Manitoba Committee Hansard — 5 January 1995 (Public Utilities Committee, Sitting 1, 35th Legislature, 6th Session)

35-6-pu1

Manitoba — Debates (Hansard)

- Sixth Session • Thirty-Fifth Legislature of the Legislative Assembly of Manitoba Standing Committee on Public Utilities and Natural Resources Chairperson Mr. Marcel Laurendeau Constituency of St. Norbert VoL XLIV No. 1- 10 a.m., Thursday, January 5, 1995 ISSN 0542-5492 ISSN 0713-!NS4

MANITOBA LEGISLATIVE ASSEMBLY Thirty-Fifth Legislature Members, Constituencies and Political Affiliation 1'i!!lu Constituenc:y fmi ASIITON, Steve Thompson NDP BARRETT, Becky Wellington NDP CBRD..LI, Marianne Radisson NDP CHOMIAK, Dave Kildonan NDP CUMMINGS, Glen, Hon. Ste.Rose du Lac P.C. DACQUAY, Louise Seine River P.C. DERKACH, Leonard, Hon. Roblin-Rossell P.C. DEWAR, Gregory Selkirk NDP DOER, Gary Concordia NDP DOWNEY, James, Hon. Arthur-Virden P.C. DRIEDGER, Albert, Hon. Steinbach (Minister) P.C. DUCHARME, Gerald, Hon. Riel (Minister) P.C. BDW ARDS, Paul St. James Lib. ENNS, Harry, Hon. Lakeside P.C.

ERNST, Jim, Hon. Charleswood P.C. EVANS, Clif Interlake NDP - BV ANS, Leonard Brandon East NDP FILMON, Gary, Hon. Tuxedo P.C. FINDLAY, Glen, Hon. Springfield P.C. FRIESEN, Jean Wolseley NDP GAUDRY, Neil St. Boniface Lib. GILLESHAMMER, Harold, Hon. Minnedosa P.C. GRAY, Avis Crescentwood Lib. HELWER, Edward Gimli P.C. lnCKES, George Point Douglas NDP KOWALSKI, Gary The Maples Lib. LAMOUREUX, Kevin Inkster Lib. LA1HLIN, Oacar The Pas NDP LAURENDEAU, Marcel St. Norbert P.C. MACKINTOSH, Gord St. Johns NDP MALOWAY,Jim Ehnwood NDP MANNESS, Oayton, Hon. Morris (Minister) P.C.

MARTINDALE, Doug Burrows NDP MCALPINE, Gerry Sturgeon Creek P.C. MCCORMICK, Norma Osborne Lib. MCCRAE, James, Hon. Brandon West P.C. MCINTOSH, Linda, Hon. Mrs. Assiniboia P.C. - MITCHELSON, Bonnie, Hon. Mrs. River East P.C. ORCHARD, Donald, Hon. Pembina P.C. PALLISTER, Brian Portage Ia Prairie P.C. PENNER, Jack Emerson P.C. PLOHMAN, John Dauphin NDP PRAZNIK, Darren, Hon. Lac du Bonnet P.C. REID, Daryl Transcona NDP REIMER, Jack Niakwa P.C. RENDER, Shirley St. Vital P.C. ROBINSON, Eric Rupertaland NDP ROCAN, Denis, Hon. Gladstone P.C. ROSE, Bob Turtle Mountain P.C.

SANTOS, Conrad Broadway NDP SCHEllENBERG, Harry Rosamere NDP STEFAN SON, Eric, Hon. Kirkfield Park P.C. SVEINSON, Ben La Verendrye P.C. VODREY ,Rosemary, Hon. Mrs. Fort Garry P.C. WOWCHUK., Rosano Swan River NDP River Heights V«XXrrt Flin Flon VtnJnt

- 1 LEGISLATIVE ASSEMBLY OF MANITOBA THE STANDING COMMITTEE ON PUBLIC UTILITIES AND NATIJRAL RESOURCES Thursday, January 5, 1995 TIME •• 10 a.m. LOCATION ··Winnipeg, Manitoba CHAIRPERSON·· Mr. Marcel Laurendeau (St. Norbert) ATTENDANCE -11-- QUORUM· 6 Members of the Committee present: Hon. Mr. Orchard Messrs. Ashton, Edwards, Helwer, Hickes, Lamoureux, Laurendeau, Pallister, Mrs. Render, Messrs. Reimer, Rose Substitutions: Mr. Robinson for Mr. Ashton Mrs. Dacquay for Mr. Pallister Mr. Martindale for Mr. Hickes at 1:15 p.m. Mr. Schellenberg for Mr. Robinson at 2:05 p.m.

APPEARING: John McCallum, Chairman, Manitoba Hydro-Electric Board Robert Brennan, President and Orief Executive Officer, Manitoba Hydro-Electric Board Ralph Lambert, Executive Vice-President, Engineering and Environment, Manitoba Hydro-Electric Board Glenn Schneider, Department Manager of Public Affairs, Manitoba Hydro-Electric Board Jim Ernst, MLA for Charleswood MATTERS UNDER DISCUSSION: Annual Report of the Manitoba Hydro Electric Board for tbe fiscal year ended March 31, 1994. *** Mr. Chairperson: Good morning. Will the Standing Committee on Public Utilities and Natural Resources please come to order.

Before we proceed with the business of the connnittee, I have before ~re certain resignations of tbe comnittee tmmbers. They are as follows: Mr. Ashton and Mr. Pallister. Are there any nominations to replace Mr. Ashton? Mr. George Hickes (Point Douglas): I move to replace Mr. Ashton with Mr. Robinson. Mr. Chairperson: It has been moved by Mr. Hickes to replace Mr. Ashton with Mr. Robinson. Is it agreed? [agreed] Are there any nominations to replace Mr. Pallister? Mr. Edward Helwer (Gimli): Mr. Chairperson, I would like to replace Mr. Pallister with Mrs. Dacquay, the member for Seine River. Mr.

Chairperson: It has been moved by Mr. Helwer that we replace Mr. Pallister with Mrs. Dacquay. Is it tbe will of the committee? [agreed] We have before us the following report to be considered: The Annual Report for the Manitoba Hydro-Flectric Board for the ~ar ended March 31, 1994. Copies of this report are on the committee table for any members who did not receive one. I do believe you have all got one at this time. I would invite the honourable minister responsible to make his opening statement and to introduce the staff present this morning from Manitoba Hydro.

2 LEGISLATIVE ASSEMBLY OF MANITOBA January 5, 1995 Hon. Donald Orchard (Minister charged with the administration of The Manitoba Hydro Act): Mr. Chairperson, first of all, let me offer to all of the bright faces around the table the very best for 1995, not having had the opportunity to wish everyone well in the new year. I would like to introduce officials from Manitoba Hydro with me today. Immediately in front of me is Mr. John McCallum, Olairman of the Manitoba Hydro-Electric Board. Next to Mr. McCallum is Mr. Bob Brennan, President and Chief Executive Officer of Manitoba Hydro. Next to Mr. Brennan, Mr.

Ralph Lambert, Executive Vice-President Engineering and Environment; and at the back: of the room, Glen Schneider, Manager of Public Affairs with Manitoba Hydro. Mr. Chairperson, the annual report of the Manitoba Hydro-Electric Board being reviewed by this committee today is for the fiscal year ending Man:h 31, 1994. As indicated in the report, 1993- 94 was a successful year for the corporation, with recoro profits being achieved. The net profit on operations represents a significant turnaround from the net loss that was incmred during the previous year.

A $24 million net loss the previous year to a $69.5 net profit, '93-94-net loss, paldon me, in '92-93 of $24 million, it is significant that Manitoba Hydro achieved this improvement in its financial results in a year where there were no electricity rate increases in Manitoba. As Mr. McCallum and Mr. Brennan will discuss later, Manitoba Hydro is progressing towards becoming a stronger and financially healthier organization. This is being accomplished with a rate structure that is very favourable to the residents and businesses of Manitoba.

To further help improve the competitiveness of industry in our province, electricity rates for the large industrial customers will not be increased over each of the next two years. As was announced in the Honourable Eric Stefanson's Budget Address of April 20, 1994, there was a further boost to the mining and manufacturing sectors within the Manitoba economy by the announcement of the phased removal of the provincial sales tax on electricity used for production.

Effective June 1, 1994, this electricity tax on mining and manufacturing was reduced by one-half to 3.5 percent; and on April1, 1995, the mining and manufacturing industries of Manitoba will see the complete removal of the last 3.5 percent of the provincial sales tax from their production electricity requirements. Mr. Chairperson, these positive steps represent an opportunity for industry and commerce in Manitoba to grow and expand into new markets, especially in this era of global competitiveness.

Not only will these measures help existing businesses, but they also provide a tremendous incentive to attract new industry to Manitoba for the benefit of all Manitobans. With respect to residential and small-business users of electricity, the average rates will increase by a modest 1.2 percent over each of the years 1994 and 1995. Combined with no rate increase in 1993, these rate increases are amongst the lowest of all major electric utilities in Canada. It is noteworthy that the men and women who provide electrical services in Manitoba often do so under hazardous and frequent inclement conditions.

I would like to extend my thanks and appreciation to them for the high quality of service that we enjoy in our province. I would like at this time to invite Mr. John McCallum, as Chair of the Manitoba Hydro Electric Board, to present remarks, following which Mr. Brennan has a presentation of slides on the operations of the corporation. Mr. Chairperson, with those brief remarks, I recommend passage of the Manitoba Hydro Electric Board report for the year ending March 31, 1994. I would ask Mr. McCallum to make some remarks. Mr. Chairperson: Thank you, Mr.

Minister, at this time we will hear from the honourable critics and then we will come back to the staff- Mr. Orchard: Oh, yes. - -

- January 5, 1995 LEGISLATIVE ASSEMBLY OF MANITOBA 3 Mr. Chairperson: Does the critic from the opposition party, the honourable member Mr. Hickes have an opening statement? Mr. Hickes. *

(1010) Mr. ltickes: First of all, I would like to also wish everyone the best in 1995, and I have a few brief comments that I would like to put on the record. When we look at Manitoba Hydro, the profit that was made in '93, I think it was $69 million, I would just like to congratulate Hydro for their long-range planning. When you look at the resources coming from the North, you only have to look at the people involved, the people living in northern Manitoba and also to look at the high cost of living, that is, the effects on people living in these isolated communities.

When you look at the high cost ofliving and then you look at the cost of hydro compared from the North to the South-for example, when you look at costs, all you have to do is compare some of the prices that we pay here for goods compared to some of the goods that people in northern Manitoba have to pay. For an example, you look at flour-a bag of flour which a lot of the northerners use in their daily lives-in Winnipeg wepay$6.99. InShamattawa, we pay $12.29 and Tadoule Lake is $16.50. So it is more than double. Then another product that is used in northern Manitoba is sugar. In Winnipeg it is $4.19.

In Shamattawa it is $6.55. Ground beef, we pay $3.28 and in Shamattawa it is $8.24. I could go on and on and on. The reason I raise this is because when you have household budgets compared to our budgets that we utilize in the city of Winnipeg and compared to what the individuals in northern Manitoba have to pay, we only have to look at the cost of hydro for users in the city of Winnipeg and other communities and compare it to what a lot of the individuals in northern Manitoba are paying for their own hydro rates. When I was looking through the 43rd annual report, I came across a

section that said, and I will quote: Manitoba Hydro rate structure is such that customers in the North pay the same rates as their counterparts in the South. When I look at some of the bills of people who use hydro in southern Manitoba and compare them to some of the bills that were shown to us by residents in northern Manitoba, I was really surprised to see the differences. In some cases, it was two to three times higher than what people pay in the South and yet-[interjection] the bill, yes. An Honourable Member: The consumption. Mr. Hi ekes: I will get to that.

When I see the amount of money that it is costing individuals in the North to pay for the hydro that is produced in the North and compare it to the cost we pay in the South, I would just like to question Manitoba Hydro if they have ever thought of looking at trying to assist northerners to bring their bills down to a more livable rate.

When I say that, we have energy conservation programs, retrofit programs and if some of that could be looked at to try and assist northerners that are exposed to n:uch more extreme cold weather than we are-and also a lot of the houses in northern Manitoba are poorly insulated and they are not really energy efficient and if there is some way that Manitoba Hydro could look at that because in the end the people in the North would benefit from lower hydro costs, but also Manitoba Hydro could save a lot of kilowatt hours that could be exported elsewhere. It is just a thought, something to think about.

It might be a way to assist northerners. Some of the other issues that hopefully we will be looking at, I read in this

article that there were going to be 500 positions that will be either laid off or people retiring and also that there was a committee in place to assist individuals in finding other employment elsewhere. We would be raising questions on that to see how many people actually were laid off or retired and how

4 LEGISLATIVE ASSEMBLY OF MANITOBA January 5, 1995 many of them actually got employment elsewhere and how many of them were assisted by Hydro to get these employment opportunities. Another great concern I had reading through this report, when I looked at the number of employees who were WOiking for Manitoba Hydro, there were 4,044 employees and out of that there were 245 aboriginals, 111 people with disabilities and 92 visible minorities. I only have to say again that the resources are from the North and most of those northern communities in the North are made up mostly of aboriginal people.

When I see there are only 245 aboriginal employees with Manitoba Hydro, it is no secret that a lot of work has to be done to try and bring that number up because there is such high unemployment in northern Manitoba. In SOJre coommities it is anywhere from 90 to 95 percent and if training opportunities leading into jobs with Manitoba Hydro were aggressively pursued, I think it would benefit evecyme includingtheco~tiaL I was vecy pleased to see that there were negotiations of the comprehensive settlements taking place.

Some of the communities have agreed to settle, like Split Lake, and others are in the process, like York Landing, Cross Lake and Nelson House. Norway House is still there, but I am sure progress will be made. Also, when I look at that I question: Where is the weir that was promised to the community of Churchill? I know they have been negotiating with Manitoba Hydro.

It is in the works; it is processing, but some of the questions my colleague will be raising are what stage is it at, because I grew up in Churchill and I remmlber as a kid growing up there we used to go up and down the Churchill River and go up to Fishing Creek and Herriot Creek and we used to do all our fishing there. We could get in and out with a boat and motor and now the only way you can get up there is with one of those jet boats.

There is a lot of work to be done there, and I know that the commmity has been asking for a weir and to try and get the fish stocked back into the coOlOJlmity, because a lot of the people have relied on fishing for their food. My colleague will be asking questions to see how far that has progressed and if it is a possibility that it would be settled and built. I was talking to some friends in Cross Lake. I know that Hydro and the comnnmity had built a weir there and restocked the comnnmity there and they were vecy, vecy happy with that.

It was a joint effort with Manitoba Hydro, the comnnmity, the band, evecybody was involved. In fact, the contractor for that building of the weir was the band. They participated in building it. It created local people with local jobs and the community was vecy happy with that co-operation. So, hopefully, the s~ could happen in Churchill, but my colleague will raise questions on that. "'

(1020) When you look at the Fox Lake Band, I had received calls from them pertaining to their settlements. 1hey were hoping that something could be negotiated with Manitoba Hydro because they have been affected by various dams along the way. One of the options they looked at--1 do not know how Hydro has viewed it, but when the last project in the immediate area is Conawapa whether that goes ahead or not or if it does-what happens to the whole commmity of Sundance? There are beautiful houses there. There is an indoor skating rink, curling rink, bowling alley.

There is even a little nursing station there, a huge shopping centre and very nice housing. What happens to that whole area? 1bey were wondering if that may be part of the whole settlement package or if there is a possibility that they could take some responsibility for that area and for the buildings. There is a lot of potential there and a lot of positive things that happened. I think a lot of credit has to be given to the management and staff of Hydro and the minister who has taken the responsibility and the former minister who has brought forward positive events.

One of the events that my colleague will be raising questions on is the whole Conawapa project. That project was a possibility of creation of job opportunities for northerners and Manitobans. There had been a lot of work done - -

- - January 5, 1995 LEGISLATIVE ASSEMBLY OF MANITOBA 5 with the environmental assessment and also with the building of a road into Conawapa, and also the building of a cofferdam. I just heard lately that the cofferdam was removed, so I have not had a chance to go up there and see it if it has or not. 'Ihat kind of concerns us, where the building of a cofferdam I am sure costs a lot of money and to remove it would cost more money. Then, whenever the day the government ever goes with building of Conawapa or whatever, you have to rebuild the whole cofferdam again. I just do not understand the reasoning behind that.

When we look at the power sales, the one area that has created a huge profit for Manitoba Hydro is the sales generated from Limestone, but since then, I have not heard or seen of any power sales to anywhere since that agreement. I mentioned at that time, when Manitoba Hydro was dismantling Manitoba Fnergy Authority, which was the marketing arm of Manitoba Hydro, I totally disagreed with it because now who is going out to find the markets for Manitoba Hydro for export purposes? Obviously, there is not nmch advice, because nothing has happened.

Manitoba Energy Authority had the expertise, had the people who had the experience, and they were the matketing arm Since then, I have not heard of one power sale that has taken place. The other area that troubles me to a degree is in the April budget last year, Manitoba Hydro and Manitoba Telephone services were forced to pay corporate capital tax for the first time. According to the budget papers, this would cost the two corporations in excess of $15 million, so we will be asking for an accounting of how this tax is affecting Manitoba Hydro and Manitoba consumers.

Once again, like the property tax increases and the sales tax increases of the 1993 budget, this govemm:::ot is pretending that their tax increases are not tax increases but merely adjustments. To people living on low incomes in my riding of Point Douglas and also in the North, a tax increase is a tax increase. The tax increases of over $400 per family in the 1993 provincial budget had a major impact on residents in the inner city and in other parts of this province, so we want to know how this new tax increase will affect residents of this province.

Virtually everyone in the province uses Manitoba Hydro, so we all are going to end up paying this new tax. [interjection] No, that is how I see it. Mr. Orchard: Can you document this $400 for your residents? Can you document it? Can yw table it today? Mr. ffickes: Well, the tax came just after the year end. The corporation must kilow now, nine months later, how it is being affected.

Interestingly, when the tax was brou~ in last year, the government said that this meant that Manitoba Hydro and Manitoba Telephone were being put on a more level playing field with their competitors, a rather curious statement since none of their competitors forced their employees to take Fridays off without pay. Their competitors operate in Manitoba to make a profit, not to provide services anywhere in the province that they are needed.

This simple basic truth is often forgotten or ignored by the anrent government who does not understand that the mandate of Manitoba Hydro is to see hydro service affordable everywhere in this province and not just in Winnipeg or nearby communities like the gas companies are operating under now. At the same time, I would like to commend the people of Herb Lake and the co-operation that led to their getting hydro service over a year ago. We want to see the same use of Manitoba Hydro occur in other isolated communities instead of having to rely on diesel generators.

When we talk about that new corporate tax increase, someone will have to pay that, and obviously it will have to be the consumer-through what means I do not know. It will have to be worked out by the government, but when Manitoba Hydro loses that profit, they will have to get it from somewhere else. So that corporate tax, we would like to know more.

6 LEGISLATIVE ASSEMBLY OF MANITOBA January 5, 1995 We will be raising those kinds of questions, and my colleague, who is the representative for Rupertsland which covers most of the northern communities, will show you some examples of some of the hydro bills that have been brought to his attention where some of the bills were, for one umth, $700, $800. Here in Winnipeg, if anyone got a bill for $700 or $800 on their hydro bill, I do not know how they would react.

But it seems extremely high and he has documents that he will be tabling to show you the actual bills that are, to me, extremely high-because a lot of people are living on social assistance or meagre means that they try to get by on trapping or seasonal work. When you look at these high, high bills in a lot of these isolated communities, it has a direct impact on band finances and band funding because the bands that are allocated X number of dollars per person that are on social assistance, when a person is on social assistance, it is the band that has to pay these high cost of hydro bills.

So it affects the whole community and it affects the operations of the bands. So my colleague will be raising some of those and tabling examples. Those are just some of the concerns that we have, and I would be glad to get some infonnation for the honourable minister on the $400. I will get it to him as soon as I can. So with that, I just thank you for letting me put a few things on record, and when we go into questioning, my colleague has a lot of questions that he will be raising with you, and hopefully we will get some answers for the constituents and the people that are affected by Manitoba Hydro.

Thank you very much. Mr. Chairperson: I would like to thank the honourable member. Does the critic from the second opposition party, Mr. Edwards, have an opening statement? Point of Order Mr. Paul Edwards (Leader of the Second Opposition): Mr. Chairperson, I want to start not by making my statement, although I do want to make a statement-by raising a point of order, which is simply to ask, through you pexhaps the minister, why it is that we are proceeding to the report for the year ending March 31, '94, when in fact this committee has not passed the report for the year ending March 31, 1993. Mr.

Chairperson: For the trember's information, the government House leader has called, by order of the day, the annual report for the Manitoba Hydro-Electric Board ending March 31, 1994. It is his prerogative to do so. The committee cannot determine what we are to hear. 1he government House leader makes that decision. •

(1030) Mr. Edwards: Just on that point, and I do not want to unduly delay the work of this committee, but I do want to say that it is, in my view, at least in my experience I might say, unprecedented, that a committee would m>ve on to a subsequent year's aooua1 report without having first fully considered and in fact passed the prior year's report. In my experience-and that is what I am saying, Mr. Minister, and I think that it is ill advised. I do not understand the logic for going on to a future year without having fJISt dealt with the prior year. In fact, the minister and you, Mr.

OJ.airperson, will recognize that it has been the practice oftentimes that discussion on an annual report is pretty free flowing and oftentimes the committees agree to meld the two together and discuss issues generally and, at the end of the day, pass the two. I would be prepared to do that. I do ask, Mr. Chair, and I do not know if, in fact, you have the prerogative, that we fold into our discussions here today both of the annual reports and just deal with them cumulatively, and at the end of the day we may consecutively pass the '92-93, and then the '93-94. Mr. Chairperson: Again, for information, Mr.

Edwards, you did not have a point of order. But for information clarification, if the committee so decided, we could discuss the '93-94, but we could not pass the '93 report because it is not before this committee. We could pass the '94, but not the '93. - -

- January 5, 1995 LEGISLATIVE ASSEMBLY OF MANITOBA 7 If it was the will of the committee, we could discuss it and pass it at the next meeting when it is brought forward. Mr. Edwards: Mr. Oulirperson, might I ask then, on a point of clarification, for your

interpretation of

Section 46(2) of The Manitoba Hydro Act, which specifically states that "Upon being laid before the Legislative Assembly, the report of the board stands permanently referred to the Standing Committee on Public Utilities and Natural Resources of the Legislative Assembly." My reading of that is that that report has been referred and is now permanently referred to this committee, therefore is properly under our purview and consideration at any time that this committee is in fact called and constituted as it is right now. Mr.

Chairperson: On the point raised by the honourable :rrember, again, it is not on the order of the day and the committee cannot change the order of the day order. Until the govemment House leader makes the request to change that order of the day, we cannot deal with the past reports unless they are brought forward. Mr. Orchard: Mr.

Chairperson, pemaps I can help my honourable friend Should my honourable friend have specific issues that he wishes to bring up regarding the annual report for year ended March 31, 1993, I am quite sure that if my honourable friend had specifics, we can deal with them Ifhe has a list of them that he might wish to make available to us, we can certainly entertain this discussion. My honourable friend makes reference to the fact that in his experience, and acknowledges that it is limited, it is unprecedented that we do not pass annual reports.

My honourable friend's experience is limited because oftentimes reports are referred to this committee as was the case last year with the 1993 annual report, dealt with a fair degree of substance and not passed by this committee. That is neither unusual nor unprecedented, as my honourable friend would indicate in his limited experience. Now the committee is also very free ranging and wide open, and I am sure my honourable friend with his considerable political skill can raise any issue he wishes under the auspices of dealing with this current year's fiscal report.

So I think my honourable friend, should he have issues that he wishes to raise, let us know what they are and we will provide my honourable friend with answers if they are available today by Hydro staff or myself as my honourable friend requests those issues as emmatingfromtheMarch31, 1993, report that he seems to have some concerns with. Mr. Edwards: I think the minister had a limited understanding of the point that I made, Mr. Chair. The point was not that this committee does not meet and deal with annual reports and then break without passing them on a regular basis, no doubt.

That is in fact a very common occurrence. The issue rather is that we would embark on the consideration of a further subsequent annual report without first dealing with the prior year's annual report. That is bad practice in any definition of how a business should run, how a government should run. and how a government should attempt to run and review the affairs of its Crown corporations. There is not any logic in my view in moving on to a subsequent year's annual report in a substantive way without first having voted and passed or not passed the ammal report from a prior year. Mr.

Chair, I repeat my request to you for a specific

interpretation of the

section of The Manitoba Hydro Act which does take precedence, I believe, over the particular referral of the minister to this committee of the 1994 report which specifically states that upon being laid before the Legislative Assembly, which has in fact occurred with both of these annual reports, those reports are permanently referred to the standing committee. This is the standing committee. My

interpretation would be that we have within our power here to deal substantively with both of those reports as referred to this committee. My suggestion to committee members is that we would deal substantively and vote consecutively on those reports, first dealing with the '92-93 and following that, move to the '93-94.

8 LEGISLATIVE ASSEMBLY OF MANITOBA January 5, 1995 Mr. Chairperson: Thank you, Mr. Edwards. I will review the

section of the legislation that yru were talking about, 46(2), and I will get back to yw later on. But I do want to let the committee know, we as a committee do not have any power over the Oiders of the day to change it or make any changes to it. Mr. Edwan:Js, were you going to caay on with your opening statement? ••• Mr. Edwards: Yes. Well, the minister certainly has some input, one would think, into that and to the reports that are called by his House leader.

I have not heard yet from the minister any rational, reasonable explanation that we would not have continued on the debate of the prior year's annual report before moving on. I am sure that he will, in his very extensive experience, be prepared to give the con:mittee nrmbers some guidance on that. It is unprecedented, I think, and I do say, in ~ experience, that we would move on to a subsequent report seems awfully silly and just a bad practice and with his extensive experience I am quite surprised that he would seek to pursue this route. Having said that, Mr.

Chairperson, let me say with respect to this annual report, as with prior years I greatly look forward to the presentation which will come forward from the chair of the board and the chief executive officer of Manitoba Hydro and other officers of the corporation. I might say that I have often found those very informative. It represents an ideal in terms of the way other Crown corporations I would like to see cmre to this committee and lay out fully the plans and the financial status of the Crown corporations involved I appreciate their coming here today, again, to speak with us on this committee.

I want to say that of key importance to me in these discussions, obviously, is the continuing discussion of the role of Manitoba Hydro in the broadest sense. I think that a lot of the details in the financial reports we may get into, but frankly I see one of the prin:wy roles of this committee is to discuss the principles and the mandate upon which Manitoba Hydro functions.

That is why in the last sitting of this committee I spent some time and received some responses in detail about efforts of Manitoba Hydro to move beyond the strict selling of power to other purchasers and move into, in many respects, selling our expertise that we have developed in this province in terms of hydro development and training know-how, in which I think we are at the forefront. We all see very well and know from the Conawapa experience that the expansion of the past fuw decades now, while not off the books, has to be proceeded with very cautiously.

Nevertheless, we very nmch want to retain the expertise that we have built up in Manitoba Hydro in this province. That is our challenge, as I see it: to maintain and even enhance the expertise that we have built up in this province, which I think is second to none. •

(1040) We see the other difficulties that Crown corporations-like Ontario Hydro, like Quebec Hydro, are having enormous difficulties. I think, thankfully, we have avoided some of those and I congratulate those involved in making the decisions to avoid some of the pitfalls that those other corporations have had. Our corporation has not been without some serious pitfalls and difficulties.

We will get into discussing in further detail in particular I think the ongoing discussions about the Northern Flood Agreement and remaining settlenr.ots that we all want to see made to settle some of those issues which have been around for 25 years. But, nevertheless, I think the Crown corporation has in fact in the last number of years that I have been sitting on this committee reviewing these reports been on a long-range plan that is going to move to a better, more sustainable financial position for the long term. I know that there has been a lot of concern about the debt equity ratio moving towards the .82.

I think we - -

- January 5, 1995 LEGISLATIVE ASSEMBLY OF MANITOBA 9 are still at about .93, or whatever the current status is, but that is obviously a goal that we simply must achieve to put this on a firm financial footing.

What I would like to discuss in some detail is the role that Manitoba Hydro sees for itself in worldng with the provincial government and other institutions in this community, like the university and like AECL and like all of the other institutions with some science and technology background to really promote the expertise that we have developed in this province in getting to remote areas, in the engineering capability that we have developed, the energy conservation experience that we have had which has been highly successful.

How do we promote and enhance that in terms of exporting our know-how and our potential? I am excited about that. I think we have to take an aggressive stance, never forgetting that our primary role is to serve local consumers and indeed to serve the local business and industrial community and attract those from outside of this province to come here with our abundance of power in a relatively stable way and very cost effectively. I want to talk about how this corporation continues to interpret

Section 2 of The Hydro Act, whidl talks about the mandate of Manitoba Hydro and what they see as their future planning. I believe that they continue to do five-year plans as other Crown corporations do, and I want to talk a bit about that. I also would like to spend some time discussing some of the specifics of the settlement with Ontario Hydro and what has happened with that Conawapa deal. I know last time we met there were some remaining settlement discussions that were going on. I would also like to talk about the current rate structure for Manitoba corporations. I know they are competitive.

I know there are others that are hotly competing for corporations, industries that are big users of power. I recently had a discussion with the manager at the Canadian Oxy plant. He was talking about the aggressive moves that Alberta is making in these areas. So I want to have some discussions about that and about how competitive we are. I am sure that will be brought up in some way in Mr. Brennan's opening comments.

I do want to speak about that and how we can better make sure that we attract businesses to Manitoba with our power source, use it as the economic incentive and the economic ace that we have always understood we had I know some of the tax moves that the minister has made, that this government has made have been very well received in the comrmmity. I want to talk about some of those and the implications of those as we move towards the complete removal of the sales tax on electricity by I believe Aprill, 1995. I also want to talk about the financial statements in a little bit of detail.

There are some interesting notes to those financial statements from this year, so I will hope to get into those in some detail. I might also say that flowing from the 1992- 93 report discussions, flowing from the responses whidl were received following our last meeting which was-if I am not mistaken this committee last met on June 21, and there were some responses received, a number of which I have further follow-up questions on. I do look forward in this session, hopefully when the Chair has the dlance to review what I consider to be the

section referring that report on a permanent basis to this committee, to getting back to those specific discussions about the '92-93 report .. Mr. Chair, having said that, let me just conclude my opening comments by saying that I think the member for Point Douglas (Mr. Hickes) reminds us, and I acknowledge, that the people in this province who reside in northern Manitoba have indeed a special relationship to Manitoba Hydro, one that I think we all need to acknowledge and respect and ensure that the benefit of Manitoba H}dro, its development, its power which

10 LEGISLATIVE ASSEMBLY OF MANITOBA January 5, 1995 it provides to this province is not at the expense of one portion, one sector of this province. Most particularly of comse I am speaking of those residing in northern Manitoba and in particular those in the First Nations commmity residing in northern Manitoba who have paid an inordinate price for our development over the years of Manitoba Hydro at what we have all reaped the benefit of. We always must be cognizant of that.

I have been encouraged in prior discussions with these gentlemen who are here today that we have turned the page in Manitoba Hydro on how we deal with development, how we deal with our own citizens in northern and remote regions of this province. I have been encouraged by what I perceive to be a recognition of some of the mistakes of the past and a moving forward in a different way and a more positive way. The Northern Flood Agreenr.ot will indeed be a

chapter that we will all be happy to see end in terms of reaching settlement, equity and fairness with the communities in the North that paid such an inordinately high price and continue to, and whose lives have, in a very real way, been destroyed. I have had the opportunity to hear the passionate and the very emotional and very persuasive pleas of those who have lived in some of those commmities. We need obviously to move forwanl never forgetting some of those mistakes but learning from them and doing our best to reconcile some of the injustices of the past. So I recognize what the member for Point Douglas (Mr.

Hickes) and indeed I am sure that the member for Rupertsland (Mr. Robinson) will also speak of in tenm of these discussions. I look forwanl to those discussions. I look forward to them on a continuing basis. lhey are always a part of our discussions of Manitoba Hydro reports, and they always should be. We sit here in the city of Winnipeg knowing full well that in fact the price that has been paid for the power that we have has indeed come from the far reaches of our province, and in particular in the last number of decades in northern Manitoba, and it has not been without cost to those communities.

With those comments, Mr. Otair, I look forward to DX>Ving forwanl on this report and look forward to your advice to the committee on the process of moving to discuss and in fact complete the discussion on the 1992-93 annual report. Thank you. Points of Order Mr. Chairperson: The Honourable Mr. Hickes, on a point of order? Mr. Hickes: Yes, on a point of order. I would just like to also agree with the member, the Leader of the Liberal Party (Mr.

Edwards), that we should have been discussing '92-93 before we discussed '93-94, but he has gone to great length to explain all that so we are willing to continue on with '93- 94. On a point of order, the honourable minister has asked me to table some information when I referred to an equivalent of $400 tax increases so I would just like to table a copy of the Winnipeg Free Press dated Wednesday, April 7 of 1993. There are copies for the minister and whoever would like to see the figures. Also the headlines of the Winnipeg Sun- Mr. Chairperson: Order, please.

The honourable member does not have a point of order. *** Mr. Chairperson: I will take the tabling as such. Mr. Hickes: Okay, I will table this. Mr. Chairperson: Thank you, Mr. Hickes. Mr. Hickes: I would like to also table the Federal-Provincial Relations and Research division where it says, the total annual impact of - -

- January 5, 1995 LEGISLATIVE ASSEMBLY OF MANITOBA 11 the tax-related changes on individuals are as follows: Tax credit $53 million; sales tax $48 million; gasoline and gasohol $13 million, which is a total $114 million. To achieve this in any other way would require raising Manitoba's incon::e tax rate from 52 percent to 57.7 percent or increasing the Manitoba sales tax rate from 7 percent to 8.4 percent I would like to table these just to verify my comments that I made earlier. Thank you. Mr. Chairperson: Thank you, Mr. Hickes. I would like to thank all honourable members for their statements.

At this time I believe we are going to have a presentation by the staff, and were you going to be doing a slide presentation? Mr. John McCallum (Chairman, Manitoba Hydro-Electric Board): The plan is I would have a few comments and then Bob has a presentation on the overhead. Mr. Chairperson: Okay, so we will proceed with the opening statements, and then we will get authority from the committee after. •

(1050) Mr. McCallum: Mr. Chairperson, members of the committee, on behalf of my colleagues here, Bob Brennan, Ralph Lambert and Glenn Schneider, let me wish everybody all the best in the new year as well. I am pleased to have the opportunity to present the Forty-Third Annual Report of the Manitoba H)dro-Electric Board for the year ended March 31, '94. Mr. Olairperson, my opening remarks will focus on some of the major policy issues dealt with by the board over the past year. Following my comments, Manitoba Hydro's President Bob Brennan will provide you with a slide presentation on the operations of the corporatioo. as well as a

summary of current issues that are impacting us. First of all, the Ontario Hydro Sale Tennination. The status of the terminated Ontario Hydro 1,000 megawatt sale agreement is an ongoing issue that is being closely monitored by the Board of Manitoba Hydro. Ontario Hydro has filed a Statenr.nt of Oaim in the Court of Queen's Bench of Manitoba contesting the amount of the certificate of costs issued by Manitoba Hydro. The corporation has filed a Statement of Defence which refutes statements made Ontario Hydro. Examinations for Discovery have been arranged to take place the weeks of March 13 and March 20, 1995.

Secondly, Aboriginal Settlements. A very high priority of the Board of Manitoba Hydro continues to be the settlement of the corporation's outstanding obligations associated with the Northern Flood Agreement of 1977. Substantial progress has been made over the past year, as will be further discussed in Mr. Brennan's presentation. 3. Financial results. Net income of $69.5 million for the fiscal year 1993-94 was the highest in the corporation's history.

The significant improvement over the net loss of $24 million experienced in the previous year was attributable to a substantial increase in revenues and to a reduction in the operating, administrative and finance expenses of the corporation. Operating and administrative expense reductions have been achieved for three successive years, primarily through cost control and corporate restructuring measures. It is especially noteworthy that the record net income of 1993-94 was achieved in a year in which there were no electricity rate increases to the power consumers of Manitoba. 4. Electricity rate increases.

Following a two--week hearing by the Public Utilities Board in early 1994, approval was granted to increase rates by an average of 1.2 percent effective April 1, 1994, and a further average increase of 1.2 percent to be implemented on April 1, 1995. Mr. Brennan's slide presentation will show that Manitoba H}dro has the lowest rate structure of all major electrical utilities in Canada. With no rate increase in 1993 and the modest rate increases in 1994 and 1995, Manitoba Hydro will maintain

12 LEGISLATIVE ASSEMBLY OF MANITOBA January 5, 1995 and further enhance its position as one of the lowest-cost providers of electricity in North America. 5. Retained earnings and equity. The record earnings of 1993-94 allowed the corporation to remain on course towards achieving financial targets and substantially improving the equity position. The corporation's short-term retained earnings target of $370 million is expected to be attained by 1996-97. However, both the short term and the longer-term financial target of a debt equity ratio of85-15 are wrrently under review, as will be discussed later in Mr.

Brennan's presentation. Mr. Olairperson, I would like to take this opportunity to recognize the dedicated efforts of Manitoba Hydro staff and employees over the past year in providing an excellent quality of electrical service to Manitobans. Manitoba Hydro employees often work under extraordinarily adverse conditions and they continue to provide one of the highest standards in the country for reliability of service and safety of operations. The corporation is very proud of this achievement and will strive to fmther enhance our service to customers at every opportunity. Mr. Olairperson, that concludes my remarks.

Mr. Brennan will now take the committee through the slide presentation which will provide specific information on the significant issues that face the corporation. Thank you. Mr. Chairperson: Is there leave of the committee for Mr. Brennan and his staff from Manitoba Hydro to make a slide presentation at this time? An Honourable Member: Leave. Mr. Chairperson: Leave has been granted. Mr.

Robert Brennan (President and Chief Executive Officer, Manitoba Hydro-Electric Board): The presentation we will review today will focus on a small and short corporate profile of Manitoba Hydro, an update on our financial affairs, where we are and where we are going, some slides on our performance measurements as compared to other utilities across the country, how our rates compare with other utilities for the various classes of service we have and some of the issues facing the corporation as we see it today. This is the corporate mandate of the corporation.

This has been approved by both management and the board of Manitoba Hydro. The mandate itself is taken right out of the act and we are interpreting that mandate within the context of the act and within the legislated mandate, which is the act itself of course, and within the context of values of society as we see them today. Manitoba Hydro is the fourth largest electric utility in Canada. We presently have fixed assets of $6.2 billion, with revenues of $950 million.

We have approximately 4,000 employees and we have a gross payroll that is used for both operating purposes-you know, operating our system-as well as all our capital construction. That totals $184 million and we have 385,000 customers. In addition to Manitoba Hydro's service area, there is a service area which is in the inner city that is served by Winnipeg Hydro. This is the total installed generating capability of Manitoba Hydro as well as Winnipeg Hydro. We have installed at 12 sites approximately 4,800 megawatts.

Winnipeg Hydro, through their two plants on the Winnipeg River, have 140 megawatts to supply the entire Manitoba system and then we have two thermal plants-one at Brandon, one at Selkirk-and they total 369 megawatts and then we have some isolated diesel sites that provide 17 megawatts. Our total installed capability is 5,360 megawatts. This is the undeveloped hydraulic potential of the province. It is in no particular order, but it does show that the total is more than that which we have already installed.

Some of these sites have very limited environmental impacts where others have JIDre extensive environmental impacts. Some are bigger and some are smaller. Some are more expensive and some are relatively - -

- January 5, 1995 LEGISLATIVE ASSEMBLY OF MANITOBA 13 inexpensive as it relates to some of the more expensive ones. *

(1100) The financial update: This shows our actual results for 1993-94, the report that is before the committee now, whereby we had a net income of $69.5 million. We are projecting with the rate increase of 1.2 percent on Apri11 of 1994, that we will achieve a forecasted net income of $58.7 million. 1bis will increase our total equity in the company to $287 million which as we talk about later is pretty well the lowest in the country.

Our debt ratio is 92 percent debt and 8 percent equity in the company, in the assets the company has, and interest coverage which is the amount of net income we have to pay interest has gone from 1.16 to 1.13. We would like to see that in the range of about 1.15 to 1.25. This is our actual operating results for the last four years.

You can see that our revenue has gone up relatively dramatically as has our expenses. 1be expenses have gone up mainly as a result of a new plant coming into service and that is reflected in the interest and depreciation expense whereby it goes from $256 million to $410 in the case of interest and depreciation from $93 million to $149 million. Our total net income is varied significantly depending on the year. The loss in '92-93 primarily represents the last units of Limestone coming into service for which there is not an awful lot of additional energy coming about. [interjection] We also had it here.

We do have it on the next one as well. We have the next three years here and then we show you what happens in the longer term. You can see that now our revenue is staying relatively constant and the challenge will be to make sure that our expenses stay in line with the revenue increases we have. We would like to keep our net income up relatively well so that we have the opportunity to increase our equity within the company. The two increases we have of 1.2 and 1.2 have already been-and that is for implementation Apri11 of '95 as well as the one that was implememed Aprill of '94.

Those are approved by the Public Utilities Board. The future projection, which is only a projection, indicates that we require virtually no rate increases to achieve our debt equity targets of 85 percent debt and 15 percent equity. I will talk about that as we get to it, too. This is a

summary of our capital expenditures over the next five years starting with the current year, and they fluctuate dramatically. We are in the process of improving our reliability of our system through the expenditures associated with our transmission system It also includes our mitigation paymems associated with Northern Flood settlements. I will get into the Northern Flood settlements. Mr. Edwards: Could we just leave that slide for a minute? Mr. Brennan: Yes. You will tell me when it is okay to go on, Mr. Edwards? Mr. Edwards: Yes. Fine. Mr. Brennan: 1bese are our two financial targets as it relates to equity.

We would like to have, in the short term. an equity component of $370 million to withstand the impacts of drought conditioos. We have had that target for some time now. We believe that our forecasts do provide for us achieving it by '96-97. Our long-term financial target is to achieve equity of 15 percent within the company and have 85 percent debt. Our forecasts can achieve these with virtually no rate increase. These are some corporate perfonnance measurements we have. The first one is the average outage per customer measured in average mim.rtes per customer.

Manitoba Hydro is the blue line, and the composite is all the other utilities across the country. So it is a composite of all utilities. We have marked who the best is in each case. We cannot identify individual utilities without their authority to do so. It does give us an

14 LEGISLATIVE ASSEMBLY OF MANITOBA January 5, 1995 indication of how we are doing, where we are going and how we generally compare. Marking the best shows how far away we are from the very best. As you can see in terms of this particular ratio, we are pretty well the best. We are the best. This is the average duration in minutes of each particular outage. The red line is the composite again and the blue line is Manitoba H)dro. As you can see, we changed approximately 1990, whereby the composite got a little better than Manitoba Hydro. I guess there are a couple of reasons for that.

Manitoba Hydro is faced with an awful lot more ice storms and that sort of thing than most other utilities. We also have seen a dramatic improvement with Quebec Hydro in the last few years. They really were influencing the composite quite dramatically, and at the same time 1hey were not doing very well, and they have improved. This is the employee accident frequency. It measures the number of accidents per million employee hours of work. You can see that Manitoba H)dro is doing very well as compared to the composite and are in fact the best in the country.

This compares the percentage of time the system is available for our customers, and this measures against the system unit cost. Certainly you can put more money into your system and increase that number. I guess the cballenge is to make sure you have an appropriate balance. As you can see, Manitoba Hydro pretty well has the highest reliability and the lowest cost. The one that is lower in terms of unit cost there than Manitoba Hydro is a small municipally owned utility in British Columbia.

This is interest coverage, the number of times interest is earned This is the ratio we like to tmintain within the range of 1.15 to 1.25. As you can see, Manitoba Hydro was doing better in the last couple of years, certainly in '94. We are projecting to do reasonably well in the future. In the past it has been all over the place though. That is something we would like to work on, keeping relatively constant if we could This is the interest coverage as taken from Moody's, an investment rating service, and it was something they published in November of '94 that compared one specific year.

Manitoba Hydro is, in terms of interest coverage, the fourth best. SaskPower has quite a bit better interest coverage. They have m:>re equity and they achieve that equity as a result of selling both their gas reserves as well as their gas distribution system. B.C. Hydro did a similar type thing. They sold their gas distribution system as well and separated it from the electric utility. In the case of Nova Scotia Power, they went private. This is the debt equity ratio. As you can see, the composite of all other utilities across the country is around the 80 percent neighbourhood.

Our target is to get to 85, which is still not as good as the composite and that is why there is some question of whether our target is a reasonable target. In discussions with various interested parties including the Public Utilities Board. we are looking at that and are going to review it. You can see that where we are is not acceptable and we have to improve. •

(1110) This is an index that compares the projected rate of inflation that we have in our forecast over time. It is an accmwlative type chart starting with '94 and going to the end of our forecast period of 2004 and compares what happens with our projected rate increases that we have in the forecast including the 1.2 at the front end for the two years as well as the longer term to get to 85- 15. You can see that we can achieve the 85-15 with virtually no rate increases. Our customers will see as a result of that a real decline in the price of electricity in real terms. This is our total cost per kilowatt hour.

This was also provided by Moody's and we just copied the chart. It is not a Manitoba Hydro developed chart. You can see that in terms of total cost, Manitoba Hydro has the lowest total cost per - -

- January 5, 1995 LEGISLATIVE ASSEMBLY OF MANITOBA 15 kilowatt hour of any utility in the country that was provided by Moody's. The Alberta utilities are not on the chart and I think it is because in most cases they are investor-owned utilities. I do see Nova Scotia on there so I am not sure what all the rationale was that Moody's considered them separately. This is how our rates compare. This is a residential customer at 1,000 kilowatt hours per month. It is somewhat of an average for a nonelectric heat type customer. As you can see, Manitoba Hydro has the lowest average bill in the country.

It also includes some U.S. cities which are at the extreme right-hand side. It does show that across Canada, we have the lowest residential rates. This shows 2,000 kilowatt hours which is sort of an average electric heat type. It is spread out during the year. Certainly we know that in the month of January electric heat customers would have probably more than 2,000 and in the summertime and spring and fall they would have less, but on average 2,000 is probably not a bad number. You can see once again that we are the lowest, followed by Quebec and B.C. This is a general service small customer.

This would be a cust()]IX7like a small Tom Boy or IGA type store, that type of store, and it shows that in Winnipeg the bill would be $1,500 a month, and $1,579 in Vancouver which is relatively close. 1ben there is a pretty large jump to the next closest customer in Quebec. This is something like an elementary school with 300 kilowatts and 120,000 kilowatt hours a month. Here the bill is $5,129 a month in Manitoba. It goes up to $5,779 in B.C., followed by Alberta. You can see that Quebec is fourth on this particular one. The Maritime provinces are always on the right-hand side.

This is a manufacturing customer of Manitoba Hydro. It is a relatively large load at 20 megawatts and 12,000 kilowatt hours a month. Here the bill was relatively large, $352,000 a month followed by B.C. at $411,000. These customers clearly have an advantage. This is the second largest customer in the Manitoba Hydro system, or approximating it in any event. This is in thousands of dollars a month. The bill is $1.8 million a month. It is a very large bill. We are followed by Alberta in this case. Alberta for large high load factor customers is the province that is chasing Manitoba Hydro or challenging us.

We are then followed by B.C. and Hydro-Quebec. These are the rate increases for '92, '93, '94 and '95 of other utilities across the country. Oearly there is a desire of all utilities to minimize future rate increases. That is the challenge right across the country now. Certainly you can see that Ontario Hydro had two large rate increases in this particular year, but they also had pretty large rate increases before '92 and are now committed to no rate increases in the next two years. In actual fact for '95 they have a modest decrease for industrial customers. Nova Scotia Power is doing reasonably well as well.

These are the rate increases that the large industrial power customers of Manitoba have actually experienced. In '92 they had an average rate increase of 2.4 percent. In '93 we did not have a rate increase. The rate increase that was approved by the Public Utilities Board did not provide for any increase for large industrial customers. In addition to that of course, large mining and manufacturing customers also saw the reduction in their power bill as a result of that tax being phased out, the tax on production facilities for mining and manufacturing companies. This we took out of the Globe and Mail.

It was made up by another source, an economic consulting company. It does show that Manitoba Hydro is relatively competitive in almost all areas. Lethbridge in Alberta is relatively competitive as well. You do see that in terms of electric power costs Manitoba Hydro is definitely the lowest. SOJre current issues of Manitoba Hydro. Our objective in terms of customer service is to be the best electric utility in North America in terms of

16 LEGISLATIVE ASSEMBLY OF MANITOBA January 5, 1995 rates, reliability and the type of customer satisfaction that our customers feel. Our financial strategy is to aggressively pursue the attainment of our financial targets while maintaining electricity rate increases below the rate of inflation. As you saw, the forecast we reviewed with you shows we can achieve that with rate increases significantly below the rate of inflation. The restructuring program was mentioned. We are in the process and almost completed the reduction of approximately 500 positions within the company.

We are contim1ing to review our operations and processes to achieve efficiency and improvements. Our objective in that area is to have some more decentralized decision making. We believe that will improve our customer service. We will want to continuously improve the efficiency of our operations and at the same time improve our customer service. Mitigation settlements. That has been talked about. We are quite proud of the achievements we have made in terms of the Northem Flood Agreement We now have complete settled agreement with Split Lake.

We have either a Meioorandum of Understanding or an ag~eement in principle. It depends on the community as to what name the agreement has or the understanding we have, but we now have an understanding with all four other commmities, including Norway House. So we are hopeful that within the next six months or so, two of those will result in final agreements, probably three, and we are hopeful of having all of them done by the end of the calendar year. We have a relatively ambitious schedule, and we are hopeful of achieving them all. Environmental protection.

Manitoba Hydro is committed to protecting and enhancing the environment in all our cotpOration activities, and we deem that to have an extremely high priority. Our Power Smart. We continually review our Power Smart initiative to ensure that we are achieving the targets we would like to at the lowest possible cost, and our current target is to save 264 megawatts of capacity and 902 million kilowatt hours of energy by the year 2001. Our objective, of course, is to capture all cost-effective conservation in Manitoba that is in fact cost effective and that changes year by year. Our marketing strategy.

I will review it very quickly. It is to provide reliable service and, if in fact we have a problem of any sort, to restore the service as quickly as possible. We want to promote the efficient use of electricity, both directly and through leadership with industry. We want to maintain and improve our customer satisfaction, both in terms of the product we supply as well as our policy and services.

We want to assist industry to become more productive and competitive by providing various services to industry as well as through our rates, and we want to keep our rate increases below inflation and be the lowest-cost provider of electricity in North America. Electrical industry development within the province. We would like to pursue opportunities for industry advancement by emphasizing our comparative rate advantage with other provinces, and with various industry allies, and work with them to develop competitive rates.

We have been working with our industrial customers now, and we have come up with some opportunities and we are going to continue to do that in the future. We have talked about some of our employees at Manitoba Hydro. Although it may seem a little self-serving, I am extremely proud of the employees of Manitoba Hydro and my job as president is certainly served well by the people we have working within the company at all levels. They are extremely committed employees. They work under extremely difficult conditions at times.

They do provide the highest system reliability across the country, and we do have a good safety record, which is the best in the country, and we are the lowest-cost provider of electricity. With those comments, Mr. Chairperson, that ends my presentation. Thank you very much. - -

- January 5, 1995 LEGISLATIVE ASSEMBLY OF MANITOBA 17 Mr. Chairperson: Thank you very much, Mr. Brennan. Mr. McCallum: I should say we have copies of this available to the committee. Mr. Chairperson: There will be copies of the slide presentation given to the committee members. Chairperson's Ruling Mr. Chairperson: On Mr. Edwards's point of order on

Section 46(2) of the act, it was not a point of order. All the act refers to is that the report shall stand before the Public Utilities and Natural Resources committee, and it is standing at the committee level, but not on the order of today, and the committee cannot change the order of the day. It is the govemur.nt House leader (Mr. Ernst) that does it. ••• Mr. Edwards: Mr. Chair, I do not intend to get into some large argument. I did raise it as a point. I appreciate you getting back quickly. I respectfully take issue with the

interpretation simply referring to the particular words, which are that it is "pennanentlyre:furred." My

interpretation of that is that it is indeed permanently on the order of this committee and within the ability of this committee to at any given time consider what is permanently referred to the committee. So that is my point, Mr. Chairperson. I leave it on the record and I again repeat that I believe it is poor practice to move on to a subsequent year's annual report without fully and finally dealing with a prior year's report. Mr. Orchard: Mr. Chairperson, my honourable friend raises an interesting legal technicality I guess we might call it. I will develop a scenario for you.

We complied with the act that ~ honourable friend quoted from in referring the 1993 annual report to this committee. My honourable friend may or may not be aware, but there is no obligation and 'it is incumbent upon the committee to pass the report, but there is no requirement that reports be passed.

Now I will develop a scenario in the absence of substance and substantive criticisms of this Crown corporation that had we referred the 1993 report so that we could achieve presumably ~ honourable friend's desire of having it passed, the criticism would have been that I violated the act in not having referred the 1994 report. So, Mr. Chairperson, we complied with the act for the 1993 report. We are complying with the act for the 1994 report. As a gesture of-how do you word that? What is that word? You know what I mean. An Honourable Member: A gesture of good faith. Mr. Orchard: That is easier.

It is less technical and less legalese-a gesture of peace and good will in the new year. We would entertain a motion from my honourable friend that we pass the 1993 report right now if he so desires. If he does not so desire, we would certainly attempt to answer any question ofbuming issue that he has regarding the 1993 report and deal with that and pass both reports at the end of today. Mr. Chairperson: I have to advise the minister that I have already ruled that we cannot pass the report today. It is not before the committee. Mr. Edwards, you wanted to comment. Mr. Edwards: Sure.

I am, admittedly, given that was your advice and now the minister appears to be saying that in fact we can bring this report back into the purview of the committee, I would love to take him up on his offer and move that we consider in these discussions-and they may or may not end today in terms of voting on these annual reports but that we include the '92-93 and that when we do come to the end of these discussions we would then consecutively vote on the annual reports, first the '92-93 report, secondly the '93-94 report. Presumably, he did not check with the chairperson

18 LEGISLATIVE ASSEMBLY OF MANITOBA January 5, 1995 before extending that invitation to me given the chairperson's comments. Might I ask, Mr. Chairperson, whether or not I might move that motion and I think deal properly and I think. effectively. I do not want to show disrespect for the Clair, Mr. Minister. Mr. Orchard: Mr. Chairperson. might I help you out on that? There is an old saying that when you are a lawyer and you are in court, in an absence of substance of your argument, you debate technicalities.

Now I would not make that inference today, of course, but I have already indicated to my honourable friend that there is enough flexibility in any committee that anybody with any experience whatsoever in parliamentary procedure could pose questions today which may well deal with last year's report, previous years' reports. My staff and myself are quite willing to answer those burning issues.

You will note that this is the third time I have tried to give my honourable friend an opportunity to identify what it was that was so vexatious to him about last year's annual report that was unresolved, because my honourable friend, as Leader of the second opposition party, posed no questions on Manitoba Hydro. I do not know whether he has ever posed a question on Manitoba Hydro or included it in any of his debates. I am really curious as to what the burning issue is that we are to resolve today which seems to be troubling my honourable friend.

Could we, perchance, maybe get on with the discussions of the Crown corporation and how it is performing and the real issues around Manitoba Hydro? Mr. Chairperson: If I could just offer a little recommendation Is it the will of the committee that we have a broad discussion on the '93 report as well as the '94 report that is before us today, understanding that we will not vote on the '93 report because the committee does not have the authority? Mr. Edwards: Mr.

Clair, I move 1HAT this committee, at the conclusion of its deliberations, whether that be today or at a future date, at a reconvening of this committee, consider and indeed vote on consecutively both the 1992-93 annual report of the Manitoba Hydro utility as well as the 1993-94 annual report. I so move. *

(1130) Mr. Orchard: Might I make a suggestion While Mr. Edwards is writing out his motion. maybe the members of the official opposition might have issues they want to discuss about Manitoba Hydro. Mr. Eric Robinson (Rupertsland): I would like to proceed if I may, Mr. Olairperson, on addressing some issues relative to northern Manitoba and pemaps aboriginal people. Before I commence with my questions, I would like to, of course, wish my colleagues all the very best and God's blessings in the forthcoming new year.

I think we are all aware that we are indeed in for a challenge in the coming year in every respect Also I would like to welcome the staff of Manitoba Hydro to this committee. It is my first opportunity to address some specific issues that have been brought to my attention in my work as the MLA for Rupertsland. I would like to begin by asking my question I would like to, as well, thank the honourable minister and also the member for Point Douglas (Mr. Hickes) and the honourable Leader of the Second Opposition (Mr.

Edwards) for their comments, their opening comments, particularly as it pertains to First Nations people. My initial question I guess is regarding the substation that is being built in Snow Lake. We have had reports that this substation is going to cause a path, if I can call it that, that is going to start from Snow Lake to The Pas. As far as I understand it, it is 55 feet wide and 100 miles long. The method of clearing the area that I describe is by burning. I am just wondering if I could get clarification on that, if that indeed is the case and the reports that we have received, whether - -

- January 5, 1995 LEGISLATIVE ASSEMBLY OF MANITOBA 19 or not why labour was not utilized to cany that workout. Mr. Brennan: As a matter of fact, this particular line is going to be hand cleared or cleared using human resources as well as equipment. We m:t with the Swampy Cree Tribal Council on this particular project, and in fact they have been awarded a contract to clear it. I think that took place within the last two months. Mr. Robinson: Mr. Chairperson, in his

preamble the honourable member for Point Douglas (Mr. Hickes) mentioned the feeling of First Nations people and other aboriginal people in northern Manitoba about the feeling that exists out there, and rightly so I think in a lot of cases, about the rates ofhjdro and the apparent inequality that does exist between northern Manitoba and southern Manitoba. We have spoken to First Nations communities throughout northern Manitoba, Sagkeeng being one of them, and we were shown bills that had $800, $900 per month. Also, we have met with conmnmities such as Fox Lake, Cross Lake.

In my discussions with Olief Garrioch the other day, he informed m: that the hydro rates were quite high in the community of Cross Lake. I would like to table som: copies of som: hydro bills which average about $200 to $300 a month in som: northern communities that are governed by the Southeast Resource Development corporation, otherwise known as the Southeast Tribal Council. I would like to table that for the information of members of this committee. With respect to Southeast, we have had an opportunity to review som: of the bills.

On December 23, 1994, for the community of little Grand Rapids, the total bills were $8,586.81. On the sam: month in 1993, November, the bills from that commmity-now these were provided to us by the social assistance people at the Southeast Resource Development cotporation-the total cost of hydro paid out by the social assistance people was $2,732.92.

I think the question that has been posed to us, if indeed the rates are equal, as is indicated in the report of Hydro, and I would like to quote again, Manitoba Hydro's rate structure is such that customers in the North pay the same rates as their counterparts in the South. It would appear to m:, Mr. Chairperson, when the average hydro rate in the city of Winnipeg, for example, is $105.21 and compared to the figures that I have tabled, it would appear to me that the rates in northern Manitoba are much greater than they are in southern Manitoba.

Now, perhaps there is an explanation, and I certainly would like to bear that explanation as to why these rates are drastically different. Mr. Brennan: Manitoba Hydro has three rate zones. We have the city of Winnipeg with one rate zone and after the first 175 kilowatt hours, all energy is the same price in Manitoba, everywhere, no matter where you are. There are differences in the basic rate and the first block, which is the fJrst 175 kilowatt hours. Any conmnmities of the same size anywhere in Manitoba, with the exception of the city of Winnipeg, will pay the same rate.

In the case of the city of Winnipeg, the basic charge is $5.67 and the first 175 kilowatt hours are 5.798 cents. After that, all power is billed at 4.746. In the case of a medium density, which is any commm.ity which has a hundred metered services, and I believe it is 15 custom:rs per kilometre of line, if they meet that test they can meet that mediunHI.ensity rate and there they would have a basic charge of $7.02 and pay 6.615 cents for the first 175 kilowatt hours. After that, all power is at the same rate, again, of 4. 746 cents.

In the low-density rate-and that is people who did not make the criteria I previously mentioned and these are primarily farm-type communities, that sort of thing-the majority of them are in southern Manitoba-have a basic charge of $13.10 and pay 7.4 cents for the first 175 kilowatt hours and after that, all power is once again at 4.746 cents. •

(1140) Mr. Robinson: Mr. Chairperson, to put it in

20 LEGISLATIVE ASSEMBLY OF MANITOBA January 5, 1995 layman's terms, I wonder if Mr. Brennan would again repeat some of the finer details of what he just said I believe I understood him to say that in some areas of northern Manitoba we have a different density level. Is that correct? Mr. Brennan: There are different density levels anywhere in the province. So we have the three rate zones that are composed of-the first rate zone being the city of Winnipeg.

The second density level, if you will, is any community that has at least a hundred Iretered services and 15 customers per kilometre of line so that would be most of the communities like Cross Lake, Norway House, Nelson House, would all meet that criteria. The city of Brandon, Portage Ia Prairie, Thompson, would all meet that criteria. Then there is the low-density and the diesel areas whereby people pay a basic charge of $13.10 and 7.4 cents a kilowatt hour for the first 175 kilowatt hours and the balance at 4.746.

At a break of any sort, I will tell you what the difrerences are by just calculating from one zone to the other. Maybe I can even get somebody to do it. Mr. Orchard: Mr. Chairperson, might I offer a suggestion to the help of the committee and all those so interested If Mr. Brennan could table for all members of the committee the rate

schedule because it does indicate that there are no differential rates in northern Manitoba versus southern Manitoba depending on the comnnmity size. Farms in rural Manitoba pay a higher rate than most of the individuals in communities in northem Manitoba. So I think it would be helpful if we tabled this because it would have all the numbers at my honourable friend's disposal. Mr. Robinson: Mr. Chairperson, I am still not convinced and pethaps I will require some more education on this whole issue. I do believe that Mr. Hickes, the honourable member for Point Douglas, pointed out the high cost of living.

Added to the high cost of living of course are the communities that have been affected by hydro development over the years having to pay higher hydro rates than the remainder of the province seems unfair to me. Now I want to leave that for now and pethaps come back to it at another time. I wanted to ask questions relative to power outages, Mr. Chairperson. We have had power outages and the minister will recall that I wrote him a letter back in September of 1994 regarding this issue.

Most recently, a power outage occurred at Little Grand Rapids and that affected not only the elders in the community, but also the children. The outage occurred from 5:30 in the morning till 3:30 in the afternoon, and I am sure that all conmittee members here can appreciate the hardship that did occur at that time for the residents of Little Grand Rapids. My question is not only for the people of Little Grand Rapids but for Pauingassi, Berens River and people that use the land line from Winnipeg. What measures are in the plans to COireCt sudl outages occurring in the future?

Also, there have been outages in the past that have lasted for up to two days which have hampered the lights at the airstrip at Little Grand Rapids, for example, therefOre not allowing medivacs to occur. In case there was an accident we would have been in a situation where petbaps we would have had a loss oflifu. Mr. Chairperson, I would like to ask either the minister or the staff as to what measures are in place to deal with such issues as power outages. Mr. Brennan: The specific line you are talking about, Mr.

Robinson, is on the east side of Lake Winnipeg going up from the area of Pine Falls, Lac du Bonnet, up the east side of the lake. We are extremely concerned about servicing these communities. We have had a couple of outages that took us quite a while to restore the service. We have all kinds of difficulty. In some cases we need to send people in from other locations to those communities, and we are a victim of the weather. If the weather is not good, we cannot get in, that sort of problem Having said that, we are looking at options of how we can reinforce the supply of power there.

It is a problem and will probably be an ongoing problem in terms of how best to service these -

- January 5, 1995 LEGISLATIVE ASSEMBLY OF MANITOBA 21 remote areas, in terms of getting people in to take a look at them. We are going to see what we can do in terms of locating some of the problems faster, that sort of thing, so we know exactly where they are. During one of the outages we had an individual, in trying to restore power, going to about three different commmities and not knowing exactly where the outage was. That caused a fair amount of difficulty as well. We do appreciate the concern. We are trying to do what we can to minimize any outages.

Having said that, this is a pretty remote area and we are going to have to probably spend some money to try to locate outages and the cause of outages faster. 'There will be some problems in the longer term, I am sure. Mr. Robinson: Mr. Chairperson, I am trying to speed up with my questions. I know that other members of the committee also have equally important questions that they would like to ask the minister and also the staff. On page 9 of the '93-94 annual report, I would like to quote from that. "Service Fnhancements, Tadoule Lake was upgraded with enhanced diesel service during the fiscal year.

These customers, previously restricted to 15 ampere service, now have access to 60 ampere service through the addition of more diesel generators in the community." I received a letter earlier this week that brings to my attention and ultimately to the attention of this committee-in a letter from Chief Ernie Bussidor of the Sayisi Dene First Nation, otherwise known as Tadoule Lake. I am quoting from his letter, Mr. Chairperson. Although we now have enhanced diesel service in Tadoule Lake, about 98 percent of the residences are still using the old system of 15 amps.

It will cost on average $1,800 per home to hook up to the enhanced service with 80 homes needing this conversion. The question I guess they are asking-and perllaps this is not the place to do it-but is Hydro in a position to assist the Sayisi Dene First Nation in upgrading what they have to upgrade in order to fully utilize the service thete? Mr. Brennan: That is not Manitoba Hydro's responsibility. We bring the power up to the house and then after that the customer pays for service extension within the house, in other words, the wiring within the house.

It sounds to me like some of these houses have not been properly wired when they were built They were only wired for 15 amp service and consequently there was not outlets. This is probably something that Indian Affairs, the Province of Manitoba and I guess primarily the federal government should be involved in. Mr. Robinson: Mr. Chairperson, would Manitoba Hydro then be a partner with the Sayisi Dene First Nation in lobbying the federal government to upgrade what they need there? Mr. Brennan: It is not Manitoba Hydro's role to get involved in that sort of a situation.

Any meetings you would like Manitoba Hydro to be at to help in any way Manitoba Hydro can in a limited way-certainly we are restricted by our mandate-but any help we can be other than that we would be more than willing to do. •

(1150) Mr. Robinson: Mr. Chairperson, I am sure that the comments made by Mr. Brennan will be received by the chief and council of the Sayisi Dene First Nation as far as being of technical help perllaps in their lobbying efforts with the federal govemn:rnt in upgrading their community to bring it up to standard for their requirements. Another question I have is that there is sperulation that if and when hydro personnel come into the coiDD11.Blity to repair anything in a community, the cost of their travel is reflected to the resident's bill. So I am just wondering if this issomethingtrueorifthisissomethingfalse.

22 LEGISLATIVE ASSEMBLY OF MANITOBA January 5, 1995 Mr. Brennan: All customers in diesel-related areas pay the Satre rate as the low-density customers do in Manitoba. So regardless of the rate, those people with restricted service, regardless of the cost of providing that service, they pay the Satre rate as people anywhere in the province with that form of density. Mr. Robinson: Mr. Chaiiperson, I would like to ask about employment equity at Hydro.

I would like to know what the total number of staff, the total numbers in Hydro is, and the number of identified aboriginal people, First Nations, Metis, Inuit, etcetera, are currently employed by Hydro. Mr. Brennan: I think we can probably use the numbers that are in the annual report that Mr. Hickes referred to. I am not sure what page they were on. Do you remember Mr. Hickes? There are approximately 4,000 people, in any event, and I think about 265 people who have declared themselves as aboriginal. I think we do have a few more aboriginal people who have not declared themselves.

We know that in SOlD! work locations, I think c:me of the more noticeable ones is Jenpeg, where we believe there are more aboriginal people who have declared themselves as being aboriginal, but the number declared is about 264. In addition to that, we are encomagiog aboriginal people to work with Manitoba Hydro in some of the work opportunities that are available to us. Some of the examples we have had are the construction of the weir at Cross Lake where in excess of 90 percent of the people working on the job were aboriginal.

The line into Split Lake was done by a joint work contract with another contractor and there we had an extensive use of aboriginal people, some of the clearing contracts we have on the transmission lines and that sort of thing, and we are encouraging people not ooly to work for Manitoba Hydro and taking whatever action we can to have them work with us, but in addition to that to wolk on some of the opportunities we have in terms of contracts with Manitoba Hydro. Mr. Robinson: Roughly, with the figures that have been put on the table by Mr.

Brennan, quick figuring would give us an aboriginal employment number of about 4 percent overall. I would like to ask the minister or his staff whether or not there is in place any training initiatives, training programs for aboriginal people, to bring the level up a little greater and to place aboriginal people in permanent employment situations. Mr. Brennan: Manitoba Hydro has various programs to assist people to get the right training. We offer bursaries and that sort of opportunities to staff.

We have some summer employment opportunities whereby we encourage aboriginal people to work for us, especially in the North, both in Thompson and Gillam-or out of Thompson and Gillam, to have some summer work experience that will allow Manitoba Hydro to employ them in the future. We are working with the various educational associations as well. In addition to that, we are associated with Brandon University and Swampy Cree in the foundation of the Northern Business Institute, and a very large supporter there. Mr. Robinson: Mr.

Chairperson, in Fox Lake a concem expressed to us by the First Nation of Fox Lake-during the summer of 1994, there were 14 jobs open for students in the Gillam area, and only two of the 14 students were members of the Fox Lake First Nation and the others were students who had parents working for Manitoba Hydro according to the Fox Lake First Nation. I am wondering if there are efforts being made. I know we talked about employment equity in general, but as far as summer student programs are concerned whether or not there is a concerted effort to employ more aboriginal youth in the summertime. Mr.

Brennan: I will have to check, Mr. Robinson, but I was under the impression we had - -

January 5, 1995 LEGISLATIVE ASSEMBLY OF MANITOBA 23 a special program in the case of Gillam that was directly related to aboriginal people, so I will have to check that I was quite confident though that we had a program whereby a certain number of positions were identified as being only available for aboriginal people, but I will check that out and get back to you. Mr. Robinson: Mr. O:a.airperson, another expressed concern by the Fox Lake First Nation is a need for a cross-cultural awareness program for all Manitoba Hydro employees.

Incidents, such as racism, apparently have ocrurred in the community and also within Hydro that affected aboriginal people. I am wondering if there are any efforts being made to develop cross-cultural awareness programs. Mr. Brennan: Yes, there is. Mr. Chairperson: Mr. Brennan. Mr. Brennan: I will have this right by the end of the session, Mr. O:a.airperson. I am a little too anxious. We are concerned about the issue that you raised as well, and we are looking at that now.

I think there is an opportunity that we can take advantage of those services that would be in the bettemrnt of everybody involved, so we are trying to take care of that. Just before you go on, can I give you the other information that we are looking at, the differences in the zones. Zone 2 over Zone 1 in terms of actual cost worlred out to $2.77; Zone 3 over Zone 2 worked out to $7.45; and Zone 3 over Zone 1 wotked out to $10.22. Those are the increments, assuming somebody went through 175 kilowatt hours per month and all energy above that would be at the same price. Mr. Robinson: Mr.

O:a.airperson, I will review that information that was given by Mr. Brennan. I would like to table for the information of the committee a presentation by the Fox Lake First Natioo on some issues that they have in mind and they would like to see addressed in the next little while by Hydro. I would like to ask a rew questioos relative to Sagkeeng and the discussions that have been ongoing in that First Nations community with respect to land erosion on the north shore. I would like to ask the minister or his staff as to what stage the discussions are at now at the Sagkeeng First Nation. Mr.

Brennan: Manitoba Hydro has taken the positioo over the years over an extended period of time that the operating activities of Manitoba Hydro have not caused any problems associated with erosion. After going to the comnnmity, seeing their problem-both Mr. Lambert and I actually went to the cotDDllmity and visited both sides of the river-we have determined that there is a need to at least talk to the community to see just what can be done to help them with their specific problem We have been talking to them on an ongoing basis for at least the last year and a half.

It is my understanding, although the discussions are not complete, they are still talking about what options are available to them •

(1200) Mr. Robinson: Mr. O:a.airperson, we have had periodic reports by the Sagkeeng First Nation oo the discussions they have had with staff of the Hydro corporation. I am wanting to ask the minister or his staff as to when they anticipate any satisfactory resolution or at least a first step in a satisfactory resolution on the outstanding issues that do exist in Sagkeeng. Mr. Brennan: We were hopeful that we would have achieved them by now, Mr. Robinson. Having said that, I guess both sides to the issue have to be satisfied that they can live with the problem and the potential solutions to the problems.

I would hope that we could resolve it fairly soon, but I guess that will depend on just how both sides react to the issue. It is my understanding that both sides are wotking reasonably hard to see if that can be achieved

24 LEGISLATIVE ASSEMBLY OF MANITOBA January 5, 1995 Mr. Robinson: Mr. Olairperson, there are other outstanding issues relating to the Fox Lake FtrSt Nation that we touched upon very briefly earlier. I am wondering as to what state the discussions are with respect to the Fox Lake First Nation with respect to the treaty land selection that is to be made by the band and other related matters. Mr. Brennan: I cannot talk to the treaty land selections. That is not a Manitoba Hydro responsibility. I can talk to the other issues that have been discussed with Manitoba Hydro.

Som: time ago, I m:t with the former chief and I m:t with him a few times regarding their concems about the project and how best to resolve the issue. We had staff working with the commmity to see what could be done to address in some way some of the concerns they had with Manitoba Hydro's operations. One of the issues they did want, as you brought up earlier or as Mr. Hickes brought up, was the issue of som: of the fitcilities at Sundance. We are prepared to talk to the comnmity about those facilities.

Having said that, there are some ongoing operating costs that are a problem that other parties such as Indian Affairs have to be party to, and it is my understanding those discussions are going relatively slow. Certainly from Manitoba Hydro's perspective we are prepared to talk about just how best the comnnmity can use some of those facilities in a way that they can have some ongoing benefits. Mr. Robinson: Mr. Chairperson, there are many issues that I would like to get into with relation to the Fox Lake First Nation, but time does not permit ox: to do so.

As I said, I want to be respectful to other members of this committee. I know there are other concerns that they have. The most recent issue in Gillam is the employees' retroactive-the tax. increase and the expectation for the ruling of the federal Finance minister with respect to the subsidized housing that Hydro employees were receiving and of course the pending Revenue Canada move to back tax. the workers of Hydro at Gillam, which I understand will affect some 450 people. I would like to know what the position of Manitoba Hydro is in regard to this.

I have written to the minister and I have written to the federal Minister of National Revenue with respect to the concerns by the residents of Gillam on this matter. I am wondering what the position of Hydro is. Is it to take the side of the citizens? I know that Mr. Brennan made a public statement, Mr. Olairperson, with respect to that, coming to the side of the employees. I would like to know the latest developments on that. Mr. Brennan: We areext:retrely concerned about this particular issue.

We do not think it is right nor proper that the federal government reverse a position that they gave Manitoba Hydro employees as to taxing as a taxable benefit some of the deductions that they previously had for remote housing. We are doing everything possible to help our employees get out of this particular predicament. We had our vice-president of Finance go to Ottawa, along with a lawyer. We have subsequentlymet with the Department of National Revenue, with the federal government, as late as this week to see what can be done, and we are hopeful that some changes will be made to that particular ruling.

We are very, vecy concerned about it though. We think it is vecy unfair to our employees, and we are ttying to do evetything we can to help our employees resolve that issue. Mr. Robinson: Mr. Olairperson., I would just like to add to that comment. I would like to thank Mr. Brennan for that answer. I would like to just maybe end that particular subject by asking the honourable minister and his staff to keep me updated and also the residents of Gillam in this vety critical area If they would do that, I would be most satisfied. - -

- January 5, 1995 LEGISLATIVE ASSEMBLY OF MANITOBA 25 I would like to ask a question now relative to the northeast power transmission line. I would like to know the cunent status of the northeast power line. Mr. Brennan: We are awaiting the federal government to apProve their commitment to the project It was a stage approval they had. They had approval until such tiire as we obtained the environmental licence and had the authority to a<X}Uire all the land from the various communities.

We now have band resolutions from all the communities, and the communities have had referendums where they have approved the acquiring of all land. So, as far as we are concerned, it is an issue that the federal government has to approve. They appear to be wanting to renegotiate parts of the agreement, and we are saying we want to get on with the building of the line as soon as possible and we do not want to renegotiate anything. We want to build that line, and we would like to get on with it as soon as possible.

If any work is going to be done this winter, there has to be a commitment from Canada very, very soon. Mr. Robinson: Mr. Olairperson, I have a nwnber of other questions that I wanted to ask the minister and his staff Because of time restrictions I am unable to do that at this time, but I do want to thank the minister and his staff for answering the questions that I have put forward on behalf of my constituents and other northern Manitobans. Thank you. •

(1210) Mr. Orchard: Mr. Olairperson, before we move on in the questioning, I just want to clear up the first issue raised by my honourable friend, and that being the perceptioo. that there is a differential rate and that northerners, in particular, pay a higher rate for their electric service. There was reference to bills as high as $800.00. I have done a quick perusal of the bills that my honourable friend the member for Rupertsland (Mr. Robinson) tabled.

I find only one bill that approaches the $800 and that was one in which the monthly energy consumption was some $57.75, but there was, regrettably for that particular custom7 ofManitoba Hydro, arrears in the tune of $759. I think maybe that is where the confusion comes. I went through other bills. There were some bills in which the consumption was as high as alm>st-well, a little over 5,000 kilowatt hours. In reviewing those bills, it is consistent with the information provided by Mr.

Brennan that their charges for electricity are consistent with the charges which would be levied for a resident of a community of a similar size no matter where they were in Manitoba. In other words, if they are a medium-density customer, their monthly basic charge is $7.02. The first 175 kilowatt hours of electricity was charged out at .6, or zero- six-six dollars per kilowatt hour, or in other words 6.6 cents per kilowatt hour and the run-off rate for the balance of the electricity used of 4,915 kilowatt hours was at the run-off rate of 4. 7 cents a kilowatt hour.

Those rates are the same at the high end of consumption as are paid by consumers in Winnipeg or indeed on farms. The difference in that particular bill is that the basic charge is less than Manitobans pay in low-density service and the first 175 kilowatts hours is ofless cost than those similar customers elsewhere in rural Manitoba and northern Manitoba who are low density customers.

So I just want to make the case with my honourable friend that any of the bills that he has presented to m:, there is no differential in terms of the rate structure that those Manitoba Hydro customers are paying because of their location. It is coo.sisteot with low-density and medium-density customers in the balance of Manitoba, whether it be northern or rural. They are rates that are slightly higher by the amount of, I believe, $2.70 per month than a customer of Manitoba Hydro or Winnipeg Hydro would pay in the city of Winnipeg. Those rates-I want to refresh honourable

26 LEGISLATIVE ASSEMBLY OF MANITOBA January 5, 1995 members of the committee, I want to refresh their memory-were established under the three rate zones by the Manitoba Hydro corporation in 1985, and those rates have been consistent since 1985 for all ofManitoba. It is an issue that has been in place now through two or three separate administrations who have governed while Manitoba Hydro has been the Crown corporation providing services and were introduced by the previous Pawley administration in 1985.

I would like also to point out to my honourable friend that in the case where there is diesel electric service, in other words, service not provided by the thermal end or hydro generating system where there is no land line connection to some of the remote reserve comunmities, and they are served by diesel electricity, their costs are consistent with the rate groupings-low or medium as the case may apply~ven though the cost of diesel service generation is a nmltiple higher than the system rate.

Those additional costs are absorbed, I believe, in part by the system and are subsidized in part by the federal government so that the cost of services in those remote diesel installation comnmities is consistent with the rates charged to customers in other parts of Manitoba and are significantly below the cost of service provision. I think my honourable friend would agree that is a reasonable digression from the 1985 policy of establishing three zones.

To give you the background on the establishment of the three rate zones, the current three rate zones were introduced in Manitoba in 1985 with the objective of recovering costs from customers based on cost causation relationships. If that policy of three rate zones had not been broken in the case of diesel generated comnrunities, the bills would be significantly higher, but that is not the case. That is the only exception to the general rule of three rate zones and consistent application of charges regardless of location of residents in Manitoba.

The only divergence from that policy established in 1985 is in the case of the remote diesel generated comnmities where application of that policy of charging rates in order to recover costs accotding to the cost of service provision would result in significantly higher rates for those diesel communities. Manitoba Hydro and the provincial government rightfully has said that would be inappropriate and have only charged the low-density or medium-density rate even if it is diesel generated Mr. Robinson: I would like to thank the minister for his comments.

Obviously, we are going to disagree on this issue, and I will be in comnnmication with the honourable minister on this issue. I believe that northern Manitobans do have a concern. I believe it to be legitimate. I thank him for his response, and I guess it is a matter of us agreeing to disagree on a certain issue. Thank you. Mr. Edwards: I want to take your offer up and that of the minister to deal with both of the annual reports. I do note that you have had some discussions with, I believe, the Qerk's Office about the motion that I have proposed I wonder, Mr.

Olairperson, I will seek your advice, would you like me to move it at this point or at the conclusion of today? Mr. Chairperson: You have already moved it. I just have to read it on the record. Mr. Edwards: Well, Mr. Olairperson, there has been one amendment as you will note in it, and if you will read it in as amended I would be pleased to deal with it now. Mr. Chairperson: It has been moved by Mr.

Edwards THAT this committee recommend that at the conclusion of these hearings it vote consecutively on both the 1992-93 Annual Report of the Manitoba Hydro-Electric Board and the '93-94 Annual Report of the Manitoba Hydro-Electric Report, voting iJrst on the '92-93 report. Agreed? All those in favour. -

January 5, 1995 LEGISLATIVE ASSEMBLY OF MANITOBA 27 Mr. Orchard: Absolutely. Great idea. Mr. Chairperson: Carried. Mr. Edwards: I would like to start by taking the ~who are here from Manitoba Hydro back briefly to that '92-93 report. In the president's IreSsage in that report, Mr. Brennan indicated that obviously the supply of electricity, a new supply would be required by the year 2009. That was subsequently amended in his comments to 2010. He goes on to say, unless another favourable export agreement is arranged. Is Manitoba Hydro currently looking for a further export arrangement? If so, with whom? Mr.

Brennan: Manitoba Hydro has ongoing dialogue with all utilities that we currently sell power to and interface with, as well as those that are a little more remote from Manitoba Hydro. We have ongoing agreements with a good number of utilities right now. Some are just operating agreements whereby they buy intenuptible power. Other agreements are in place whereby they buy short-term firm power, and there are a good number of those in place.

One of the problems that Manitoba Hydro is experiencing today is the fact that other areas are not experiencing the type of load growth that we all previously experienced, and most other areas also have low load growth projections. (Mr. Jack.Reilrer, Acting Chairperson, in the Chair) There is also a concern about low cost gas being available and people using that as an option, especially in the case of people requiring capacity only and not having to bum much fuel.

People generally appear to be not wanting to take much risk Generally people are looking at their options and trying to leave an actual decision as long as possible. There is nothing we have that looks like it is going to mature very, very quickly. We do know that sorre utilities are going to need power, and we are having ongoing discussions with them I think people are keeping their cards pretty close to the breast though at this point. Mr. Edwards: Mr. Acting Chair, clearly there is, on this continent and indeed worldwide, the startings, the makings of some economic recovery.

In the industrial manufacturing sector in the United States, although there have been some concerns about whether or not that is being sustained, in particular south of the border, however, I wonder, Mr. Brennan, if you can indicate, the northern States, does it continue to be our primary market target in terms of future export sales? •

(1220) Mr. Brennan: It is certainly the largest customer we presently sell to. It is also a customer that has interchanges with other customers as well that we would probably like the opportunity to deal with directly. There have been some legislative changes in the States whereby generation is being deregulated. Transmission is still regulated, but there is an opportunity for other people, other power utilities to use their transmission facilities.

What this is causing is some unrest in the United States in tel'Im of people trying to make any sort of commitments because they are not sure where that is going to lead. At this point it is pretty preliminary, but we are talking to them We are talking about being part of any arrangements as it relates to transmission. We are hopeful that if there are some good opportunities for Manitoba Hydro we will take advantage of them Mr. Edwards: Mr.

Acting Chair, the statement in the responses to the questions that were forwarded to members of this committee flowing from the June 21 committee bearing, at page 3 of those materials there was-and it was a response to questiooing that I had posed to Mr. Brennan about

28 LEGISLATIVE ASSEMBLY OF MANITOBA January 5, 1995 the projected capital expenditures of the corporation. At that time there was a projection that for the '94-95 year there would be $330.2 million spent. I note from the cwrent projection that has gone down. At least I am reading from the current projection that came forward in the materials that were the subject of the slide presentation and I believe it has gone down under $300 million for '94-95. Does the projection continue to be $330.2 million for this cwrent year, or has it been further revised? Mr. Brennan: The cwrent projection is $262 million.

What we do annually-and it is an ongoing process. It is not just annually, but certainly we finalize it in a document annually. We contimtally monitor our capital expenditures to see if they are still required. We look at what can be deferred, what do we not have to do, what is happening in terms ofload growth in certain areas, can we push smrething back, is there a need to put something new in as a result of reliability considerations. It is an ongoing process, and our capital expenditures can change dramatically. But we can give you a

summary of the changes if you would like, Mr. Edwards. Mr. Edwards: Well, to a certain extent we have them and based on the statements back from a number of months ago, the '94-95 was 330.2. That has obviously come down. I would be interested in knowing the reasons for that or what was the cause of that fuirly substantial reduction in what appears to be the cwrent projection for '94- 95. If you notice, going on, the projection last t:iJre for '95-96 was 341.3. That appears to be up now to 402.5. The projection had been 253.9 million for '96-97. That also is up.

Has there been some consistent reason that those projections have changed from the last time that we met? Mr. Brennan: I guess I probably should summarize it to give you a real exact answer, but I do know that our demand-side management costs have come down in the short term. 'They have come down in the longer term as well. Demand- side management is the biggest reduction, I believe, but I will confirm that for you.

In addition to that, we had a deferral by one year of the North Central agreement and that has pushed money back out So it has pushed it from one year to the other so it will increase future years and decrease the short end, the front end In addition to that, there are some new transmission expenditures. '!bey are mainly in the area of the transmission and substations and that sort of thing. That is for reliability concems. Mr. Orchard: Mr. Acting Chairperson, I think Mr.

Brennan has in part acknowledged one of the major reasons for the differential year over year and that is, of course, the North Central Project. The province and Manitoba Hydro are ready to nx>ve. We have made our commitments, but right now the issue is whether the federal govemment is going to maintain their commitment. We have had some delay so that this year's projected capital expenditure is significantly lower.

Unless we achieve agreement in very quick Older with the federal govemment, that project will be at this committee next year and see the '95-96 capital projections down significantly because you will note that the next year's capital is increased because we have had to move dollars that we expected to flow on that line into subsequent years. So that is why I think it is important that we as soon as possible get agreement to proceed. Mr.

Edwards: Thank you for that clarification. 1be other statement in the notes forwarded to members, page 2, obviously deals with the cwrent projection of 2010 for domestic requirements. Is that still the projection? Mr. Brennan: Yes. 1be latest projection is 2010-2011 fiscal year. Mr. Edwards: What is the current plan? We got into this a bit last time, but has there been any revision in sort of the cwrent plan to deal with that? What is Manitoba Hydro looking to do? Is Conawapa still the first choice? Let us assume for

January 5, 1995 LEGISLATIVE ASSEMBLY OF MANITOBA 29 a second that Manitoba Hydro does not come across another export arrangement that would substantiate the construction of Conawapa. What is the plan to deal with the 2010 projection? Mr. Brennan: Right now, it would probably be a smaller plant, like a smaller plant on the Nelson than Conawapa or a plant on the Bumtwood, or other thermal options even. We are looking at all options, and we will delay making a decision as late as possible so we have the best information available. Conawapa is the most economic plant.

It has the least environmental impact From our perspective, it does in any event. The problem with it is it provides such a large quantity of power on to our system that although it is economic in terms of our unit costs, it is very, very bard to cover by ratepayers and that is a real problem for us. So unless there is an increase in load growth, Conawapa is going to have some difficulty, or unless we can get some kind of firm sale. (Mr. Chairperson in the Clair) Mr. Edwards: The other factor obviously is the number of years back you have to go depending on which option you are choosing.

Obviously, we got into that discussion when we were discussing Conawapa a number of years back, the certain lead time that is required I presume that if the thermal option is used, there is less lead time required to actually put that into place. Are those options set out in any understandable way in terms of if we get to 2005, do not have a major export agreement that would justify Conawapa, is that too late? Let us assume for a second that the 2010 remains relatively fum. Is there a timetable at which point a decision has to be made on each of the options? Mr. Brennan: Yes, there is, Mr. Edwards.

The item requiring the longest lead time is hydraulic generation and it is in the neighbowhood of probably in excess of 10 years, so we would have to make a decision at that point as to whether we want to commit ourself to that option or not. Some of the other options require a shorter period of time. That is the problem people in the States are experiencing. They are not wanting to make that commitment so far ahead. Therefore, they are looking at gas options as being the least risky even though they might not know the price of natural gas over the long term. Mr.

Edwards: Is it possible that as other jurisdictions face the same set of circumstances that in fact in the short to medimn term the prospect for export sales will be enhanced? Is that the feeling of the board of Manitoba Hydro, that in fact the opportunity for export sales to justify or essentially allow Manitoba Hydro to prepare for the 2010 deadline here, are those prospects going to be increasing? Is that the projection of Manitoba Hydro currently? Mr. Brennan: We believe that in the short term people are very, very concerned.

In a longer term, we do know that people are going to have to make some sort of investment decisions as it relates to new generation. We think with the economy turning around-it is doing extremely well in the United States at this point in time-that we will see some impact that will be positive to Manitoba H)Wo. We are anxiously waiting to see how that comes about. •

(1230) Mr. Chairperson: The hour being 12:30 p.m, I am seeking what the will of the committee might be. Mr. Orchard: Mr. Olairperson, can I make a suggestion that we break for a quick lunch and reconvene at 1:15 p.m, and run the committee till 3:30 p.m There are some commitments that senior officials at Manitoba Hydro have that require their presence approximately four in the aftemooo, so if we ran from 1:15 p.m till 3:30, we could get considerable more discussion. Would that be agreed? An Honourable Member: Agreed.

30 LEGISLATIVE ASSEMBLY OF MANITOBA January 5, I995 Mr. Chairperson: Is it agreed that the committee will recess and return at I: I5 p.m.? [agreed] The committee recessed at 12:30 p.m. After Recess The committee resumed at 1:20 p.m. Mr. Chairperson: Committee, come to order. I have received the resignation of Mr. Hickes effective January 5, I:I5. Are there any nominations to replace Mr. Hickes? Mr. Robinson: Mr. Olairperson, I move to replace Mr. Hickes with Mr. Martindale. Mr. Chairperson: It has been moved by Mr. Robinson that Mr. Martindale replace Mr. Hickes. Agreed? [agreed] Mr. Edwards: Mr.

Olair, I would just like to continue from where we left off before lunch. Going back to some of the other coiiJIIX:nts that came out in the response from the corporation to members of this committee flowing from the June 2I meeting, one of the statements at page I of that from Mr. Brennan has to do with the projected load growth and what the factors are that impact that. Mr. Brennan stated at that ~ that industrial customers are not using as much power as we forecasted they would.

The second reason for the load growth decline, he says, is that the average use for a residential customer is less than we thought it would be. I want to just ask, firstly, is that trend predicted to continue, and if so, for what period of time? Mr. Brennan: We do not have the decrease continuing. It is my understanding that the trend of more efficient appliances coming in and that sort of thing will continue. The decreased trend is not as significant as it was in terms of residential use per customer.

The softening of the industrial use is forecasted to return to more normal levels, certainly not what they have been in the past but they are forecasted to increase. Mr.

Edwards: With respect to the projections of last year and of this year that the financial picture for Manitoba Hydro is going to improve-that has been talked about for the last number of years-and as well the commitment that rates will not increase in any event beyond the rate of inflation but obviously hopefully substantially below the rate of inflation-and that appears to be a connnon trend in the industry-how is the financial picture going to improve if rates are below inflation, if not zero, and the industrial customers have flattened out their demands, residential customers are cootimJiog to have declining demand. and there are not export agreements that the corporation can point to coming up that would enhance the revenue?

Maybe I am missing something. What is the most significant factor in allowing the financial picture to improve given those circumstances? Mr. Brennan: The biggest item we have in terms of forecasting cost increases to the customer is new generation transmission impacts. If we can manage our net debt that is on our projected balance sheets so that it does not increase, interest and depreciation do not increase, we have pretty well fixed interest and escalation rates. The majority of our debt, 80 some odd percent, has fixed interest rates.

Now some of that comes due at varying times, but they are fixed and certainly depreciation is fixed So as long as we do not increase our cash requirements to increase interest expense, then we should be able to manage it. I think that is the biggest thing. The fact that we just had Limestone come on our system and we have quite a surplus until 20 II including the return of the NSP sale of power from the end of that sale in 2005 that we are in good shape. Mr. Edwards: Is built into those assumptions this continuing static level of industrial -

January 5, 1995 LEGISLATIVE ASSEMBLY OF MANITOBA 31 requirement for power and a stabilization of the residential demand? What is the projection of demand? How does that factor into the revenue projections of Manitoba Hydro at this point? Mr. Brennan: Maybe I did not explain myself very well there. We are projecting increases in load growth. and they are in the neighbourhood of about, on average, 1. 7 percent a year or 1.6, in that neighbourhood. That is an annual increase and that is what is causing us at the end of that period of time to require some form of new generation.

But we are projecting increases in revenue. We are also projecting increases in our export sales as well through interruptible rates going up and that sort of thing as well. Mr. Edwards: So the increase in revenue generated from exports sales is not due to new sales but due to increasing prices of existing arrangements. Mr. Brennan: That is correct. The forecast only provides for any fum sales that we have today. Any new short-term or longer-term fum sales would improve our financial picture. Mr. Edwards: The interest rates that you spoke of earlier, Mr.

Brennan, obviously-although I see that they came down slightly; the Bank of Canada rate came down slightly ~terday or recently-have been on a trend of moving up. What is the susceptibility of Manitoba Hydro? You have an overall debt in the many billions of dollars. What does the financial picture look like in teiDlS of the projection? I heard one economic analyst suggesting that basically painting a picture of a ~ouple of years of maintaining high, if not higher mterest rates, which is indeed scary I think for all of us, but what is the impact of that on Manitoba Hydro? *

(1330) Mr. Brennan: Our average rate of embedded debt is in the neighbourhood of 9.4 or 9.5 percent. Four years ago, that was 10.5 percent so we have brought it down in the last four or five years. We are probably gaining by the fact we are refinancing debt even at today's prices, our interest rates. Mr. Edwards: What impact, given ou

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Collection	Manitoba — Debates (Hansard)
Citation	35-6-pu1
Type	hansard
Volume / chapter	35th 6th hansardpdf pu1.pdf
Language	en
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