earlier that there were 3,700 and some emplo yees in Hydr o at ma ximum over the last year. How many of those would be in that union? MR. L.D. BLACHFORD: The majority of them. The lB W is the largest union.

I'm sorry I don't kno w, approxi mately even, how many there are in it but it is the largest un ion. MR. A. B. RANSOM: What was the general pay increase then in the cu rrent year, the last year of the existing agreement? Is it poss ible to give an approxi mation of that? MR. L.D. BL ACHFORD: On the last agr eement beginnin g the first week in Jun e, it was 10 .5 percent. Effective as of, approxima tely early December last year, there was an additional 2 percent added to that. 86 MR. A.B. RANSOM: lt was 10 .5 percent in Jun e plus another 2 percent in December. lt ran from December to the end of Ju ne, '82 then.

I assume that negotiations are ongoing now? MR. L.D. BLAC HFORD: They are, yes. They' be been going for about one month. MR. A.B. RANSOM: I don't believe that there is any item in the Annu al Report which actually identifies the amount that's paid in salaries. There may be and I may have mis sed it, but can you give me an indication of the total wage bill of Hydro? MR. L.D. BLACHFO RD: The total gross salary as of March 31s t in the previous 12 months was $95,61 9,000 and a bit. MR. A.B.

RANSOM: I assume that's approxima tely the amoun t that the new payroll tax will apply to then; it appl ies to total comp ensation so I assume it can't be too far off that. MR. L.D. BLACHFO RD: Yes, that should be approxi­ mately the amount, yes. MR. A.B. RANSOM: Could you give me some exam­ ples of the approximate compensa tion that applies to different positions in Hydro, especially those in the field. I'm not interested so much in the high er levels but people that would be located in a regional area, linemen or whatever, I'm not sur e of the categories that you use. MR. L.D.

BLACHFORD: I don't have that information here, Mr. Chair man, but it can be obtained and given to the memb er. MR. A.B. RANSOM: I'd appreciate it if I could get some examp les of that then, please. it's my un der­ standing, Mr. Chairman, that the government is carry­ ing on negotiations at the mom ent with other alumi­ num compan ies as well as Alcan; one of thos e I un derstand is Kaiser. Are Hydro people involved in negotiations or discussions with Kaiser? MR. L.D. BLACHFORD: Yes, we've had representa­ tion on some of these discussions. MR. A.B.

RANSOM: Would that be the same group of people then tha t we were told last week were working with the government on the Alcan situation? MR. L.D. BLACHFOR D: No, Alcan is a different case. This is a different group that has been in discussions with the other aluminum compan ies. MR. A.B. RANSOM: I wonder if Mr. Blachf ord then would give us the names of the people who are work­ ing in discussions with Kaiser? MR. L.D. BLACHFORD: Morley Fraser and Paul Jarvis. MR. A.B. RANSOM: In Mr.

Chernia ck's introduc tory statement he said that in regard to Limestone which is the next plant on the boards, the preparatory work is

Tuesday, 18 May, 1982 continuing as heretofore. Could Mr. Blachf ord tell the Comm ittee then just what is meant by 'continuing as heretofore?' MR. L.D. BLACHFORD : We're continuing to do our engi neering and other work in order to hold the earli­ est possible date for the first in-service ·date of this plan t with the expectation that some arrangements will be made that the plant will be needed at that time. Cur rently this date is 19 88. MR. A.B. RANSOM: When did that sort of work beg in? Has this been ongoing over the years? MR. L.D. BL ACHFORD : Yes, this has been ongoing over the years.

A year ago this simil ar date was 19 87; along about Aug ust or September it became obvious that we could no lon ger hold a 19 87 date so it had to slip to 19 88. MR. A.B. RANSOM: Has there been any, du ring the past year or 10 months, increase in the activities that were necessar y to hold this position that Mr. Blach­ ford refers to? MR. L.D. BLACHFORD: There has been some increase over the year but it is generally an ongoing exercise. MR. A.B.

RANSOM: Has there been any additiona l amount of money expended then, say, in the last year or the last six months to mai ntain this position as opposed to what it would have been the year before? MR. L.D. BLACHFORD: Yes, there has been. MR. A.B. RANSOM: Could we have an indication of what approxi mately what sort of expenditur e we're talking about? MR. L.D. BLACHFORD: We spent on outside consul­ tants, in the last 12 mon ths prior to the 1s t of March, about $960,000 for design on the Limestone plant. MR. A.B. RANSOM: The last how many months? MR. L.D.

BL ACHFORD : Twelve months before, approximately, the 1s t of March this year. MR. A.B. RANSOM: Ho w long will it be possible to cont inue holding this position with respect to Limes­ tone before it's necessary to either get a firm decision that some thing is going to go ahead, that ther e are sales that will require that construc tion of Limestone, or until these holding activities are going to have to be stood down? MR. L.D. BL ACHFORD : I gu ess you never have to stand them down but periodically you will have to slide the in-service date of the plant by another con­ struction season.

This seems to come up about the middle to the three-qu arter mar k of the year, that you recog nize at that time you can no longer hold that date and you have to slip it one year. MR. A.B. RANSOM: If there was a decision to pro­ ceed with construction of Limestone, how long does it 87 take from the time that the decision is made until you would actually be engaged in what you mi ght call a signi ficant work in the field on the site? MR. L.D. BLACHFORD: lt would depend on the time of the year the decision is made.

But if, for example, it was possible to give Limestone a go-ahead within the next couple of months, there could be workers on site on excavation wor king on and within the Coffer Dam by late autu mn. MR. A.B. RANSOM: By late autumn of this year? MR. L.D. BLACHFORD: This year. MR. A.B. RANSOM: If the decision is made before mi d-July or the end of July, you can have them work­ ing there late this year? MR. L.D. BLACHFORD: I believe so. MR. A.B. RANSOM: Mr.

Chairman, in the annual report it refers to under the foreign exchange on long­ term debt, there is a reference there to the val uation of the long-term debt of the corporation as at March 31, 19 81 would have been increased by approximately $326 million when transla ted at the year-end rates of exchange. That $326 mill ion then is obviously made up of a numb er of different cur rencies and different issues. I can't tell from the annual report or from pub­ lic accounts or the budg et documents jus t how much of tha t $326 milli on is made up of specific bond issues in different cur rencies.

Is it pos sible for Hydro to su pply me with that informa tion? MR. CHAIRMAN: Mr. Cherniack. MR. S. CHERNI ACK: Whilst Mr. McK ean and Mr. Bla chford are looking at it, it seems to me tha t there is a certain amount of information here on Page F9. I see a Deutsch Mar k loan, a Swiss Franc loan, U.S. Io ans. I believe that the Finance Department of the govern­ ment, which of cou rse, is responsible for all borrow ing may have it more readily but there are a numb er of loans here, there's even a Sterling loan there on this list. I don't know, they're all there. MR. L.D. BLACHF ORD : Mr. Chair man, regarding Mr.

Ra nsom's qu ery. If you'd like some thing that ties in specifically with the $326 million, I gue ss we'd have to get tha t. But we do have I think what he's asking for as of March 31 , 19 82, it comes out to $334 mill ion. Wou ld that be sufficient? We'll have a copy made for you. MR. A.B. RANSOM: And that will show the composi­ tion of the $334 million and it will at least identify the issue. MR. L.D. BL ACHFORD: it's broken down between U.S . dol lars, Deutsch Marks, Swiss Francs, Pounds, Yen and un its of account, whatever that may be. MR. A.B.

RANSOM: But will it identify the specific bond issues tha t are involved or does it jus t show the agg regates because ...

Tuesday, 18 May, 1982 MR. L.D. BLACHFORD : Ju st have the aggr egate by cur rency. MR. A.B. RANSOM: I'm interested in the specific bond issues that are involved. MR. L.D. BLACHFORD: I'm sorry, it only gives the breakdown by currency. MR. CHAIRMAN: Mr. Cherniack. MR. S. CHERNI ACK: Mr. Ch airman, I've just con­ firmed with Mr. McKean that as far as he knows they're all lis ted on this

Schedule on Page F9 and F1 0 except that they're intermingled with the Canadian but I think that they can qu ite readily pull ed out and if Mr. Ra n­ som wants it done, we'll see to it that it is done for him . MR. A.B. RANSOM: Thank you, Mr. Chairman. MR. S. CHER NIACK: Do you want it to be done? MR. A.B. RANSOM: Yes, thank you. Mr. Cha irman, last year in particular I guess, the then Opposition was qu ite interested in the amount of time tha t the Ch air­ man of Man itoba Hydro had been spending on his activities.

I wonder if the present Cha irman would advise us of how he finds the workload in this job and how mu ch tim e he spends on it? MR. S. CHER NIACK: I've worried about that time because it's more than I bargained for but I'm gu ess­ ing, it's about half-time. MR. A.B. RANSOM: I think, Mr. Chairman, that's approxi mately the same amoun t of time that the pre­ vious Chairman had indicated that he would spend on the job as well. Could the Chairman tell us how often he meets with the Minister to discuss questions relating to Hydro? MR. S. CHERNI ACK: I do n't keep a record, Mr.

Chairman, but we're avai lable by telphone and per­ sonally at a moments call. I would say at least onc e a week, probably more often but certainly we're in fairly close commun ication. MR. A.B. RANSOM: Has Mr. Chern iack met with Cabi net to discu ss any of the Hydro issues? MR. S. CHERNI ACK: No, Mr. Chairman. MR. A.B. RANSOM: Mr.

Ch airman, there have been some fairly strong commit ments made by the New Democratic Party du ring the election and prior to that, concern ing such things as immediate orderly devel­ opm ent of Manitoba Hydro. lt was often interpreted as an im media te com mencement on construction of Limestone and in fact, the previous government had been criticized for not proce eding with the construc­ tion of Limestone. Given that kind of com mitment which has been made repeatedly for the imme diate orderly develop­ ment of Limestone, I wonde r if Mr.

Blachford could just outline to the Commit tee what circu mstan ces migh t lead to Hydr o being able to proceed with imm e- 88 diate orderly development of Lime stone? I appreciate tha t there can be different

interpretations put on what immedia te orderly development would be but, I'd per­ haps leave it to Mr. Blac hford to put his

interpretation on what imme diate orderly development would be. What circu mstances might lead to that? MR. L.D. BLACHFORD: For the orderly construction of the power plant, this is what I mean by main taining our forces in order that we can meet an in-service date of this stage in 19 88. Now, if you'r e referring to when the power will be needed, the Western Gr id will trigger Lime stone before an al uminum smelter would. MR. A. B. RANSOM: I take it that we're talking about in this case the grid or an aluminum smelter as bei ng those projects which could result in immediate orderly developm ent as far as Mr.

Bla chford is concerned, which migh t result in it proceeding prior to 19 88. MR. L.D. BLACHFORD: Mr. Cha irman, I'm sorry the circu mstances are that in a commi tment to an alumi­ num smelter now would not imme diately trigger Limestone as far as supplying the load is concerned. MR. A.B. RANSOM: Then how soon would a com­ mitment to the inter-tie require the construction to beg in? MR. L.D. BLACHFORD: If an inter-tie were comm it­ ted for an in-service date as soon as possible, then this would im mediately trigger a Limestone plant. MR. A.B.

RANSOM: So by that definition then the only way that im mediate orderly development could take place is if the Western In ter-tie is concluded? MR. L.D. BLACHFORD: The Western In ter-tie, if it were to be built as soon as possible, would trigger Limestone im mediately. MR. A.B. RANSOM: Are there any other circums tan­ ces that Mr. Bla chford can foresee then that might fulfill tha t requir ement of immedia te orderly development? MR. L.D. BLACHFORD: More load, or a place to sel l the power is what will trigger the plant, the construc­ tion of the plant. MR. A. B.

RANSOM: But the load is expected to grow at a rate of 3.4 percent over the next 10 years. I assume there would have to be qu ite a signi ficant increase in the load demand then before it would be set? MR. L.D. BLACHFORD: lt would, but presumably there are other ways that you can make a load grow, such as the idea of running trains on electricity between here and Thu nder Bay. However, some thing like that would not happen immediately. lt would not trigger things very qu ickly; load in whatever form. MR. A.B. RANSOM: Well, Mr.

Chairman, this perhaps places the Chair man of Hydro in a difficul t position in that the Chairman has been, of cour se, a New Demo-

Tuesday, 18 May, 1982 cratic mem ber of the Legislature for many years and was part of that party when they were condem ning the previous admi nistration, for instance, for deferring or stopping the construction of Limestone and for deflat­ ing the construction industry in the province.

He was part of tha t party that was condem ning the previous ad mini stration for proceeding with what I believe he had termed as a phony rate freeze and which as recently as a year ago, at least in March of 19 81, the party was sti ll on record as saying that it was a phony rate freeze and com mitments have been continua lly made over the past few months right up to and includ­ ing the election that the government would proceed with immediate orderly development of Limestone.

Certainly the feeling that the public had was that, if the New Democr atic Party were elected to government that they would proceed with the construction of Limestone as a means of revita lizing the economy.

When we look at the graph tha t was han ded out last week, which put the expenditur e on the basis of '81 , '82 dol lars, we can see how much the im pact of the mon ey that was spent in the 19 70s to accomplish that purpose to a very great extent, to continue to stimu­ late the economy and there's a possibil ity that the New Democra tic Party had been sort of hooked on that kind of expenditur e to stimula te the develop ment of the economy. Now, I'm wond ering how Mr.

Cherniack is going to balance the comm itment that he has on the one side to the party, which is now the government, to immedia te orderly dev elo pment as a means of stimu lating the economy of the province, how he's going to balance that with his responsibi lity as Cha irman of Manitoba Hydr o.

Because it's evident now that from the infor­ mation that we've received du ring the past few days, that it's not possible to proceed with Limestone con­ struction un less there are some of the projects which the previous government had been negotiating, un less some of those projects are conclud ed or un less there is some as yet unid entified or a very ill-defined project such as electrification of railways included, it's not going to be able to go ahead before 19 92 and if MAN­ DAN is concluded, which seems to be a probability rather than a possibili ty, that Limestone is not going to be required until 19 96.

So it's going to be very difficul t I believe for the Chairman to main tain his loyalty to the party and his responsibi lity to Hydro at the same time. I'd like to hear from the Chairman how he plans to balance those two things. MR. CHAIRM AN: Mr. Parasiuk. HON. W. PARA SIUK : Mr. Chairman, I'd like to com­ ment tha t the Cha irman's been asked to com ment on pol icy which I'v e articul ated in the House. I said tha t the New Democratic Party Government is proceeding with im media te orderly development of Li mestone.

We have indeed negotiated a No rthern preference clause and a Northern preference commi ttee with the All ied Council for the fu ller participation of Northern people in the Hydro developments. We are pursuing negotiations with suppl iers to ensur e that there is greater Canadia n and Man itoba co ntent. We are proceeding in discussions with the Federal Govern ment to see if we can get special train­ ing programs in place to ensur e that we do get fuller 89 participation of Northern people, not only in the con­ structi on, but in the long er-term opera tions of Limestone.

I have said that we believe that an inter-tie does offer the opportu nity of getting a firm power commitm ent, that it would be necessary to proceed with Limestone.

I have said that we are pursu ing other alternatives as well to the south of us which could, in fact, create the demand for 1, 000 mega watts which would indeed be sufficient, had any of those negotiations been fruitful over the cour se of the last three or two or one year or if, in fact, we would be able to bring one about over the course of the next six months or so with respect to a major sale to the south of us and that, as wel l, coul d provide the firm power demand required in order to trigger Li mestone, the actual construc tion of Limestone.

We believe that the development of those alterna­ tives as qu ickly as possible is indeed the orderly development of Manitoba Hydro. Tha t is the policy of the New Democratic Government. That's the pol icy that has indeed been communic ated to the Chai rper­ son of Mani toba Hydro and that is the polic y that he and the board and the staff of Manitoba Hydro are operating un der. MR. S. CHERNI ACK: Mr. Chairman, I ju st respond to Mr. Ransom by saying that when I was a member of the Opposition to his government, I criticized them about a nu mber of matters. I believed then and I believe now I was correct.

Since the new government was formed , my role in Hydro makes me comm itted to dev elopi ng Hydro in the best poss ible way for the benefit of the rate payers and the Province of Manitoba. My com mitment to the NDP is my comm itment, it's not of cur rent conc ern, be it to the Hydr o or to Mr. Ransom. But certainly it is my responsibili ty as long as I feel able so to do , to work on behalf of the benefit of Ma nitob a Hydro in accordance with the pol icy of the govern ment as it is interpreted to me and as I interpret it. I might say that the more you're involv ed in any project the more you learn.

I'm learning a great deal. I expect I would kno w mor e the next time around, a year from now, and be able to give whatever additional information I learn then. But I did learn that the plan­ ning, the expectation was a great deal greater than appeared to be when I learned more about the future demands on Hydr o. MR. A.B. RANSOM: Mr. Chairman, the Chair man may be correct in his statement that his comm itment to the NDP is not my concern, but his comm itment to the NDP Govern ment, I think, is a legiti mate conc ern for mem bers of the Comm ittee and because of Mr.

Cherniack's backgr ound as a long-time MLA for the New Democratic Party, I think it is a concern to us and to the people of Manitoba how the Cha irman is going to distinguish between what is in the interests of Hydr o and what is in the interests of the New Demo­ cratic Party Government because this is a departure to have this sort of appointment to the Cha irman ship of Hydro. Previously, I believe it's correct to say, that the peo­ ple who have been Cha irman of Hydr o have all been

Tuesday, 18 May, 1982 people who have had some technical background in Hydro matters. We know that the Minister has stressed very strongly the technical natur e of things such as Hydr o rate increases and the Hydr o rate freeze, so we are concerned to kn ow how this sort of thing will be balanced because we would not want to see that Hydr o was used to fulfi ll some of the promise s that have been made by the party prior to being in government.

The Minister made some com ments about Northern participation and suppl iers, Canadia n content and special training provisions, all of which are very worthy things to pursue, all of which we were pursu­ ing in some measure, at least, and it should be obvious to him that those sorts of things are not going to be of any great sign ificance if the developm ent of Limes­ tone is not taking place.

That's what we've been talk ­ ing about, is the im mediate orderly development of Limestone because the commi tment was by the New Democratic Party, tha t someho w they were going to be able to get this construc tion back on the rails and that we were going to see the same kind of construc­ tion activity when the New Democrats were returned to power that we saw in the 19 70s as a consequence of the building.

Now it seems evident tha t the only way that kind of imm ediate orderly developm ent could take place would have been if the Western In ter-tie Agreement had been sig ned the day after the government came into power. They're not contempla ting anyth ing in any kind of detail; they're not contempla ting anything that could have led to the immediate orderly develop­ ment of Hydro. of Limestone, in the way that it's been described to the Comm ittee.

In fact they have set back the timing of the develop­ ment of Lime stone because there was an In terim Agreement tha t had been agreed to, at least by the three Ministers who were negotia ting on the Western Power In ter-tie, and that those three Ministers were prepared to recommend that agreement to their respective governments and the then Premier Blak e­ ney had made reference to that proposed agreement as one that cou ld have all owed an In terim Agreement to be signed, I believe his words were, 'within the next few short weeks,' and tha t was stated, I believe, around the 31s t of October.

So given that statement by then Premier Blak eney that an In terim Agreement could have been sig ned within the next few short weeks, we could have had construction un der way this summ er. Now that doesn't seem to wash, Mr. Chairman, with the government's commi tment that they would have immed iate orderly development. What we were seeing was im mediate orderly development by the previous ad minis tration. lt now appears that developm ent is going to be sub ­ stantially set back by the activities of this gove rnment. MR. CHAIRM AN: Mr. Minister. HON. W.

PARASIUK: Yes, I have com mented on this in the House before when I asked the other Ministers in Saskatchewan and Al berta whether they had sub ­ mitted this to their Cabi net, they said they hadn' t. When I looked at the In terim Agreement it was the judgm ent of myself and the comm ittee that I relate to, of Cabi net, that there were some very serious wea- 90 knesses to the agreement. I can't go into those because we are negot iating on those points right now with the other two governments.

I'm qu ite prepared at the appropriate stage, to mak e that public but we believe that if that agreement had been left as it was at that time, that there could have been some very serious problems. Given that, that could have been and would have been, disorderly development, so we proceeded to see if we could tighten up those cla uses because the imp lications were very serious to the province, we believe we are doing that. The only thing tha t has, in a sense, slowed it down somewhat now has been the election cam­ paign in Saskatchewan and the election of a new government.

I have been in contact with the new Minister. He is to get back to me as soon as he can with respect to a date for our next meeting between the government repr e­ sentatives and then Hydr o representatives of Mani­ toba, Saskatchewan and Al berta. I've talked to the Al berta Minister and we are awa iting the word from the Saskatchewan Minister as to when he feels he can meet with us. We hope we can meet as soon as possi­ ble and that we can proceed with the firming up of an agreement as qu ickly and as expeditiously as possible. MR. S. CHERNI AK: Mr.

Chairman, I ju st want to respond to those comm ents or qu estions of Mr. Ran­ som in regard to my role. I'd like to point out to him that before I accepted this position, this appointm ent. I did look into the qu estion of the role of the Cha irman and confirmed that those who recommended the sep­ aration of the Chair man from that of the present Ch ief Executive Officer, did so to some extent on the basis that they thought it was advisable that the Chair man should be outside of the ad mini stration and not necessarily a techn ical person.

I agreed with that and I felt that if I came in with an expertise it might only be to inject myself into that area which was none of my busi ness and that was the ad min istration ofthe Hydro operation on a day-to-day basis, so I accepted that the role of Chai rman is one that need not be, and in my opinion now should not be, one of high technical knowledge in the field of hydro-electric generation. Secondly, the qu estion of the commi tment that I have to the NDP not being Mr.

Ransom's affair, my com mitment to the NDP Government, of course, is one where I am comm itted in the ligh t of what I think is best for Hydr o to advise the government on what I think is best for Hydr o and for the government then to discus s with me those f .3atures which they feel are beneficial for all of Man itoba. So, Mr.

Chairman, when the rate freeze, which I criticized some three years ago as being unne cessary and therefore phony or artificial, I think I was right and I think the figur es that were shown then and are avail­ able now are correct, based on the assu mptions that were made and given to us at that time. The factors tha t made them different from what they tu rned out to be were reviewed this morning at some lengt h. I' ve no problem about that. But I do feel, Mr.

Chairman, that the best role I can play is one that in con nection with the rate freeze, when the figur es were presented the foreseea ble overall deficit in the not too distant futur e at the recom mendation made by the ad min istration of Hydro

Tuesday, 18 May, 1982 that the rates be increased was passed on to the gove rnment. lt was the government that made the decision not to proceed with unfreezing the rates. in spite of the fact that Hydr o projections are that at this stage they ought to be un frozen and that the rate increase is ju stified and they believe will prove necessary. · MR. CHAIRMAN: Mr. Doern. MR. RUSSELL DOERN: Mr. Chairman. jus t briefly on this point. Mr. Chai rman. I jus t have a couple of min­ utes here so the Leader of the Opposition can have his com ments. I want to respond also to Mr.

Ransom's remarks where he's apparently trying to make a case for experts in fields over generalists. I don't know whether he could defe nd or provide the informa tion on all the backgr ou nds of the various four chairmen un der his government. I happen to know John Bulm an. I happen to have a very high regard for him. He was the appoi n­ tee of the Telephone System but I don't know whether he was an expert in commun ications or had a back­ ground in commun ications prior to becoming the Chair man. He certainly had a background as a busi nessman. Mr.

Chai rman. the question that the Con servatives are raising is whether or not people who are not experts can fill positions of general managers and simila rly -(Int erjection)- Well. people who are NDP MLAs who were former Min isters who were lawyers; who have extensive experience in government and in public service. I would say are well su ited to filling such positions. I would simp ly remark that there are many people who had non-te chnic al backgr ou nds who filled posi­ tions with some abilit y and some expertise over a period of time. I would say to Mr.

Ransom tha t prior to his appointmen t as Minister of Fina nce, I wasn't aware of his back ground in the field. probably a backgr ound that he acq uired as he went along just like other peo­ ple in that particular portfolio. So I' d simply say, Mr. Cha i rman. that the require­ ment to be a Chairman of a Crown Corporation in Mani toba such as Hydro. isn't a degree in engine er­ ing. it's a general grasp of the area and the ability to run a board . Tha t would strike me as more important than a couple of degrees in engine ering.

The experts can be hired and their expertise can be drawn upon and I think the argu ment put forward by one or mor e memb ers of the Comm ittee in regard to the Chairman. are pretty weak and pretty thin. HON. S .. LYON: Mr. Chairman. a few qu estions to the Chair man and perhaps to the President as well. Can the President first of all tell us. Mr. Chairman. who were the principal representatives of Manitoba Hydr o on the Western In ter-tie nego tiating team? Who were they prior to November 30th? MR. L.D. BLACHFORD : The Chair man was involved prior to No vember 30.

We also had the manager of System Planning who was heavily involved as well as the gentleman who is the comp troller. Anyway, he's the manager of Financial Planning and he also fulfills the role of comp troller. Mr. Brennan. 91 HON. S. LYON: Mr. Brennan. So that Manitoba Hydr o has had a consistent and hig h-level input into the negotiations on the Western In ter-tie that led up to the In terim Agreement that has been referred to and sign ed I believe in October of 19 81 ? MR. L.D. BLACHFORD : Yes. they did have high input into it. HON. S. LYON: Mr.

Cha i rman. to the President. it's my und erstand ing that In terim Agreement which was un animou sly recommended by the then th ree Minis­ ters to the then Premiers of the Provinces of Al berta. Manitoba and Saskatchewan. it was un derstood that the Agreement would then be submit ted to the legal staffs of the gove rnm ents in qu est ion and then thereafter presu mably, to the Executive Councils or the Cabi nets of those governments. Was that your un derstandi ngs? MR. L.D. BLACHFORD: Yes. I believe that was what was to happen in the next step. HON. S.

LYON: As one wou ld expect in matters of tha t sort. lawyers being lawyers they would try to tig hten up agreements from the standpoint of Mani­ toba or Saskatchewan or Al berta. That was not any­ thing un usual in your expectation. was it? MR. L.D. BLACHFORD: No. there's nothing un usual in having lawyers look at it. HON. S. LYON: Mr.

Chairman. to the President. were you aware of any serious deficiencies in the In terim Agreement which still had to be reviewed by the lawy­ ers before going to the govern ments. of a natur e that has been mentioned this morning by the Minister in rather vag ue terms about serious deficiencies. alleged deficiencies in the Agreement? MR. L.D. BLACHFORD: I wasn't aware of any legal deficiencies in it but I certainly didn't look at it fro m that point of view. HON. S.

LYON: So when the Minister speaks here and in the House and elsewhere about serious defi­ ciencies in the Agreement. you don't know what he's talking about. do you? MR. CHAIRMAN: Mr. Parasiuk. HON. W. PARASIUK: Poi nt of order. Mr. Chair man. we can have the Leader of the Opposition trying to ask the President to comment on negotiat ions tha t are presently un der way that he himself has been present at because the President. the Chief Executive Officer of Man itoba Hydro. the person in charge of the entire adminis tration is now involved in the negotiati ons. Mr. Chairman. He has been at the meetings.

He has been apprised of what's been going on. Those negotia tions are pres­ ently in process and the former Premier. who I think should know better. is just trying to open up in to the public arena. those negotiations at a critical time when I think they should be left to be com pleted.

Tuesday, 18 May, 1982 HON. S. LYON: Mr. Chair man , speak ing to the point of order, I can assure you that the purpose of the qu estion is to elicit truth. We can hear the Minister's version of the truth any time in the House. What I'm more interested in at this stage and I think that the memb ers of the Comm ittee are more interested in, is getting at some of the facts and the truth through the officers of the corporation. We have that opportunit y once a year. We can hear the Min ister prattle on at any time. Now, Mr. Blachford, I return to the point that I referred to before.

Were you aware of any serious deficiencies in the In terim Agr eement that was sig ned on October 9th, I think it was, of 19 81 ? MR. L.D. BLACHFORD: You were referring previously to legal matters. I'm not aware of any legal compl ica­ tions in that agreement. As I say, I'm not a lawyer. lt was tu rned over to the lawyers, as I unde rstood, for them to have a look. Again, this was the govern ment who did this. HON. S. LYON: Mr.

Chairman, to the President, as the Chief Executive Officer and President of Man itoba Hydro, were you aware of any deficiencies in that Agreement that were bad for Man itoba Hydro or for the people of Man itoba? MR. CHAIRM AN: Mr. Mackling. HON. A.H. MACKLING: Mr. Chairman, on a point of order. Mr. Chairman, the Minister responsible has indicated that negotiations are ongoing in respect to an Agreement. He has indicated tha t he was con­ cerned about deficienc ies in the Ag reement.

For the Hono urable Leader of the Opposition to want to eval­ uate what those deficiencies are during the cour se of ongoing negotiations, is im proper. No w, Mr. Cha irman , the fact is that the Agreement is under negotia tion. it will be open to the Leader of the Opposition when nego tiations have concl uded, to be abie to examine the record as to whether or not the negotiations were successful, what cha nges were made in the agreements that he talks about and that would be appropriate.

To ask the President of the Corporation at this time to go into a detailed review of those agreements when they're un der nego�iation would be im proper. lt would certainly jeopardize the position of the Corporation in its negotiations and indeed, would be improper. HON. S. LYON: Mr. Chairman, to the alle ged point of order, let me say this. I have asked the qu estion of the Chairman stimula ted by com ments made by the Min­ ister here and on other occa sions, that there were serious deficiencies in the Agreement.

The President, the Ch ief Executive Officer of Mani­ toba Hydr o has been in that position fortunately for a considerable period of time. I'm merely asking him if he was aware of any such major deficiencie s in the Agreement over which he had some power of su perin­ tendency and some power of control up until, at least, November 30th that I kno w of. There's noth ing out of order about that qu estion at all. MR. CHAIRMAN: As a Chairman I have a responsibil- 92 ity and I believe there was a Point of Order raised.

I believe, and I am not a lawyer, there is an argu ment going on between lawyers, but as the Chairman I have a responsibi lity as well and I believe that there is a point of order. Negotiations are cu rrently going on so I believe that there was a point of order. So if you want to choose to pursue in some different light, proceed. HON . S. LYON: Mr. Chairman, I'll rephrase the qu es­ tion because there is clearly no alleged point of order in what I was asking before.

I'll ask this qu estion, was the Chairman aware of any serious deficiencies, sub ­ stantive, legal or otherwise in the In terim Agreement up to and including the 30th of November, 19 81? Then the answer is, of course not. HON. A. MACKLING: Mr. Chairman, the same point of order prevails because ess entially it's the same qu estion. There is before this Commit tee knowledge that negotiations are ongoing, that certain proposals were put on the table for discu ssion with other ju risdictions and the Minis ter has ind icated a concern about weaknesses in those negotiations.

Now for anyone to be asked to deta il the specifics of that Agreement and to make that public evalua tion at this time, would certainly joepardize the fair negotiation of tho se agreements. Now it's open for the Leader of the Opposition to say there was no provisions that were weak in the agreements, that doesn't joepardize the negotiations. Bu t to ask the President for

chapter and verse of the particul ars of the Agreement and his indication where they're strong and where they're weak, is im proper. HON. S. LYON: On the al leged point of order, the Member for St. Ja mes miscontr ues the line of the qu estio ning and I'm not asking the President of Ma ni­ toba Hydr o for chapter, line and verse on the Ag ree­ ment at all.

I'm merely asking the President of Man itoba Hydr o, and I believe that he has already partially an swered the qu estion, if he was aware of any serious deficien­ cies in the In terim Agreement which was approved un animously by the three Min isters and the major principles of which, to go further, on the secrecy kick tha t the Minister is on, the major principles of which were made public at the time the In terim Agreement was annou nced, is the President aware of any serious deficiencies in those major principles that were made public? MR. CHAIRM AN: I believe it is a repitition of the same qu estion. HON. S.

LYON: No, it isn't, Mr. Chair man. The ma jor principles of that Agreement for your informa tion, Mr. Chairman, were made public in October of 19 81 . I'm asking the President of Man itoba Hydro if he is aware of any major deficiencies in those major principles. MR. CHAIRM AN: The Minister of Natural Resources on a point of order. HON. A. MACKLING: Mr. Chairman, the Leader of the Opposition has now asked a specific qu estion

Tuesday, 18 May, 1982 about matters that are on the public record and the que stion is in order, but not the previous question. HON. 5. lYON: We're really happy to have that ju dg­ ment from the Memb er for St. James. HON . A. MACKLING: Well, you should be because it's fair. MR. CHAIRMAN: The hour is 12 :30. it's quite obvious we're not going to comple te the report by today so there will have to be another meeti ng, the time of which will be annou nced in the House. Comm ittee rise 93