LE GISL ATIVE AS SEMBLY OF MANITOBA THE STANDING CO MMITTEE ON PUBLIC UTILITIES AND NATURAL RESOURCES Tuesday, 4 June, 1985 lE - 10:00 a.m. CATION - Winni peg, Manitoba AIRMAN - Ms. Phillips fENDANCE - QUORUM - 6 Members of the Committee present: Hon. Me ssrs. Cowan , Harapiak, Parasiuk, Hon. Mrs. Smith Messrs. Ashton, Enns, Filmon, Fox, Manness, Ms. Phillips, Mr. Ransom PEARING: Manitoba Ener gy Authority - Marc El iesen, Chairman �TTERS UNDER DISCUS SION: 19 84 Annual Repor t - Manitoba Ener gy Autho rity .ERK OF COMMITTEES, Ms. T. Manikel: Committee, me to order. As our former Chairman, Mr.

Santos, 10 longer a mem ber of this comm ittee, we must elect 1ew Chairman. Are there any nominations? ,N. W PARASIUK: Myrna Phillips. I. CLERK: Are there any further nominations? Seei ng ne, Ms. Phillips, will you please come to the Chair? lDAM CHAIRMAN, M. Phillips: I call the comm ittee ord er. I will invite the Honourable Minister to make 1 opening state ment on the report we are considering the Manitoba Energy Authority. )N.

W PARASIUK: Thank you , Madam Chairpers on. >viously, the Manitoba Energy Authority has had a 11 and busy year. lt would be my intention to have 9 Manitoba Energy Authority presents its report, have 1 Annual Repor t review ed, and then do Hydro bsequent to that. Given that, I would like to now call on the Chairperson 1d Execu tive Direct or of the Ma nitoba Energy Jthority, Mr. Marc El iesen , to make a statement to e Public Utilities and Natural Resources Standing >m mittee of the Leg islature. ADAM CHAIRMAN: Mr. Elies en. R. M. ELIESEN: Thank you . On behalf of the Board of.

Directors of the Manitoba 1ergy Authority, I am pleased to present to you formation on the ac tivities of the Authority this past 1ar. I note that the 19 83-84 Annual Report of the 80 Author ity has been tabled in the Leg islature, and I belie ve additional copie s are avai lable from the Clerk of the Committee. Since this is only the second time that the Authority has made a presentation to this legisla tive comm ittee, it may be useful to provide comm ittee memb ers again with a brie f outline of the Manitoba Energy Authority's legisla tive manda te.

The Authority was esta blished by The Manitoba Ener gy Author ity Act which came into effect on July 2, 19 80. In general , the Author ity is resp onsible for formulating and putting into place policies that ensur e the long-term energy security of Manitobans. More specifical ly, we are charged with negotia ting the export and import of electrical energy from and into the province. Finally, the Author ity perfo rms du tie s in these and related areas as dir ected by the Minister of Energy and Mines or the Lieutenant-G overn or-in-Council.

The first Board of Directors of the Autbority was appointed March 18, 19 81, and was chair ed by Mr. Paul Jarvis, the then Deputy Minister of Energy and Mines. The present Board is chaired by myself with Mr. Saul Chernia ck as Vice -Chairperson . Other mem bers servi ng on the Board incl ude Mr. John Arnason, the President and Chief Executive Officer of Manitoba Hydro; Mr. Alan Puttee, the former Assistant Deputy Minister of Energy for the Department of Energy and Mines; and Ms. Patty Park, Special Assistant to the Minister of Energy and Mines.

In addition to a small professional staff that it emplo ys di rectly , the Board is assisted in its activity by the staff of the Manitoba Department of Energy and Mines, and Manitoba Hydro. Toda y I have with me a number of staff mem bers kno wledgeable in the field of el ect rical export negotia tions and govern ment policy related to the co­ ordi nation on the construction of the Lime sto ne Generat ing Station. If there are any matters that we can't fully address toda y, then cer tainly we wou ld attempt to, in writing, provide those detailed repl ies.

I want to be gin by outlining the ME A's principal activities dur ing the past year. First, the National Energy Board decision on the Northern States Power contract will be reviewed. Then a report will be provided for the comm ittee on the status of ME A act ivities in the field of power export negotia tions. Also, a brie f outline will be provided on discussions that have taken place between the Energy Authority and representatives of ene rgy -intens ive ind ustries se eking to locate in Manitoba.

Finally, I will con clude with a synopsis of the Authority's resp onsibility for the co-ord ination of go vern ment policy surr ounding the construc tion of the Limes tone Genera ting Station. Northern States Power Contract. This past year has been an important one for the Energy Authority. Following successful negotiations between the ME A and Northern States Power Company of Minneapol is, Manitoba Hydro applied to the National

Tuesday, 4 Jun e, 1985 Energy Board of Canada in August of 19 84 for a licence to export 500 megawatts of elec tricity to Northern States Power Co. for a 12 -year period be ginning in 19 93. The Board held hearings into the application in November, hearings during which 17 gr oups intervened. The NE B rendered its decision on March 18 th of this year, approving the agreement and gr anting Manitoba Hydro a licence allowing it to meet all of the terms of its contr act with NSP. Mem bers of the committee will recall last ye ar's discussion of the NSP contr act .

I would like to review with the committee the analyses we presented to you last year, and that undertaken by the National Ener gy Board in its March , 19 85 decision: 1. Gene ral Eval uation. In bringing the NSP contract before the comm ittee, I stated that there were many econ omic benefits and that: "This was a good business deal for Manitoba." When put to the test of the National Energy Board 's own independent analysis, the Board agreed , stating that: "The Board was satisfied that the revenues from this expor t would accrue to the bene fit of not only Manitoba but Canada as a whole." 2.

Profits from the Sale. Information was presented last June which showed that Manitoba could expect to receive arou nd $400 million (discounted to 1984 dol lars) or $1. 7 billion, when expressed in "as received " dol lars, in profits over the life of the 12- year agre ement. The National Ener gy Board ex amine d our work carefu lly and concurr ed with the es timates we put forward by stating that: "The export sale is expected to yield net revenues of about $400 million (1 984 discounted dolla rs) over the term of the cont ract." 3. Costs of Making the NSP Sale.

Information on the costs incurr ed by Manitoba Hydro in making the NSP sale was presented to the committee last year. This showed that the capital and inte rest costs incurred by adv ancing the next thr ee stations in Manitoba Hydro's genera ting seq uence, together with the associated opera ting and maintenance costs and the costs arising from the reduced surplus sales occasi oned by the sale were some $305 million (19 84 discounted doll ars).

I repor ted our view that the cos ting me thodolo gy was the appropriate one to use in the circums tances, and was that followed by other Canadian utilities when eval uating similar projects. I also noted that we looked forward to ev aluating the views of other s regard ing cos ting methods and results. These matters were fully discus sed at the NEB hearings where witnesses from Manitoba Hydro were available for cross exam ination.

In their deci sion, the National Energy Board ag reed with our assump tions and me thod ology on cost apportionment, concl uding that the advancement costs were "in the Board 's view the appropria te costs to be assessed against the expor t." 4. Sensit ivity Analysis. Last year we informed this comm ittee that while there were cer tain risks involved in the NSP deal, the se had been fully analy zed and sound provisions had been negotia ted into the cont ract to protect Manitoba's inter ests.

In es timating the $1. 7 billion profit base case, 81 cautious assumptions had been used in the analysil A full range of inflation rates, interest costs, constructio costs, load gr owth, exchange rates, coal pric es, etc had been exam ined in 15 separate sensit ivity tests. I all cases, benefits would accrue to Manitoba. The National Energy Board in their decision agree that we had assessed the risks properly and ha negotia ted appropriate protec tion for Manitoba. "In the case at hand the Board notes that a sensitivi1 analysis has been conclude d in the applicant's cos· recovery analyses.

The Board accepts that the sensitivi1 analysis add resses risks and demonstra tes that undE conditions of lower or higher inte rest rates an escala tion rates, and 'd ifferent load gr owth rate1 benefits to the applicant remain substantial. The Boar also notes that the export contract and the pricin formula e contain features and provisions which woul minimize the impact on the applicant's revenues < significant red uctions in Sher co 3 costs resu lting fror the United States Government ac tions or cha ngin ec onomic and financial cond itions.

"Based on these considerations, the Board is satisfie that there is sufficient evidence to show that the ris� asso ci ated with the pro posed export have bee adequa tely exam ined and are within ac ceptabl bounds. " 5. Load Forecast. Some ques tions were asked by comm ittee member dur ing our last appearanc e before you conc erning t� . load growth forecasts which underla y Manitoba Hydro conclusion that Lime stone would be re quired to me• Manitoba's own needs and re quirements for electric , use in 19 92. Manitoba Hyd ro's load gr owth estimates received thorough review by the National Energy Board .

"Tt Board notes that the June 19 84 load forecast, whic was filed dur ing the heari ng, predicts slightly lower loa gr owth du ring the reque sted per iod, an corres pondingly larger surpluses. The Board is satisfie that the load forecast methodology used in the! forecasts is reasona ble. " 6. Sequence of Genera tion. Information was presented at last yea r's committE hearings showing the impact on the start ing da te ' the Lime stone Genera ting Station as a resu lt of tt NSP sale.

Manitoba Hydro in their application befor the National Energy Board provided their analysis whic showed that a $21 million (19 84 discounted dollar additional pr ofit would resu lt from th e one-ye; advancement to a 19 90 first power date for tt Limes tone station.

The National Energy Board agreed that the one-ye; advancement to 19 90 would mean a profit for Manitot Hydro and verified Hydro's estimate of the size of th; profit. 'The Board notes that for the sale seq uenc from Manitoba Hydro's pe rspect ive, the excess il revenues over costs for the two-year advancemer would be about $20 million more than the one-ye; advancement.

" The NEB further stated that although it was outsic their jurisdiction to sanc tion an in-service da te ft Limes tone, they could find no fault with Manitoba advancement plans and · again I quo te: "In tt circums tanc es, the Board would not accep t ar

Tuesday, 4 June, 1985 ontention tha t app roval of this export licence pplication is tantamount to appr oval of the clvancement of the in-service da tes of the Lime stone, luskwatim and Conawapa stations as bei ng Man itoba yd ro 's best course. The Board 's assessment of the Kport proposal has not, however, turned up anything > suggest that the utility's expansion decisions are rong." 7. Pr ice to NSP vs. Pric e to Ma nitoba Hydro ustomers.

We provided informa tion to the comm ittee last year howing that due to the profits re sulting from the NSP ale, the rates paid by Manitoba customers will be lower •ith th e sale than without the sale. Furthermore, dditional material indicated that the rates that will be aid by Northern States Power will be significantly reater than the rates that will be paid by the averate :ttepayer in Manitoba during the sale peri od, 19 93 to 005.

The National Ener gy Board in their report stated that •hile it was difficult to compa re rates at which power •as sold to another utility and those at which it was eliv ered to a customer the y were confident though 1at Manitobans would pay less for Manitoba Hydro lect ricity than NSP would. Again I quote from the Board 's report: "The Board � aware that the expor t price would be su bstantially reater than the rates paid by the applicants' large 1dustrial custo mers.

"The evidence showed that the proposed export price ,f fro m 67 to 98 mills per kWh over the life of the ontract would far exceed Manitoba Hy dro's dome stic ates for large industrial customers of approximately 0 mills per kWh in 19 84 and 34 mills per kWh estimated :>r 19 93. " 8. The Price Paid by NSP. Finally, when the Manitoba Energy Authority came tefore you last year we argued that we had negotia ted 1ard with NSP and were satisfied that we had obtained 1 good price, a fair price for the electricity Manitoba tlanned to export. This was in our view the real test tf the contract with NSP.

I must say we were pleased to have the National :nergy Board verify that in their words, and I quote: 'The Board is satisfied that in the cir cu mstanc es of his case the export price is the best price that cou ld >e negotiated by the applicant in its particular United Hates marke t." The National Energy Board conduc ted its own ndependent analysis about the NSP sale. Their analysis :onfirme d that which was presented to this comm ittee ast year which showed that the NSP sale is a sound >usine ss deal that will bring benefits to Manitoba for •ears to come. 9. Current Export Sale Ne gotiations.

With a sound deal in place with Northern States Power ve can now go forward to other Canadian and American Jtilities and bargain from an es tablished position of �trength in elect ricity export sales. Significant prog ress was made in negotia tions for utur e export sales over the past year. While important :�dvances were made these are sales and multi-year �ommitments requiring both time and prude nce.

We continued discussions with the Western Area =>ower Ad ministration (WAPA) of Golden, Colorado, for :he sale of 1, 200 megawatts of power for 35 years. 82 In April of this year, we signed "a principles of negotia tion" do cument with the Wismintoba Group - a gr oup of eight utilities primarily in Wisconsin - for the sale of 1,2 00 megawatts of power for a 15 to 30- year period. We are continuing negotia tions with the Minnesota­ Wisconsin Power Suppliers Group - a group of seven, primarily Minnesota utilities - for a 500 to 1, 10 0 meg awatt purcha se for a 15 to 30-year period .

During the past year, both Ontario Hydro and the Sask atchewan Power Corpora tion appr oached Manitoba regard ing the sale of electrical energy on a firm basis. Saskatchewan Power has indicated an inter est in discussing the purcha se of 300 to 500 meg awatts over the long term be ginning in the early 19 90's.

I am now pleased to announc e that the Manitoba Energy Authority and Ontario Hydro have agreed in a Letter of Intent to und ertake studies and to enter into negotiations regard ing a proposed power sale which coul d take one or more of the following forms: - a sale over existing transmission; - a sale of firm capacity and energy in the 300 to 500 MW range for a period of up to 20 years with additional ca pabil ity added to existing interco nnec tions; and - a sale of firm capacity and energy of about 1, 000 MW for a period of up to 35 years with new transmission added from Manitoba to Ontario.

Copies of this recently signed Letter of Intent are available to mem bers of the comm ittee, and I belie ve the y are currently bei ng cir cula ted. Manitoba is pursuing thus a number of options and , in this way, we have sought to avoid putting all our eggs in one basket . We have kept each potential buyer informed of the other nego tiations and of the fact the province will conclude one and, at most, two more deals.

We feel that by having a number of compe ting sales options in play, Manitoba has es tablished a solid barga ining position that will bring the largest possible bene fits to the utility and to the province. We expect that a contract will be signed with one of the potential buyers within the next 12 to 18 months. The conclusion of another major power sale would necessitate the advancement of the construction of the 1 ,300 MW Conawapa Ge nera ting Station. Conawapa would req uire a 10 -year devel opment schedule, creating 9, 000 person years of direct and 16 ,000 person years of indirect empl oyment.

During the past year, the Neb raska Public Power Distr ict decided the y cou ld no longer pur sue the MANDAN Line Project. Nebr aska had acted as the lead utility in the United States for the project. In their judgm ent and in ours, the MANDAN Line continues to be a viable proposition offering significant benefits to utilities on both sides of the border . However, Neb raska decided that, due to lower than expected load growth, there was not sufficient interest amongst their partners to continue with dev elopment of the line.

Neb raska Public Power invested about $35 million - that should be in U.S. dolla rs - in MANDAN over the past 10 years. Manitoba Hydro has spent about $5 million to $6 million Canadian on the project, largely to plan the route the line would take. These plans will be used as we exam ine options for future transmission routes to our Am erican cus tomers.

Tuesday, 4 June, 1985 In view of the MANDAN Line canc ellation , we have commenc ed dis cussions of es tablishing sea sonal div ersity exch ange s with other sum mer-p eaking neighbour s. The benefits of this kind of arrangement have long been recog nized on both side s of the border . Energy Intensive Indu stry Discussions. The Manitoba Energy Authorit y ha s also been charged by the Minister of Energy and Mines with resp onsib ility for encou rag ing energy -inten sive industries to invest in Manitoba.

To this end, we engaged in a joint study of the construc tion and opera tion of an aluminum smelter in Manitoba with the Aluminum Company of America. In December of last year, Alcoa decided to withdraw from the study , citing as reasons changes in its corpo rate prior ities resu lting from a poor interna tional market in aluminum. At the time of its withdrawal, Alcoa noted that Manitoba is amongst the lead ing contenders in the world for the esta blishment of a gr eenfield smelter . Mr.

Fetterolf, the President of Alcoa stated: "Aicoa's decision to end plans for the smelter is not related to the specifics of the Manitoba site. The province would be among lead ing contenders in the world as a site for a gr eenfield smelter ." Since this is our view as wel l, the Authority is con tinuing discus sions with a number of Eu ropean and Asian aluminum produc ers who have expressed interest in locating in Manitoba.

In August of last year , Manitoba signed a Mem ora ndum of Unders tanding with the Federal Government in which Canada agreed to co-ope rate with us in encou rag ing an aluminum smelter to locate in the province. Discussions have commen ced on possible federal support in this area. Lime stone Co-ord ination. The Manitoba Energy Authority has been ch arged by Cabinet with the co-ord ination and implementation of go ver nment pol icy related to training and emp loyment, purcha sing and tenderi ng, indus trial offsets, and com munica tions for the Limestone project.

I would now like to give mem bers of the comm ittee a br ief outline of our activity on each of the se fields. Training and Emplo yment. In January of 19 85, amend ments to the Nelson­ Bur ntwood Colle ctive Agre ement were signed by the Hydro Projects Management Assoc iation repres enting Manitoba Hydro and major project contra ctors, and the Allied Hydro Council repres enting construction unions. The agreement itself has been in place since 19 72 and has guar anteed labour peace on major hydro projects since that time.

The amend ments which were negotia ted and agreed to by union and management representativ es enh ance oppor tunities for qual ifed northern Native and other northern resi dents on major hydro projects including Limestone. The agreement also improves working conditions at the site. To ensure that Northern Manitobans have a fair chanc e to become qualified for jobs at Limestone and futur e stations, a Northern Training Program has been introduced. To co-ord inate that tra ining, the Limestone Training and Emplo yment Agency has been es tablished .

The agency will co-ord inate the deliv ery of training provided by Provincial and Fed eral Go vernment departments, as well as initiate training wher e none currentl y exists. 83 The training program is designed to meet the jc req uirements and construction sched ule at the sit Traine es will receive simulated training at cent res Thompson and Lynn Lake for some oc cupations, an co mmunity based training in others. Most cl assroo1 work will be cond ucted through Keewat in Communi College. Purchasi ng and Tendering.

New purchasi ng and tendering policies to encou ra� the participation of Manitoba busine ss in Lime stor were also introduc ed in January. The Energy Authori co-ord inated the work of government departments an Manitoba Hydro to design the se new guideli nes an is now helping to put them in place. While the open competitiv e tendering system w rem ain the first principle of Limestone purcha sing, the! policies set out local content as a component in tt ev alua tion of cont ract bids. To be gin, Hydro h� designed cont racts tha t are within the scope 1 Ma nitoba compa nie s.

Sourcing material to hel cont ractors ident ify Manitoba subc ontr act ors an suppliers has been published. In certain limited circumstanc es where social an ec onomic bene fits outweigh costs, the Pr ovinc i< Go ve rnment, thr ough the Manitoba Jobs Fund, prepar ed to pay a price differen tial on cont racts 1 enha nce Manitoba content. As wel l, Manitoba Hydro may, under limited an special cir cu mstances, restrict calls for tende rs 1 . northern compan ies. lt may also enter into nego tiate contra cts with northern Native gr oups.

To help inform Manitoba busi ness abo ut th opportun ities the se new policie s will prod uc e, si information sem inars were held in centres around th province with about 800 rep res entativ es of loc; busine ss in attendance. Industrial Benefits. The Manitoba Energy Authority recently signed a ind ustrial benefits agreement with the Canadian Genen Electric Company related to the Lime stone turbine and gener ators. The CGE contract is a good deal fc Manitoba. Manitoba Hydro will be purchasing turb ines an gen erators at a price significantly below their inith est imates.

The Province of Manitoba will be receivin an industrial benefits package worth $15 0 million, whic will provide con tinuing benefits beyond the term of th turbine and generator contra ct thr ough lastin invest ment and job crea tion. In addition , 2,300 perso years will be creat ed, the same as would have bee created if the turbin es and gener ators had bee manufactured in Manitoba. Two previous governments and two previ ous Hydr Boards initiated discussions with CGE to negotiate sue a package. However, this is the first time an industril bene fits package such as this has been signed i Manitoba.

The Industrial Benefits Package is made up of fiv components. First, CGE has agreed to ensure that $11 million is invested in viable and long lasting busi nes operations in Manitoba. Sec ond, between 10 0 to 16 1 permanent new jobs will be created in the province' high tech nology industrie s. Third, CGE will fund tw1 research projects at a level of $1 00,000 each at th

Tuesday, 4 Ju ne, 1985 Manitoba High Voltage Direct Current Research Centre and at the Manitoba Microele ct ronics Centre. Fourth, CGE gua rantees that the turbi nes and gener ators used at Limes tone will contain a minimum 15 percent Manitoba content, about twice the Manitoba content ac hieved at Long Spruce. CGE will endeavour to incr ease this to 25 percent. Finally, CGE will invest $2 million in an eco nomic de ve lopment program with Northern Native entrepreneurs involving joint ventu res in fields of CGE expertise. Communica tions.

None of these new programs which enha nce Manitoba participation in Limes tone can be effective unless acco mpanied by a commun ications plan which informs Manitobans about the se opportunities. To facilitate this, the ME A has opened two information off ices, the Man itoba Jobs Fund Lime stone Development Office in Thompson and in Winnipeg. These offices serve as the first point of public access for individuals and busine sses inter ested in recei ving information on Limestone. Five informational brochures on various aspects of the project have been prod uced and tho usands have been distributed .

In concl usion, this has been a busy year for the Manitoba Ener gy Author ity. In the coming months, we hope to conclude another major hyd ro-elect ric export sale, make progress in encoura ging ener gy intensive industrie s in the province and will continue our role as overall co-ord inator of government and Manitoba Hyd ro policy arou nd the construc tion of the Limes tone Generating Station. Thank yo u. MADAM CHAIRMAN: Thank you, Mr. Eliesen. How would the comm ittee like to proce ed? Page­ by- page, or the repor t as a whole? The Leader of the Opposition. MR. G.

FILMON: Madam Chairman, I wonder if we cou ld achieve some agre ement. We 're deal ing with, I belie ve, the report of the Manitoba En ergy Authority and the report of Manitoba Hydro, that we will atte mpt from our perspect ive to di scuss each of th ese separately , but we wo n't pass any thing until the end. So if we go over to Manitoba Hydro and we find that the que stion we're asking should, in fact, more properly be add ressed to the Energy Authority, that we cou ld ask it under th ose circums tances, and not be restricted to being told, well we should have asked that when we were in the last discussion.

HON. W. PARASIUK: I have no problem with that. lt's just that l think just in terms of alloca tions of staff, this would be the one for basically Manitoba Energy Authority, that we would move on to the Manitoba Hyd ro when people feel that they're finished with the Energy Autho rity. But if there is some thing that people want to rais e, it cert ainly wouldn't be cut off on tha t under stand ing. MR. G. FILMON: All the staff her e are staff of the Energy Authority? HON. W. PARASIUK: No, there are a couple of people from Hydro as wel l. 84 MADAM CHAIRMAN: Is that agreed ? (Agreed) Okay, proce ed.

The Leader of the Opposition. MR. G. FILMON: Madam Chairman, I wonder in going thr ough the lengthy add ress provided by the Chairman, perhaps I can go back to front and just ask a few quest ions that come to mind. There seems to be an interrela tionship of funding and responsi bility on a number of aspects of the Energy Author ity. For instance, in the field of com munications there is a reference to the Man itoba Jobs Fund Lime stone Development Office - offices I presume that should be - in Thompson and Winnipeg . Under which budge t would the se appear?

Would they be under the budget of the Manitoba Energy Authority or under the Jobs Fund? MR. M. ELIESEN: Madam Chairpers on, the funding for the Limestone-related activities come under the Jobs Fund, and the source of financing is from the Jobs Fund. So it is not directly sourced from the Manitoba Ener gy Authority. MR. G. FILMON: Why would tha t be, Mada m Chairman? Doesn't that just sort of confuse the lines of author ity and responsi bility? Shouldn't it all be central ized under either Manitoba Hydro or the Manitoba Ener gy Authority? Why do we need to get involved with the Jobs Fund on this particular thing?

HON. W. PARASIUK: That cert ainly exists with other departments and agencies where the thought was that there cou ld be gr eater spino ffs, some gr eater maximization by using Jobs Fund funding. That's the reason why the Jobs Fund was set up to try and expand the emplo yment opportun ities for Manitobans. In the first instance there was a lot of funding in relation to com munity assets and community projects and some government projects.

As was clearly stated last year the strategy then was, ther e were some opportunitie s th at appear ed for longer term devel opments to try and ensure to the fullest extent possible, there be an attempt to maximize long-term jobs and long-term emplo yment. This is the approach that, as a resu lt, was tabled . MR. G. FILMON: Madam Chairman, I wonder if I cou ld ask, the Min ister refers to gr eater spinoffs and greater benefits. Is the Minister saying those benefits that are there as a re sult of the Lime stone Project wou ld not be there if it were not for the presence of the Jobs Fund? HON. W.

PARASIUK: I'm saying that every little bit helps, and I think that this is part of a co-ord inated effort. For ex ample, there may be some opportunities for the Manitoba Jobs Fund to work in concert with CGE through the Department of Industry, Trade and Technology. There are some possibilities there that have already been communic ated to a number of firms in Manitoba. Indeed I think by taking this co-or dinated approach, by involving various departments, by having the Jobs Fund involved , I think that we will indeed ach ieve a

Tuesday , 4 June, 1985 gr eater spinoff from the Lime stone de velopment for Manitobans than hithe rto has taken place when we've had the Long Spruce developments or the Kettle Rapids de vel opments or dev elopm ents before that time. MR. G. FILMON: Madam Chairman, during Long Spruc e and Kettle and others, we didn't have for instance the Manitoba Energy Author ity.

I am concerned that rather than co-ord inating we 're dispersi ng the efforts and, in fact, multiplying the bureaucracy in an effort to tr y and maxim ize the awareness of the advert ising spinoff on the Jobs Fund and the promotional spinoff on the ME A and so on and so forth that, in fact, I can't see that there are additional jobs that are bei ng created other than perhaps in the Manitoba Jobs Fund. But those jobs that will be created by Limestone will be created by Limestone, not by the Manitoba Jobs Fund.

If ther e were a concern to try and have an overall umbr ella co- ordina tion, why cou ldn't that function be performed by the Manitoba Energy Authority. And since the y'r e de aling in the negotiation of agreements, as has been laid out here with CGE, if that is the objective of the government, as stated and put forth, why cou ld that mandate not be carried out by the Energy Authority instead of get ting now, yet, a third party involved in the whole process. HON. W.

PARASIUK: Wel l, I don't think there's a gr eat point of disag re ement between mys elf and the Leader of the Opposition, and the coord inating function, indeed , is being carried out by the Manitoba Energy Author ity. There are particul ar types of funding for that being provided by the Manitoba Jobs Fund to ensure that task is ach ieved, and that is nothing unusual in the way in which the Jobs Fund operates. We've had instances of de partments recei ving particul ar funding from the Jobs Fund to carry out a particular task within its ambit, and this is what is happen ing here.

I think the proof of the pudding will be in the ea ting. I believe that there are significant improvements being made in terms of maximization of jobs. I think by com municating to the general public, in a whole variety of ways, we ha ve incr eased the interest and the awareness of the Limestone poten tial to Manitoba busine ss people. I think that one of the points that were raised here is that ther e were sem inars that were held ar ound the province and you had about 800 representatives of local business in attendance.

In fact, my understan ding is that we had to sched ule more sem inars because the business community was so interest ed. And I think tha t all augur s wel l. MR. G. FILMON: Sur ely the Minister isn't sugges ting that those se minars co uldn't have been organ ized and those 800 pe ople wouldn't have atte nded if the Jobs Fund hadn't been involved .

You know, surely that could have been done by the Manitoba Energy Authority under direction from the Minister and under government policy stating this is what we want to do, and we want to get the small businesses involved , and we want to have the sem inars to create the awareness and inform people of our objectives and of the opportun ities. Sur ely that could ha ve been done by the Manitoba Energy Authority, or even Manitoba Hydro for that matter. 85 HON. W.

PARASIUK: We, in fact, are having thos1 things done, it's a matter of how one wants to tunc them, and it is cer tainly legitimate to have those type: of broad gov ernment objectives pursued by having the Jobs Fund providing funding to try and achieve those objectives.

That is the function of the Jobs Fund and in fact, it fits in very well with the approach of tryi n! to maxim ize spinoffs and maximize long-term jot opportunities for Manitobans and I believe that, thr ougl a com bination of instruments, Hydro; Manitoba Energ � Authority; Jobs Fund, being an entity or instrumen that is used to add here or provide a bit of a catalys there; the Departme nt of Ind ust ry, Trade anc Technol ogy, that a gr eat deal more is being achie vec now than has been the case to da te.

We have said tha as a matter of policy and we cer tainly are doing ou1 best, more so than I think has ever been done in anl other province, more so than has been done in thil province to da te, to try and achieve that maximizatior of spinoff benefits to Manitobans. MR. G. FILMON: The statement by the Chairmar ind icates that the Manitoba Ener gy Author ity ha! opened two information offices, but those offices arE Jobs Fund offices so who really has opened those office; and under whose jur isidiction do the y exist? HON. W.

PARASIUK: We ll, in terms of acc ountability the acc ountability and the respon sibility for them liE with the Manitoba Ener gy Author ity. There have beer a number of act ivities under taken in this province witt public agencies, or thr ough com munity agencies, 01 with the private sector, where Jobs Fund has providec funds for certain types of activities geared to promotin� lo nger -term ec onomic gr owth in long-term jot devel opment in this province.

This is one such ac tivit) and I don't think there's confusion with respect to othe1 types of act ivities as to the Jobs Fund being a tunder, but an entit y being the deliverer and being acc ountable for the delivery. MR. G. FILMON: So the Energy Author ity has openec the offices and is resp onsible for them, but the Job� Fund is staffing them and providing the funding, is tha1 how it works? HON. W. PARASIUK: The Jobs Fund provides funding. but the Manitoba Energy Authority is resp onsible for staffing them. MR. G. FILMON: How many staff, Madam Chairman, are in each of the se two information offices? MR. M.

ELIESEN: In response to the ques tion, I should first note that one is not a new office. The office in Winnipeg is really utilizing the office space available o1 the Department of Energy and Mines Infor mation Offices, and what we've done there is take over a part of that space in order to provide that kind of service to req uests tha t ha ve been made. Ther e are approximately four ind ividuals involved in Winnipeg , and thr ee in Thompson who are involved in this area. MR. G. FILMON: What are tlieir position classifications and re sponsibilities?

Tuesday, 4 June, 1985 MR. M. ELIESEN: We can make that information available in a few minutes. MR. G. FILMON: What are the budge ts for each of these offices, and what are the bud gets for adver tising for these offices, or can that be separat ed? Should we be talking more on global terms of the overall budg et for the Limestone project, the ME A's role in it and the Jobs Fund's role in it? HON. W.

PARASIUK: I have said that when it came to the information and commun ication prog ram rela ting to the overal l Limestone dev elopment that I expected that that whole package would come in at less than a million dol lars, and that what we had was a project of co ntinuous consultation with the various groups that I spent quite a bit of time in the northern working gr oup on Hydro involvement, or the working group on northern involvement and Hydro dev elopment.

We spent quite a bit of time before we launched anything to consult with the busine ss gr oups in this province; to consult with communi ty groups; to consult with labour organizations, and to get from them what the y thought were very important feed back with respect to this project . And we were informed that information and commun ication would be very important. We have attem pted to meet those information and commu nication req uirements with a bud get overall that we think will be less than a million dol lars, and we co ntinue to monitor this, try to get fe edba ck from the groups.

And when the Session ends I cer tainly expect to mee ting with more of them on an ongoing basis, because we have said that the consulta tion process should be ongoing and should be continuous because this is a major project and it will take eight years to comple te. Certai nly the information co mmunication requirements are greater at the be ginning of the project than they are towards the end or even in the middle and it's important to monitor to see whether in fact the various groups feel that they're gett ing sufficient information.

That is why in overall terms we have said that we expected the bud get to be less than $1 million and will monitor the situation over the cou rse of the next thr ee months to det ermine whether the re will be changes to that. MR. G. FILMON: Madam Chairman, we know the Minister's and the govern ment's view tha t information commu nication are very important. We saw that from a Cabinet document of September , 19 83, in which it is one of the two important things in the mind of this ad ministration.

But what I want to know is, do es the $1 mill ion include the information commun ication expenses that will be paid for out of Manitoba Hydr o's budget, out of the Jobs Fund budg et and out of the Manitoba Energy Authority budget, all thr ee budg ets to do with the Limes tone dev elopment, do they coll ectively come in under $1 million in dir ect adver tising? HON. W. PARASIUK: Yes, they do. MR. M.

ELIESEN: Madam Chairpers on, I can provide the information in terms of the cla ssification, so while I don't have the ac tual salar y lev els, those cert ainly can be co mmunicated in writing. 86 With regard to Winnipeg, ther e is an over all management co- ordi nator and I don't ha ve his cl assification handy. There is a secretary to the co­ ord inator who is an AY3. There are two information officers at a Clerk 4 level - that's in Winnipeg .

With regard to Thompson, 't here is an overall management co-ord inator and we 'll make available his exact cla ssification; a secretary at the AY2 level and an information officer who is classified as a Clerk 4 level. Both Winnipeg and Thompson, since the se offices have been open , have had to deal with over 7,0 00 individual requests from Manitobans deal ing with jobs, dealing with business opportunities, etc., and the people who have been supplying this basic information are the people who I've referred to now. MR. G. FILMON: I thank the Chairman for that.

I am curious, .Madam Chairman, as to why, if the principal function of these offices is to assist people in knowing about the emp loyment opportunities and in fact the job crea tion opportun ities and the opportu nitie s for cont racts and spinoff benefits, why, if those are the · major thrus ts of th ose offices, the major staff complement is information officers and secre tarial? There are no emplo yment couns el lors and ther e are no ec onomic dev elopment spe cialists involved who can really relate the opportunities to the pe ople. MR. M.

ELIESEN: Madam Chairpers on, the Information Office deals dir ectly with some of those basic requests for information on emplo yment opportunities, how to be referred to Canada Manpower, etc ., as wel l as dea ling with specific requests from business in terms of contract opportu nities. They also have available which they refer then to the special ized depa rtments for the detail that is req uired .

For ex ample, In the case of small business or me dium business seek ing opportun ities for subcont racts, upon initial conta ct with the Limestone development office, the y would be referred to specific individuals eith er in Manitoba Hydro with regard to purchasi ng policy, or people in the department of Ind ustry , Trade and Technology who have put together the various sourcing directories available for the main contractors or people who are bidding on the inain contracts.

So there are follow-up individuals with more special ized knowledge who are referred to after an initial contact with the dev elopment office. MR. G. FILMON: Madam Chairman, I wonder if I cou ld ask, what is the principal purpose of spen ding $1 million advert ising the Limestone project? Is it to try and persuade the public of Manitoba that it is a good deal for Manitobans? That it will en hance the pe ople's opinion of the government for having entered into this agre ement? That it will give a sense of development for the province of major dev elopment in job crea tion?

What's the purpose of spe nding $1 million in advertising Limestone? HON. W. PARASI UK: We bel ieve tha t th ere are tremendous opportu nities for spinoffs for Manitobans from the Hydro devel opment. I have met with over 30 groups. They have all indicated that information and

Tuesday, 4 Jun e, 1985 commun ication is crit ical, that Manitoba firms need to have the information about these possibilities, what the timetable of them might be. They have to get involved in that tendering process and we have done everyt hing possible on the other side to ensur e that Manitoba firms are at least heard fro m. In the past a lot of the tendering took place in such a way that there was leakage. The investment was being made in Manitoba but the emplo yment opportunities or the subcontracts took place outside the province.

When you are talking about a project that over its life will in fact be a project in the $2.2 to $2. 5 billion range, that has a tremen dous potent ial, then what we would like to ensure is that the spinoff do es take place and $1 million - and I expect it will be less than $1 million- but $1 million and we 'll be able to check over the cou rse of this project the involvement of Manitoba firms and the participation of Manitobans in the act ual emplo yment opportunities, but we are talking about a great number of jobs.

We're talking about the potential of 19, 000 jobs and that type of spinoff and the objectiv e of trying to ensu re that without sett ing up price preferences and a whole set of other things which we think aren 't that good for this countr y, but by being agg ressive in terms of lett ing Manitobans know ahead of time, having them get geared up for a cont ract ahead of time, and we've been talking to people now for almost a year, that we belie ve we put Manitobans in a better position to benefit from this type of project .

We think that the $1 million invest ment will be recovered many many time s over by Manitobans, by Manitoba business firms, by local communi ties and ultima tely by the tax payer of Manitoba. MR. G. FILMON: I wonder if the Minister or the Chairman of the ME A could tell us what firms have been involved in the dev elopment of the adver tising program for the Limes tone project. MR. M. ELIESEN: Madam Chairperso n, we've had two firms involved in the dev elopment of the adver tising program for the Li mes tone project. MR. M.

ELIESEN: Madam Chairperso n, we have had two firms involved in the dev elopment of the project. Dunski Adv ert ising is one firm and West com Corporation is the other firm. These are the two firms that have assisted us in preparing the program . Dunski mainly was involved in the br oad conceptual dev elopment of the program which we were looking at of attem pting to achieve thr ee objectives; the three objectives being to inform the broad population of Manitoba about the project, what it is, where it's located, and the major gov ernment policies associated with it.

The second objective was to inform specific group s who are likely to benef it directly from Limes tone about the project, and government and hydro policies which can assist them; and the third objectiv e was really to improve the access of Manitobans to Lime stone opportun ities. MR. G. FILMON: The Dunski firm was involved in the broad conceptual dev elopment of the project, I think the Chairman said. When did the y do their- work? 87 MR. M. ELIESEN: Madam Chairpers on, the Duns� firm undertook their work in 19 84-85 and compl etec the last fiscal year.

At that particular time we were about to te rminate the successful termination of the discussions with Northern States Power. We saw the benefits of an earlier start up in Limes tone, and we thought it necessary to obtain professionalized service to assist us in dev eloping an informa tional program tc maximize the benef its related to the Limestone projecl One of the main areas really relates to attemptint to do a significantly better job than what was done earli er.

While the re cords wer en't fully prepared at the time, our rough es tima�es showed that only 40 to 4! percent was sourced from the Long Spruce Genera tint Station which is the last major hydro devel opment tha took place in Manitoba.

We realized that we could de a much better job this time arou nd, and our objective really is to try to double that to around 80 to 85 perce nl In order to do this though, one of the basic gap: was trying to ensure that Manitobans had full knowled ge of the opportunities that would be available, given the highly technical nature, given the fact that it is up North given the fact that people don't kno w - when you sa: Lime stone - what is Limes tone all about? We though it useful at that stage to bring in some specialized peo ple to assist us in devel oping the major concepts. MR. G.

FILMON: The Dunski firm did its work in the'8 4 85 fiscal year. What specific ally did they do? Did the: dev elop any of the adver tising itself, or was their role · more of a strategy dev elopment? MR. M. ELIESEN: Madam Chairperso n, I can provide some detai l.

The Dunski Adver tising Agency was askec to undertake the following: (1) dev elop themes as well as sub-theme s arou nc which to build an information campaig n; (2) ident ify the different medias most appropriate tc use when target ing information to different groups; (3) rec ommend appropriate forms of com municatin! directly with individuals and gr oups who could benefi from Limestone; (4) provide an integ rated sched ule, including med ii and non-media veh icle s of commun ication that co ulc most effectively inform the general public and targetec groups about Limestone; (5) make rec ommendations on a bud get and cos es timates that would be involved in an informa tione campaign, including creative production and placem enl (6) identify personnel agency requirements associatec with the compr ehens ive program and mak, reco mmendations on which ones should be selected (7) provide the basic creative format for the Lime stone related commun ications.

Just to follow up with more specific information, 1 cont ract was signed with the Dunski Agency in Mal 19 84 to provide the se services for $1 00,000.00. The cont ract stipulated the fee; $50,000 was paid at the beginning and $50,000 upon satisfactory completiol of the work which took place. MR. G. FILMON: So the Dunski people didn't produce any adver tising thems elves. They were all the strateg ic dev elopment and identi fying the agency req uirements the basic format, the ve hicles for best providing the

Tuesday, 4 Jun e, 1985 co mmunications, integra tion of sched ules and all of those, the best means of co mmunicat ion, the media ident ification, all of that, but they didn't produce any adver tising? MR. M. ELIESEN: Madam Chairpers on, that is correct, other than devel oping some particular ide as, but the y didn't produce the adver tising. We stcom are the Manitoba firm which did produc e the adver tising. MR. G.

FILMON: I am gla d the Chairman rem inde d me by referring to Westcom as a Manitoba firm, because I und erstand that Dunski is from out of the province and th ey are principall y located in Montreal or el sewhere. I think the Chairman said that Dunski was paid $100 ,000 of which $50,000 was paid in advance. Is that a norm al thing to do on a cont ract of this nature, that the gove rnment should pay them 50 percent up front? That sounds very unusual to me. MR. M. ELIESEN: Madam Chairpers on, I am advised that these are the usual practices associated with this particular area.

Ob viously , we had full kno wled ge of Dunski's profes sional services and there was no difficulty in entering into this general agreement and we were more than satisfied with the work that was perf ormed . At the end it was a very difficult task as I indicated earl ier .

The whole idea of trying to ensur e that you can develop a commun ication program, the results of which you are attem pting to really maximize the benefits which would be double those of the last genera ting station that was built, and there were obviously many areas and many subgr oups that have to be consid ered of tryi ng to get that information to and we were satisfied with Dunski's work. MR. G.

FILMON: Madam Chairman, the Chairman is saying that it's normal practice to pay an adver tising agency who is doing work of this nature, 50 percent of their fee in advance, before the y'v e be gun to work on it, before we have any evidence of results or anything? Wel l, I find that difficult to belie ve. Does he have a similar arrangement, for instance, with Westcom on this? MR. M. ELIESEN: Madam Chairpers on, sor ry, I didn't want to give the impres sion that we gave $50,000 right at the be ginning.

Right before Dunski started to und ertake the work, he had started into the project , and the first $50, 000 was provided. I can check the re cords and provide the information. 1t was after three or four months had developed of his analysis and we had received some reports. lt was just that he was with us for a number of months and $50, 000 was provided more towards the beg inning of the project, but it wasn't a case of him being provided with $50,0 00 before he ac tually started the project. HON. W.

PARASIUK: Yes, I certai nly could check over Manitoba Energy Authority cont racts that were entered into with adver tising compa nies and public rela tions companies prior to Novem ber of 1981 to det ermine whether in fact there has been any discrepancy in the 88 way in which the contracts were arranged or signed after 19 81, as before 19 81. MR. G. FILMON: How much of the cost of adver tising, for instance, from Westcom will be in terms of creative and how much of the cost will be in terms of the booking of actual time for televi sion, rad io, newspaper and magazines, et c.? MR. M.

ELIESEN: That information can be provided. I don't have the specific breakdown with me toda y, but we are working within a budge t rest riction and we have clearly restraints in this area and the breakd own can be provided. MR. G. FILMON: Did Westcom req uire any payment in advance before their work was produc ed ? MR. M. ELIESEN: Madam Chairpers on, I just want to empha size again that we did not provide - just for cl arification, just to make it clear, and I apolog ize if I gave that impression - any money to Dunski Advertising before the y ac tually started the work.

They got part of the contract proceeds after the y were into the project for three or four months. Now, with regard to Wes tc om, I believe similar kinds of arrangements have been made, but I can check and we can provide that information together with any of the specific bre akdo wn that has been requested . MR. G. FILMON: What had Dunski done before the y got their first payment? MR. M. ELIESEN: Madam Chairpers on, Dunski had provided very specific ideas on conceptual development in those seven areas that I had menti oned earlier.

There were detailed charts, detailed descr iptions, different creative ideas that had been put forward for our considera tion prior to them rec eiving one ce nt. MR. G. FILMON: Is it possible that detai led conceptual and sugges tions were basically a proposal which most firms normally put together in order to get a contra ct? MR. M. ELIESEN: Madam Chairpers on, not in this particular case. Dunski was hired for a specific purpose and the purposes I indicated . MR. G. FILMON: So, in fact, nobody else was consider ed and no other proposals were put forward? MR. M. ELIESEN: That is correct, Madam Chairperson.

We had knowledge of Dunski's ability and special ized services in this area and that is why we undertook a con tract with him and his firm. As most people are aware, in the area of adver tising, there is a particular creative or innovative component which really relates to individuals and their ability in this area. We had a fair and good apprecia tion of his talents and that is why he was spe cifically selected. MR. G. FILMON: From what I unde rstand, they wer en't hired to do creative; in fact, that the creative has been done by Westcom.

I wonder if the Chairman could indicate why a Manitoba firm wasn't hired to this work.

Tuesday, 4 Jun e, 198 5 Are there no Manitoba firms capable of doing this sort of work? HON. W.

PARASIUK: I cer tainly have indicated that I will get the information to see whether there have been discrepancies because on taking office in 19 81, I was presented with the bill for some thing over $32, 000 from Toronto consulting companies that have been hired by the Conservative Govern ment to provide some thing, as yet I haven 't been able to fully decide, conceptual and creative input I think in the months of Septe mber and October, and I'm not sure whether it was in November of 19 81, to the government as a whole and the contract had been signed with the Manitoba Energy Author ity.

But cer tainly I would check, as I indicated , to see whether there have been differences in approach or discrepancies, certainly with respect to the particular matter of how one could best com municate an overall program to maximize benefits while at the same time one is involv ed in ne gotiations. For purp oses of commercial confidential ity are best kept confidential, Dunski certai nly was seen as a very log ical viable alternative to use. MR. G.

FILMON: I just think it seems rather ironic when all we've been talking about is maximizing benefits to Manitoba and sourcing purch ases and contracts and all of these emplo yment opportunitie s for Manitobans, and the first thing we do is to hire a Montreal firm to tell us how to do it. lt just see ms ironic. That is the only point I leave on the record , Madam Chairman. MADAM CHAIRMAN: The Mem ber for Lake side. MR. H.

ENNS: Just before we leave, just to get a bit more detail on the information role of the agenc y and/ or the Jobs Fund, the se cond last page of the en ergy report specifically refers and we've been advised that we are opera ting two offices with a staff of sev en. lt would be interes ting to get the total staff sal ary complement that will be ch arged to those offices. In addition to that, five informational brochures have been prod uc ed of which thousands have been distrib uted .

Can the Chairman of the Energy Authority or the Minister be a little bit more specifi c, just how many thousands and where are the y being distributed to, and at what cost? HON. W. PARASIUK: We can get the list of the people who this has been sent to. There are various business organizations, the ones I have spoken to, various semi nars that have been held where people have come forward and taken the material. There is one that is printed in Cree that has been put out.

I'm not sur e whether this is the first of its type in Manitoba's history, but it cert ainly reflects an intention to provide information to as many people as possible. But we can get that information and bring it back to the comm ittee. MR. H. ENNS: I think it would be helpful not only to mem bers of this committee but, indeed, to mem bers. If thousands are being distributed , that same cou rtesy would be shown to the mem bers of the House? HON. W. PARASIUK: Let me just interject on that.

I'm sorry then , I assumed that when you in fact had people 89 go off to the se minar, which we I think arranged fo you to have people att end, I would have assumed tha what the y would have done was picked that all up. I you want I can in fact table material in the House ever two weeks if we put out a brochure or pamphlet .

If I do that, I cert ainly don't want to be accused i1 the House of making mean ingless sta tements o providing further informat ion that doesn 't say anythin! new about Lime stone because I had been accused o doing that by, I think, yourself in the House when made a few announcements in the Leg islature, but would cer tainly be pleased to provide this informatio1 to you as I provided :i nformation yesterday abou Potash. Cer tainly, I'll provide it all to you . MR. H.

ENNS: Madam Chairman, I just note we an the re ci pients of many packages of some of hi colleagues, the Minister re sponsible for Emplo ymen Services, any time there's a new youth program directe1 we get a nice package laid out to every MLA on th' desk. lt doe sn't seem to be forthcom ing as read ily fron this Minister on this subject. We have deter mined tha we are spending upwards to $1 million on thi informational program and we' re simply trying to ge a handle on it. HON. W. PARASIUK: If I haven't been as forthcomin' then I certai nly apologize to the Mem ber for .

Lakesid· and let me assure him, that in the future months h may in fact receive a great deal of information and hope that he will be appreciative of it. MR. M. ELIESEN: Madam Chairperso n, just to clarif the ref erence to the tho usands dis tri buted in m presenta tion to the comm ittee, what I was referring t were the requests that were received by mail and b phone, over 7, 000, and in a variety of areas.

And that' why the brochu res that I refer to, for exam ple, one o Training Oppor tunitie s for Northern Manitob an! another gene ral brochur e dealing with labour and job! another brochur e on the Limestone Generating Statior acco mm odations and services; one deal ing wit pur cha sing pol icies, contra ct op portu nitie s an assistance programs; and one general pamphlet deal in with the entire project itself. These have been distribute in response to the requests that have come in by phon and by mail. MR. H.

ENNS: Let me jus t put on the reco rd , Mada r Chairper son, that for onc e I agree with the Ministe When he says that we will be inundated with man brochures and a great deal of information, every secon week as I bel ieve he said it, for onc e I bel ieve him. I do want to tell him though serious ly, we are th recipients of many calls from constituencies, particular' myself respres enting an lnterlake constituenc y, man of whose residents have looked to northern projec1 for emplo yment.

They are ca lling me . re gula rly an hoping for some of the job opportunities that the y se advertised on TV and I suppose are re cipients of som of the se specific brochur es. lt would be helpful to m in carryi ng out my resp onsibility as an MLA to ha� that information available, without having to registE or attend a sem inar, which is sometimes difficult to g1 at.

Tuesday, 4 Ju ne, 1985 The Minister refers to a specific case, it wasn't so uch for myself it was for a Manitoba businessman ho was told that he was not able to go to that se minar 1d I did ask and intervened directly with the Minister 's fice, to try and get him access and the Minister did ISpond, and I appreciate it, and I thank the Minister 'r it. ON. W. PARASIUK: I think we announced the office; e announc ed the phone numbers for the office; but !r tainly I will provide the packages of information to 1e membe r.

In fact I quite appreci ate his wanting to e involved in ensuring that we maximize spinoffs to lanitobans. As I said, if he felt that someho w it wasn't 1rt hc oming, I accept responsi bility for that and I )Oiogize. IR. G. FILMON: Madam Chairman, I can tell you that aving started our en deavours to maximize benefits nd spinoffs in Manitoba by spend ing $10 0, 000 on an �tvertising agency from Montreal , we are concerned 1 ensure that the go vernment is inde ed true to its rinciples. But moving along from back to front in this !pOrt, hitting the next

section called Industrial Benefits, 1er e's a reference here to the Industrial Benefits ackage with CGE being made up of five components nd I wonder if the Chairman of the Energy Authority an indicate whether or not any of the components of 1at Ind ustrial Benefits package might involve CGE articipation in the F-18 project? IR. M. ELIESEN: Madam Chairper son, at the present me · there are a number of alterna tives available to :GE from what the y refer to as their family, the CGE mi ly, in which they will attempt to meet the obligations 1at were spelled out in the agreement with us.

Some of those alterna tives are involved in the high ech nology industries, Aerospace Industries being one ,f them, and there are a number of discussions which am aware of that are cu rrently taking pla ce. lt would te inappropriate for me to comment any further in this ,rea, other than indicating that obviously this is one ,f the ser ious areas that CGE are attempting to meet heir comm itments in this particula r area which will npact beneficially on a number of Manitoba aerospace irms. IR. G.

FILMON: I under stand that CGE had some 1bl igations pre viously as a re sult of the F-18 contract, 1r had some possibilities of crea ting emplo yment in llanitoba in any case, is it possible that the y'll be able o kill two birds with one stone and satisfy both intents 'Y this? IIR. M. ELIESEN: Madam Chairp ers on, not in tccordance with our agreement, very specifical ly. We've tttempted to ensure that any comm itments that CGE tas to Manitoba as a result of contractual unde rtakings vith the Federal Gover nment or any spinoffs related o that particular area, are not double cou nted .

And hat's why we've gone to a lot of de tail to ensu re that ve have this legal underta king, with penalties involved may say, of ensuring that Manitoba does maximize Is benefits from this und erta king. IIR. DEPUTY CHAIRMAN, S. Ashton: The Leader of he Opposition. 90 MR. G. FILMON: What sort of legal req uirements are there that ensur e what CGE's benefits to Manitoba under this agreemen t, aren 't a dupl ication of CGE's al ready agreed-to benefits through the Federal Government for its offsets on the F-18 cont ract? MR. M.

ELIESEN: Well we do have a contract with CGE which is a very detailed one and we believe that we are fully protected from the des cription or the situation which you desc ribe. That's part of a legal und ertaking by CGE and all I can say is I belie ve we 're fully protected as a result of that contractual obligation. MR. G. FILMON: The Chairman's Report refers to the fact th at CGE gu aran tees that the turbi nes and gen erators used at Lime stone will contain a minimum of 15 percent Manitoba content and as well, CGE will en deavour to increase this to 25 percent.

We'd assume then that in one case it's a guarantee and the other case it's simply an intent or a desi re on the part of the gove rnment but nothing to which CGE is contrac tually obligated? MR. M. ELIESEN: Mr. Chairman, tha t par ticular provision legally obligates CGE to ensur e that 15 percent is sourced in Manitoba, which is almost double of the kind of sourcing that took place in Long Spr uce which was around 8 perc ent.

The orientation to further maximize that Manitoba content relates to a particular program that is currently bei ng developed with the Department of Industry, Trade and Technology on the technology transfer side, in which both CGE and a Manitoba compa ny will attempt to get together , with support from the Department of IT and T to source a particular component which the y had not been involved up until then, but which involves CGE technol ogy and te chnologic al tran sfer.

That's what the reference means there to the 25 percent, that the re is an area in a govern ment program that was announced by the Minister of Industry, Trade and TeChnology to tr y to ensure that there would be a maximum of the benefits associated with this agre ement. MR. G. FILMON: Is the Chairman saying that with other gove rnment gr ants and program supports, financial supports, that CGE might incr ease further job creation here, but it would cost us some more money through other government programs? MR. M. ELIESEN: Yes, Mr.

Chairman, I belie ve the Minister of Industry, Trade and Technolo gy did make an announc ement in this area about four or five weeks ago, indicating that there would be a limited amount of support provided by the government in this industrial tech nology transfer side to try to further maximize the benefits to Manitoba firms. HON. W. PARASIUK: If I cou ld just add a clarific ation, there would not be funding to CGE, as such.

What it would be, ther e are some companie s who may need to make some investments to do a bit of R and D, or some dev elopment, or some tooling, or what have yo u, and the y may be coming to the Jobs Fund asking for some assistance to bring them up to qua lity control lev el, so that the y might be doing the sour cing. A

Tuesday, 4 Ju ne, 1985 number of companie s have indica ted that they certainly would be interested in tryi ng to dev elop that type of expertise. lt seems to fit well within the objectives and the gu ideli nes of the Jobs Fund in terms of longer­ te rm, private sector employment and that is the context in which this might occur. MADAM CHAIRMAN, M. PhiUips: The Leader of the Opposition. MR. G. FILMON: So, in effect, we would be buying the jobs by investing in some thing else to assist CGE in sourcing some ad ditional compone nts here. HON. W. PARASIUK: No.

What we would be doing, we would be wor king with the private compan ies and 1 would think that, given the private investment involved to try and gear up, or tool up, for some type of work re lating to this particular possibility, there could be some thing in the order of, I don't know, five to one or a seven to one leverage, so the private sector would be increasi ng its inves tment in the plant and capa bility of this province very significantly; not only to put it in a position, I would think, to provide some subcontr act , or some supplies to CGE - the y cou ldn't do that right now because the y just don't have the te chnol ogy, or the y aren 't geared up sufficiently to do that.

If one just did what was done in the past there would be a very good likelihood that this could be sourced outside the province, as it has been in the past. But if there is some co-opera tion between the gover nment and the private sector to try and take better advantage of a CGE contract, that strikes us as being right within the strategy and, I would have thought within the strategy of all people in Manitoba. MR. G. FILMON: So the Manitoba companies either lack the te chnolo gy or lack the inves tment in manufacturing equi pment capability to be able to supply this to CGE now.

So CGE would ordinarily buy it outside the province but, if we subsid ize it and, in effect, subsidize CGE, the y' ll buy it inside the province. HON. W. PARASIUK: We won't subsid ize CGE at all. They are doing it all within a price, so there is no subsidy to CGE; the y get nothing. There is no price prem ium at all for the 15 perc ent. If one wants to go beyo nd that and you have - and I won't name the companies - but we've had the companies already to us indicating that the y belie ve that they've got the nucleus to provide greater sourcing to CGE.

They, themselves, have said that they may need assistance; the y may not. lt may be on capital investment; it may be on some research and te chnolo gy; it may be some dev elopment costs. But we have said that, as a govern ment, this is part of the feed back that we received from various busine ss gr oups and busine ss companie s tha t we ha d discussions with over the last nine months.

They have indicated that, in instances, they cert ainly feel that the y could, not only take advantage of some opportu nities related to CGE, but es tablish a base or a ratchet from which to go on to other types of eco nomic activity. We think that this is very much a part of the building block in es tablishing long-t erm, com petit ive jobs in this province. 91 MR. G.

FILMON: Normally these companies, if th see an opportunity, would tool up and provide tl sourcing of components, or parts, or whatever materi� to CGE here, but the y lack the capital to do it and 1 they're, in effect, being assisted by gr ant or subsi1 to be able to tool up and provide it. But, nor mally, the re is a busine ss opportunity, that they see ; opportun ity to undertake and fulfill, then they wou do that with their own funds, except in this instan' the re are gove rnment funds available for them to c that. HON. W.

PARASIUK: I think there are government fun' available in a number of areas, but this is cer tainly 01 wher e we think that the spin offs are pretty significal in that we expect that the re will be future hydro activi and dev elopment within this province, so why n es tablish a bigger base. If we can go from 8 perce to 15 percent and then move it up to 25 percent, a1 move it from that point to 40 percen t, I think that has tremendous spinoffs for this province.

Furthermore, we also are having a number of forei! countr ies bec oming much more interested in Manitob� tec hnology and experience with respect to hydr electric development and transmission.

When one thin I that only 4 percent of China's hydro pote ntial has bet dev elop ed , or only 20 percent of India's hydro potent has been dev el oped , that we have received some Cl[ cont racts al ready to do some research in the countries with respect to their potential, I think th · one does start laying the foundation for some thing th; not only is beneficial to Manitoba over the cour se the next eight years, next 15 years, but also has tl potential of increa sing our export trade in an area th we have proven experience in and history. MR. G.

FILMON: But the bottom line is that tl compan ies see the opportun ity exists, know that th could fulfill the req uirements of CGE, but can't do without subsidy bY way of gr ant to get them involve So we are, in effect, saying that, yes, those opportuniti are the re, but we can 't compete unless we give the the gr ants that will allow them to compete. Thai basically an indirect subsidy to CGE. HON. W. PARASIUK: Well I can 't leave on the reco that there is a subsidy to CGE. There is a contract, fixed-price cont ract, there is no subsidy to CGE. 11 said that, for 15 percent sourci ng, the re is no pri, prem ium.

MR. G. FILMON: But to move it up to 25, it wou involve some ad ditional investment by the Province Manitoba. HON. W PARASIUK: That's right. We have said, a1 that isn't the subsidy to CGE, that would be es tablishil MR. G. FILMON: Indirectly, it is. HON. W. PARASIUK: We ll, if in fact the in tent to mo from 15 to 25 percen •. and it do es not entail a subsi' to CGE, it may entail some · assistance to a number other firms that I think are long -standing Manitoba firr

Tuesday, 4 June, 1985 at want to es tablish a base. If, in fact, the Lead er of e Opposition is somehow saying that isn't a good ing, then we on this side of the House obviously say at we are prepar ed to pursue that because we think at it do es es tablish a good founda tion for long-term bs in this province. IR. G. FILMON: Madam Chairman, the Minister le sn't need to put words in my mouth. I am quite 1pable of saying what I belie ve and he do esn 't have ' try and re orient my thinking in words to some thing 1at I didn't say.

Madam Chairman, the indication has been, both in 1is report and in the past, tha t this nego t iated Jreement with CGE for turbine gen erators was below lanitoba Hy dro's est imates for the supply of that !lrticular equipment; therefo re, it is a good deal. What tidenc e do es the Minister have or do es the Chairman f the Manitoba Energy Authority have that, for instance, 10se turbine gen erators for which I belie ve we are !lying $10 2 million could not have been supplied by lmebody on a com petitive tender basis for, say, $70 1illion? IR. M.

ELIESEN: Madam Chairperson, it may be useful mply to take a few moments to review the history hy Manitoba Hydro and the Government of Manitoba ave attempted since 19 77 to negotia te the supply of 1is equip ment with Canadian suppliers.

There was an greement signed between the Go vernment of lanitoba and the Government of Canada as a resu lt f extensive financial suppor t provided by the Federal iovernment, about $200 million at low inter est rates, >r assistance in long-d istance transmission from the lelson River, and in re turn, as a resu lt of that written greement und ertaken by Manitoba Hydro and the iovernment of Manitoba, that Manitoba Hydro would se its best efforts to negotia te the supply of this quipme nt from Canadian suppliers.

That is why the NO pre vious, as I have made reference to, Hydro loards and two previ ous go ver nments attem pted to ee whether it would possible to negotiate a satisfactory .greem ent. A third time arou nd, this is what we attempted to o, and in our particular case we are satisfied that ,ett ing $15 0 million in a compr ehensi ve industrial •enefi ts package for Manitoba is one of the most .!tractive industrial offshoots that we have ever seen •ut in place for a province in any major cont ractual •bligation.

I gue ss the se cond factor is Manitoba Hydro has ved with estimates all along with regard to what it muld cost and the price that was negotia ted was ignificantly under that particular price. For those two nain reasons, plus the obligation under a fed eral­ 'rovincial agreement signe d in 19 77, were the factors hat led to the successful culmination in this area. IIR. G.

FILMON: What eviden ce do es the Chairman 1ave that we, for instance, wouldn't have got the turbine 1enerators for 70, 75, 80 million and that we would 1ave had 20 or 30 million dol lars of saved cost that :ou ld have been invested in Manitoba in other ways? tON. W. PARASIUK: One has some way of assessing vhat one's estimates have been . These es timates were 92 drawn from the low cost tender relating to Long Spruce. CGE was the low cost tender and ther e were certain indices used to project what that might be in today's prices.

The prices came in under that substantially and at some stage they can be - since ther e are other tenders being presently looked at, I think it would be premature to say what those savings are, but they have been substantial. I might say that I know that the mem bers of the opposition have acted as if someho w this is some type of unusual departure. lt was done by the Hydro Board und er the Schreyer administration; it was done by the Hydro Board under the Lyon ad ministration.

In fact, there is an instruction or a Board decisi on, I think it's in 19 81, instructing Hydro to nego tiate, not to tend er, but to negotia te with CGE. One of the attendees at that Board meet ing was Mr. Brown, the Mem ber for Rhinela nd, who was the government representative on the Board at that time. So I am surprised that somehow the mem bers of the opposition say that we are doing some thing that again was rat her unusual. MR. G. FILMON: Madam Chairman, I would like to correct the Minister in saying that it is merely the mem bers of the opposition.

I think people throughout this pr ovince who are involved in busi ness, in construc tion, in manufacturing, who are used to bidd ing on contracts, who are used to being invited to tender on contracts, have expressed conce rn. In fact, they have expressed serious reservat ions about award ing without tender a contra ct in excess of $10 0 million on any project whatsoever, but particu larly someth ing of this magnitude has aroused the interest, concern and in fact criticism. Sur ely the Minister is not suggest ing that the only people who have raised this matter have been the mem bers of the opposition. MR. M.

ELIESEN: Madam Chairpers on, I want to go back really to the basis of why Manitoba Hydro and the Govern ment of Manitoba act ually negotia ted this particular agreement because the main policy is, as what it has been referred to, a com petitive tendering policy and that is the basis of Manitoba Hyd ro policy. The only reason why there was an attempt to negotiate this particular equipment is because of a federal­ provincial agreem ent.

On March 25, 19 77, agreement was signed between the Province of Manitoba and the Government of Canada related to Bi-pole Two financing and I'll read specifically from a clause in that agre ement, Clause No. 18 states: "Manitoba undertakes, as a condition of this agreement, to make every reasonable endeavour to support Canadian tech nology through maximizing Canadian participation and to supply of turbines and generators for the Limestone Hydro-Electric Generating Station and will make every reaso nable effort to comp lete nego tiations for the purcha se of said equip ment from Canadian Suppliers." That has been the basis upon which three Hydro Boards now have attempted to see whether or not it would possi ble to negotr ate the sup ply of this equi pment.

The Manitoba Energy Author ity, as the co­ ordina ting agency, was not given any instructions from the government to break that agreement between Canada and Manitoba. That is why, for both areas,

Tuesday, 4 June, 1985 Manitoba Hydro set up its own negotia tion with the prices; and the govern ment, three time s now, has set up separate negotiating units to negotia te an Ind ustrial Benefits package. So we were coming out of that historical context and that obligation, as a result of very favo urable federal financing dur ing the late '70s, to attempt to negotia te the supply of the equip ment from Canadian suppliers.

Again in our judg ment, what we have been able to do, we have been very very satisfied in the context of the maximum kind of industrial benefits that we have been able to negotia te for Manitobans. MR. G. FILMON: Would it not have been possible to put the contract up for tender and then, having reviewed the tenders, be able to maximize Canadian conten t? MR. M. ELIESEN: No, Madam Chairpers on. That was not our underst anding, nor the unde rstan ding of the pre vious two Hy d ro Boards or the pr evi ous two ad ministrations.

Every time that there was a possibility of the Limestone Genera ting Station was about to be commenc ed again, teams were es tablished, both of Manitoba Hydro and in the Govern ment of Manitoba - Manitoba Hydro on the prices, the govern ment on industrial benefits - to attempt to negotia te with CGE, only one supplier. I must say, the only difference that we atte mpted to do this time was to atte mpt to expand it to another possible Canad ian supplier. There are only two, CGE and Marine Ind ustries, who are based in Montreal .

We attempted to do this but, unfortunately , the kind of industrial disputes that the y were being subjected to then and which are still ongoing did not allow them to fully participate in arrangements with us. MR. G. FILMON: So just in concl usion, the Chai rman is saying tha t there was no possibility within the context of the intent of that sort of agreement that Manitoba Hydro, by virtue of the argument that it could have had massive benefits to Manitobans, to Manitoba taxpayers, ratepayers - by virtue of that, there was no possibility that the y could have gone to tender on this? MR. M.

ELIESEN: Madam Chairpers on, no. That is not the position or the policy that was provided do wn to me to attempt to implement. If we were obviously not able to negotiate a satisfactory arran gement, since there is no manda tory provision in the undertak ing between the Gov ernment of Manitoba and th e Go vernment of Canada on the provision of this eq uipment, then clearly one would ha ve gone to international tendering as Manitoba Hydro has done consistently .

But as I said, since 19 77, no one has sugge sted - in fact , the pol icy of the da y then, over th ree ad ministrations and th ree Hydro Boards, was a mor al obligation to attempt to see whether it's possible to live up to the und ertak ings that were provided in 19 77 between the Go vern ment of Canada and the Govern ment of Manitoba. Clear ly, tha t's what we attempted to do.

I gue ss, at the end resu lt, both Manitoba Hydro was very well satisfied with the price they were able to nego tiate and, on the government's side, we were except ionally pleased with the 93 tremendous kind of industrial benefits package tha we were able to negotiate. MR. G. FILMON: Was the price es timate based 01 what Manitoba Hydro had paid previ ously for the CGI turbines in Long Spr uce? MR. M. ELIESEN: Madam Chairperso n, I am awan tha t ther e was a basis obviously for you r pric • dete rmination, and CGE were the lowest tender s fo the Long Spr uce.

So there was a basis going back t4 that period of time. lt was an interna tional tender, an4 the y were the most com petitive. CGE do have th• experienc e with regard to Nelson River provision o equip ment. I am sure more questions cou ld be addressed t4 Manitoba Hydro when the y appear before thi comm ittee, but obviously there is a basis upon whicl you make your com parisons and you r es timates fo every particular compone nt related to the generatin! station itself.

In this particular case, the y were ver pleased with the kind of price that the y were able t4 negotia te which, as I emp hasized , is significantly unde their es timates which we take as given act ually whe1 we present our benefits and costs ratio on the whol• project. MR. G. FILMON: But if the estimates were based 01 what CGE had bid on a previous tender and the previou dev elop ments, then all you have to do is get in bette than that and you are satisfied with it.

If CGE had bee1 com petit ive the last time around against othe companie s on an international tender basis, what woul4 the concern be that the y shouldn't be com pe titive thi time arou nd, that you had to restrict it only to then and discuss it and negotiate it only with them ? HON. W. PARASIUK: What the Leader of the Oppositio1 forgets is the fact that the government that he wa part of from 19 77-8 1 had es tablished a negotia tin committee at the govern ment level to nego tiate wit CGE, not to do a tender bid but to negotia te.

Mayb he is not aware of that, but that nego tiating comm itte of officials existed - (Interjec tion) - yes, it did. MR. G. FILMON: Madam Chairman, that doe sn't mea that you are comm itted to go that route. You ar exam ining options, and we are always talking aboL exam ining options. MR. H.

ENNS: Madam Chairman, just a bit further o pur chasing and tenderi ng, on Page 16 of th Chairpers on's report of the Manitoba Energy Authorit: it states that: "In certain limited circu mstances wher social and ec onomic benefits outwei gh costs, th Provincial Gove rnment, through the Manitoba Job Fund, is prepared to pay a price differential on contract to enha nce Manitoba content ." My simple qu es tion is: what pric e? Ha s th gov ernment or the Manitoba Ener gy Author it es tabl ished some outside parameters as to what th� paragraph particul arly means? MR. M.

ELIESEN: Madam -Chairperso n, no, we hav not been advised of this. This was a general polio

Tuesday, 4 June, 1985 1t ement that was agreed to by the government at it time in order to ensure that no subsidy really is Jvided by Manitoba Hydro as a responsi bility of suring that the genera ting station is built at the lowest ssible cost . rhere may be particular areas or at particular times, d this is included in the tendering do cuments that �f orwarded by Manitoba Hydro, asking those bidders indica te if certain prem iums are req uired in the Jvision of cer tain work on that project . We have not tablished any parame ters on that.

Let's assume, hypothetically , if there was a significant �mium of, le t's say, 5 percent or 10 percent more d the job implications as a resu lt of that work taking 1ce he re in Manitoba, then there is an opportun ity, the go vern ment decides, of paying that particular �mium in order that the job or the work is performed re in Manitoba. But all we have done is simply tablish a mechanism. If that possibility exists, then ow that possibility to perh aps take place. I do 1p ha size tha t it is limited and exce ptional cums tances where that kind of reference is being :tde. �. H.

ENNS: Madam Chairpers on, just so that I derstand it, I think what the Chairman is saying is at Manitoba Hydro will not be involved in any bsidization, but that the Jobs Fund well may be. Is :tt a corr ect des cription if he indicates that decision 11 be made? �- M. ELIESEN: Madam Chairperson, ther e may be 1ited and exce ptional circu mstanc es by which the >ve rnment, through the Jobs Fund, are perhaps epared to pay a premium as a resu lt of that work ·ing perfo rmed in Manitoba related to the Limestone >nerat ing tendering pr ocess, but th at is corr ect , mitoba Hydro will not get involved .

Manitoba Hydro's rrent practi ces will exist with the Limestone station. 11. H. ENNS: Okay, I think we under stand each other . ,at is that, if additional costs for social and eco nomic nefits are being consid ered , those costs could be � additional costs of affirmative ac tion programs or hers, as de ter mined from time to time by the 1v ernment. lt will be thr ough their agen cy, the mitoba Jobs Fund, that will pay these additional sts. Those costs won't be charged to the construction Lime stone. 11. M. ELIESEN: Madam Chairperson, that is co rrect . lt H.

ENNS: Just a little further on the same subject :ttter, the second paragraph says: "As well, Manitoba •dro may, under limited and special circu mstances, strict calls for tenders to northern companie s." :tdam Chairpers on, you see some of the difficulty that t have, which my leader pointed out right at the >ginning.

Now we are talking about Manitoba Hydro may, under 1ited and spec ial circums tances, restrict thems elves their normal tendering and purchasing proced ure. st a moment ago we es tablished , I thought, with some 1der st anding tha t the Ma nitoba Jobs Fund, pres enting the govern ment, would be doing it. So 94 the same ques tion applies on the se cond paragraph on Page 16 , second from the bottom that is, when it says: "Manitoba Hydro may, under limited and special circums tances, restrict calls for tenders to northern companie s." My ques tion is: what are the· "limited and special circums tance s"? MR. M.

ELIESEN: Madam Chairperso n, I can indicate to mem bers of the comm ittee that 95 percent to 99 percent of all contracts tendered will be subject to the com petitiv e pr ocess with ever yone having the opportunity to bid. Just as the cu rrent case, ther e is no change in terms of Manitoba Hydro policy.

Manitoba Hydro, tod ay, may restrict a tender to the North or to particular companies, perhaps those of Native ancest ry, because of the importanc e of dev eloping and ensuring that some benefits, as a result of the hydro development work do es, in fact, take place in that area, and the benefits are accrued to those Northerners.

They are very limited, and they are except ional ci rcu mstances, and the y do involve very small negotiations with Native bands in that particular area who, normally speak ing, would not have an opportunity of bidding, or may be restricted through bond perf ormance, obli gations of being involved in the com petitive tendering process. Manitoba Hydro, itself, has adopted an affirmative ac tion policy of its own as a cost of doing business, of attempting to ensur e that its hydro dev elopment proje cts that do take place in the North take place on a fair basis.

This is one aspect, albeit a small aspect, related to ensuring that perhaps some bene fits are accrued to Northerner s of Native ancest ry. MR. H. ENNS: Madam Chairperso n, I am simply tryi ng to get the information on the record as to how costs will be allocated in this very substantial project and that is the purpose of the ques tioning. If I und ers tand the Chairperson for the Manitoba Energy Authority right, Manitoba Hydro will also, under special and limited circums tances, deviate from the normal purchasing and tendering practices which could add to the overall costs of the project .

We have established that the Manitoba Jobs Fund and the government will do so under spe cial circums tances; what the Chairman of the Manitoba Energy Authority is indicating is that it is also Manitoba Hyd ro's practice to do so. So we will end up with some pretty fudged costs I would say, Mr. Chairman. HON. W. PARASIUK: lt is our intention to make sure that we try and keep a clear idea of the costs; and second ly, one should take a look at what those benefits are.

If, in fact, we can increase Manitoba involvement in that project - and we talk about some thing in the order of $1. 5 billion in contracts - if we can double that, we go from 40 percent to possibly 80 percen t, what we 're talking about is $600 million for the Province of Manitoba. That's a very significant sum. If you then start looking at what the multiplier impacts of $600 million more within this province are it's very exci ting. If I might just comment, there have been instances in the past where Hyd ro has, ind eed , cont racted specifically with a northern group or with a Native gro up.

That's been done from time to time in the past.

Tuesday, 4 Jun e, 1985 MR. H. ENNS: Madam Chair per son, I am not attem pting to enter into a deba te about the value of maximizing job opportunities, eco nomic opportun ities,

part icul arly for our Nor thern resi dents, but I am attempting to get the bookkeeping he's using straig ht. 1 just take this occas ion because I happen to have a Manitoba Hyd ro information sheet in front of me, "Public Affairs," which clearly sets out - you know, it quotes dir ectly from the act . "The intent , purpose and obje ct of this act is to provide for the co ntinuance of supply of power ade quate to the needs of the province, and to promote eco nomy and ef ficienc y in the general distribution, supply and use of power, " The Manitoba Hydro Act . Mr.

Chairman, Manitoba Hydro, in itself, is not constituted as an emplo yment agen cy, as an agenc y to del iver social benefi ts; the gove rnment is. I'm not faulting the gover nme nt for using this ve hicle to do so, but I would like the books to be kept reaso nably straight so that we can ascertain to what extent Manitoba Hydro is fulfilling its responsi bility under its act, and to what extent the Government of the Day is adding to those costs of any par ticular project becaus e of other object ives of the social benefits that the Minister, or the Government of the Day sees as being appropriate ones. MR. M.

ELIESEN: Madam Chairpers on, that in fact is what Manitoba Hydro is attem pting to do with its own affirmat ive action policy of trying to genera te electricity in the province at the lowest cost possible.

Part of those costs that are associated with attempting to achie ve that objective include, in the judgment of the Board of Manitoba Hydro, the necessary orientation of trying to ensure that there be some spinoffs and some benefits accrue to those in the North, particul arly of Native ancestry; just in the same way as Manitoba Hydro signs a long-term agreement with 17 or 18 unions becaus e labour peace is a necessary condition of any hydro devel opment,

whereas perhaps one could get a better pric e by going with non-union perso nnel - perhaps, I said, over the short term. But over the long term , Manitoba Hydro do esn 't go that route because it recog nizes that, in the long run, it is necessary to have labour peace in any hydro project up north and, therefore, it obligates itself under a long­ term contrac tual agreement to enter into this agreement with 18 unions, at least, as opposed to people who are not involved in unions.

In the same context it is important for Manitoba Hydro to ensure that the re is some, albeit limited , very very limited oppo rtu nity for people in the North and particul arly th ose of Native ancest ry to ha ve an opportunity of obtaining some of the benefits as a result of hydro dev elopment and that's what that particu lar reference in my presen tation rel ates to. MADAM CHAIRMAN: The Mem ber for Morris. MR. C. MANNESS: Thank you , Madam Chairman.

The Minister made reference to a 40 percent es timate of the benefits going to Manitoban compan ies and individuals, is that a purely subjective es timate or has there been some significant deg ree of analysis worked toward that projec tion? 95 HON. W. PARASIUK: There was some analysis dor but records really wer en't kept. People were tryi ng I look at it after the fact of Long Spruce and 40 to � percent were the est imates that I had heard and peop are trying to take that up much higher, and also assel whether in fact that's happening or not.

So we' ll ha1 a good opportun ity now to see whet her in fact the1 is a lot of leakage from our economy when this ty� of dev elopment takes place. And we say that tt benefits are very very high if one can get the percenta� up. MR. C. MANNESS: The reason I posed the questio would cement for instance, in the supplying of ths would that be include d within the estimate of 40 perce1 or not? MR. M.

ELIESEN: Madam Chairman, just going bac there were very rough and crude after-the-fact analysE made on what amount was sourced in Manitoba as resu lt of the Long Spruce Generat ing Station and tt est imates from 40 to 45 to 50 percen t. Now what w� included in those various es timates, I gue ss we 'd ha1 to go the detailed re cords. If the cement were here sourced in Manitoba, ye that would be includ ed .

There was a lot of obviol leakage, but more spe cifically there was ne ver compr ehensive effort made to try to ensure witho1 jeopardizing you r com pe titive tendering system to t1 to maximize Manitoba content and you do notic· particularly in the construction industry, there are usual tied arrangements because Manitoba firms are not lar� enough to bid on the project and there are internation firms that are involved who have their own supplie1 and their own tie-ins from way back. Therefore thE don't lo ok cl osely at Manitoba firms who a• compe titive, but basically don't have the opportuni to bid.

What we've tr ied to do without as I say je opardizir that com petitive tendering process, and it's reflecte in the tender documents which we can make availab to you, is try to force those bidders to specify ve1 clearly what subcont racts the y will unde rtake here Manitoba if the y awarded the cont ract and who thm firms would be.

This is the first time that it's ever take place in Manitoba and on the basis of prel iminary resul· that we 've seen so far, I can inform mem bers of tt comm ittee that we are delig hted with the seriousnel in which the bidde rs without as I say jeopard izing tt price com petitive factor have gone out and ha1 attempted to gr eatly source Manitoba content as resu lt of their bids on the project itself. MR. C.

MANNESS: Madam Chairman, I asked tt question and I refer spe cifically again to that paragra� that says the Jobs Fund is prepar ed to pay a pric differ ential in cont racts to enh ance Manitoba conten I'd like to know roughly what the cement compone1 would be of the total cost of building; but m01 importantly , given that there's only one produc er at th time, Manitoba prod ucer of cement, to what degre will it be given an opportunity to bid and come in 1 a bid maybe higher than an outside supplier and I gue� the specific ques tion, what is the price differ ential th1 would be in place?

Tuesday, 4 June, 1985 IN. W. PARASIUK: Obviously, what you 're asking is · one to give some indication to a Manitoba firm as what might be its range of tolerance. Obviously, in :ommercial type of transaction with a bidding process, e can 't do that. One does take into account a number aspects, price, Manitoba content and spinoffs. Those � things that will in fact have to be looked at as per � tendering guidelin es that have been es tablished d all firms bidding on that know what that is.

I must say that we've just gone through a two-day onomi c co nference where the re were a lot of mitoba busine sses, where you had a number of ernational groups and the res ponse we got, because s was laid out as was the CGE cont ract . fhe response that we got from Manitoba busine sses, wel l businesses outside the province, was very sitive, because we haven't gone the route that a mber of other provinces have go ne. They've seen s all in a positive light rather than, you know, there � certain rest rictions. There are cert ain compan ies it can't bid because they're not from the right Jvince in other provinces.

We've not gone that route. 1ink that people are trying to maximize the se benefits t in a way I think provides some fairness and asonablene ss to all parties participating in that 1dering process and I can 't give the specifics that ! Memb er for Morris would like at this particular stage, art from saying that obviously the government and e Hydro will have to explain the decisions and !g ments that the y make through this process . �- C. MANNESS: I unde rstand what the Minister is ying, ultimately who makes that decisi on?

Is it the nister, is it the Energy Authori ty, or is it Hy dro, or it a co mbination of all thr ee? �- M. ELIESEN: Madam Chairman, clearly it is a cision made by Manitoba Hydro. That decision will · made by Manitoba Hydro as it has done in the past. e com pe titive tenderi ng, to answer your question ecifically on cement, the cement bid is already in for nestone and Manitoba Hydro are presently eval uating � bids that the y receive and when a decision is iChed , it will be announced and made public in the ual course of events. li. C. MANNESS: Then what Mr.

Elie sen is saying that given that the local supplier may bid at a price little higher than outside supplie r, Manitoba Hydro 11 then make that decision and if the y favour the local pplier, then it will be up to the Manitoba Jobs Fund put up the additional amount? �- M. ELIESEN: No, Madam Chairman, Manitoba dro will look at the bids that they'v e received for � supply of certai n goods, the services related to nes tone.

Obviously the bottom line is still the price. 1w at the same time that they're looking at the price, �y will look and evaluate the Manitoba content aspect. there are aspects there that obviously the y want to ing to the attention of the govern ment which would �ult in some ec onomic stimulus or enhance Manitoba ntent in the overall provision of the project, the y will ' so. But the bottom line is that the decision on price mari ly, taking other factors into acc ount, will be made Manitoba Hydro. 96 MR. H. ENNS: Madam Chairman, we 'll move on to another subject for a moment.

We' ll come back to all aspects of the report. But I just want to cover one particular aspect that was presented to the comm ittee again this morning. Again quoting from this Manitoba Hydro information sheet which is an informative piece of information coming from the Public Affairs Department.

Among other things the y have is a defi nition, a glossary of terms, at electrical term inology which helps lay peo ple like myself und erstand the subject matter a little better, give you a defi nition of such commonly used electrical terms as amperes, interco nne ct ions, megawatts, high voltage transmission, dir ect curre nt, etc. But missing from this glossary are the terms that we've become very accustomed to in the last little while and that is Letters of Intent, a Principle of Negotia tions document, a Memorandum of Understan ding.

This morning at comm ittee we received yet another Letter of Intent, this time with Ontario Hyd ro. I would ask the Chairman to help us a little bit in sorting out just what the Energy Author ity and Manitoba Hydro is up to. For instance, it my understan ding, referring to your report of last April, you signed a Principles of Negotia tions do cument with the Wisco nsin Group. Toda y you announced you 've signed a Letter of Intent. We are pleased to announce that Manitoba Energy Authority and Ontario Hyd ro have agreed to a Letter of Intent, I believe with the WAPA, that is the Colorado Group.

Your affairs there are simply descri bed as continued discus sions. lt is my memor y, I think, that with the now defunct MANDAN Line, that was a Memora ndum of Unde rsta nding.

How can we assess where the Manitoba Energy Authority and the government is at with these different terminolog ies that you apply to your negotiations; specifical ly, what is different to the Letter of Intent that you presented the com mittee with toda y with respect to Ontario Hyd ro and the do cu ment that you signe d entitled Principles of Negotiations with the Wisconsin Gr oup, a group of eight utilities primarily in Wisconsin, for the sale of 1, 200 megawatts? MR. M. ELIESEN: Madam Chairper son, yes, I would be pleased to go into th� t particular area.

For two sides to get together and negoti ate such an obvious important area, having significant implications deal ing in multibillion dolla r figures, there has to be a basis upon which both side s can sit down and attempt to negotia te certai n agreements in this area.

We would argue that a necessary condition - not a sufficient condition, but a necessary condition - is for both sides to show good faith, that they are serious of what they are talking about and normally that is reflected after pr e limina ry - and some times th ese pr e liminary discussions take a much longer period of time - that is reflected in what is known as a Letter of Intent setting out the obligations or the purpose between the two parties. They are either Letters of Intent or Memor andums of Und erstan ding.

Sometime s it takes place very quickly and other times there is a heck of a lot of discussion which leads up to it. In our case it certai nly is a lot of discussion because, obviously, we don't want to waste our time and resources, nor do we want the other side to waste

Tuesday, 4 Jun e, 1985 their time and resources. So there has to be a se rious intent and the serious intent is reflected in a formal und ertak ing called a Letter of Intent or a Memora ndum of Und ersta nding. This is what we have now been successful with the Ontario Hydro following numerous previous discussions on whether or not Ontario Hydro was inter ested or not interested in shor t-term or me dium-term or long-term sales and that has been ongoing over the last year or so.

We have reached a satisfaction, both sides have, that both sides are seri ous about the options, so both sides now reflected in the signed Letter of Intent are going to allocate time, effort and resources to see whether or not it is possible to come up with a satisfactory agreement that will be beneficial for the parties. Now that is an overview in terms of the de finition of either Letters of Intent or a Memo ra ndum of Und ersta nding.

With regard to the Wismintoba Group, that has been a long long process going back for the last two-and­ a-half years in which we didn' t sign any thing with them , but we involved ourselves into a significant cost-benefit analysis of which there were two significant phases we had to go thr ough, trying to see whe ther or not it would be useful to get into mean ingful negotia tions between ourselves.

So we went throu gh, first on a pre liminary basis, the econom ics and then in-depth with a Phase 2 and finally, the results of both those phases, which I say took over two years to do, reflected a conclusion that both sides felt comfor table that we can now proceed into some major negotia tions deal ing with a proposed transac tion. That culminated itself in April on the signing of a Principle s of Negotiations and we are now heavily involved into negotiations with the Wisconsin Utilities. I hope tha t gives an overview of the nuances that are involved on the Letters of Intent.

But for our side, it is important for us to have the se signed docume nts because it means we are not wasting our time and resources and neither are the other gr oups because we've done sufficient prel iminary work on both sides in order for both side s to put their signatur e on these pieces of paper, hopefu lly lead ing to a successful conclusion. MR. H.

ENNS: Madam Chairpers on, again for my benefit, as I und erstand the Chairman, the signing of a Principles of Negotiation document therefore would represent a seco nd more serious step with respect to hope fully conc luding a de al as compar ed to what the Chairman just descri bed as the signing of a Letter of Intent with Ontario. MR. M. ELIESEN: Madam Chai rper son, no, not necessari ly. In this particular case the Wisconsin Utilities req ue sted and we resp onded to having a greater articulation on principle s that would be involved in our ongoing negotia tions.

With the others on the Letters of Intent, no principle s were req uired . For ex ample, with the We stern Area Power Ad ministration, we signed that Letter of Intent in 19 84 and we do not req uire any principles.

Both sides are satisfied with what we have been discussing under that Letter of Intent and the Letter of Intent is broad enough for us to have thGse mean ingful discu ssions. 97 But with regard to the Wisconsin Utilities, followin tho se extensive cost-benefit stud ies, they wante gr eater specificity in terms of the parameters of an proposed arrangement and we agreed to that kind c agre ement on the negotia tion principles. HON. W. PARASIUK: One other aspect, if I just migt add, is that in some instances you are de aling with on entit y.

You are dea ling with Ontario Hydro which is on entity or you are deal ing with the Western Area Powe Administration or you are deal ing with Northern State Power. In other instances, you are dealing with a grou1 of nine investor-owned or co-operatively-owned o municipally-owned utilities and they themselves aren one entity so the y want to have an unde rstan ding i a sense as to their ne gotiating parameters an principles. That is why you have some variation i term inology given the particular entity that one i involved with. MR. H.

ENNS: Then with the MANDAN Nebr ask Group, Neb raska Public Power District, with whom w had a Memor andum of Under standing and a projec under which we have invested upwards to $5 to $' million, and Neb raska Public Power invested about $3 million then that didn't proceed any furth er, Madar Chairpers on, what I am just trying to do is esta blis for the comm ittee some qual itative defi nition to th terms that are being used , or are we just going througl a public rela tions exercise re alizing that com ing in wit a Letter of Intent every month becomes boring so w change it to a Memorandum of Und erstan ding.

One , that has been used , then we sign the Nego tiating c Principle s docu ments. Then we can refer back to a Letter of Intent as w have done this morning. The point that I am makin� it do esn 't see m to matter , a Memora ndum c Under standing at which upwards to $14 million hav' been expen ded , $5 or $6 million by Manitoba Hydrc 35 by Nebr aska.

Obviously , with negotiation considerably further advanced than any that we ar' spe aking of with the WAPA gr oup or with Ontario witl whom we are signing Letters of Intent and principle of negotia tion documents, that we are at this poin living in hope rather than any firm potentials with respec to energy sales. MR. M. ELIESEN: Madam Chairpers on, what I woul1 like to convey to mem bers of the comm ittee that whe1 we're dea ling with Letters of Intent or Memora ndum of Und erstan ding is that the way we look at it and th' way the people who were sitting down opposite us i� that it is quite serious.

I want to re empha size, w< wouldn't waste our time and resources and neithe would the other side if there wasn't a seri ous attemp to come to a satisfactory conclusi on. We sit do wn with these groups, and it's not as i ther e are do zens involved, we have limited market obviously, but we have well positioned ourselves, quit< frankly, in the cu rrent context of negotia ting, and hav' seri ous efforts involved with five sep arate groups a the present time.

That effort is reflected in a signe 1 Letter of Intent, which ;, ;eans both sides are prep are' to allocate sufficient resources to try to see whethe a satisfactory a:'rangement can be Gonsummated .

Tuesday, 4 Jq ne, 1985 We do have the experience of a signed cont ract with lorthern States Power beh ind us. We are working on 1at basis and we have a number of options to consider s we proceed through the negotia tions. As I have 1d icated in my prep ared text, we are fairly optimistic �at within the next 12 or 18 months we will sign one ,f those contrac tual obligations with one of the groups �ere. We hope that we will have negotia ted the best •ossible deal, given the fact that there is a compe titive 1nvi ronment at the pr esent time and inter est in �anitoba Hydro. lA. H.

ENNS: Madam Chairpers on, on Page 13 of he Chairman 's add ress, dealing with energy intensive �dus try discussions, the President of Alcoa is quoted 1 your report in saying that: "'The province wou ld be 1mong the lead ing contenders in the world as a site or a gr eenfield sme lte r. ' Since this is our view as wel l, he Authority is con tinuing discussions with a number 1f European and Asian aluminum produc ers who have 1xpressed interest in loca ting in Manitoba." Again, Madam Chairperso n, we've been subject to 1imilar general hopeful comments, whether it's potash 1r whether it's aluminum, in this case.

Can the Chairman 1e more specific when he says in his report discu ssions 1re ongoing with a number of Eu ropean and Asian 1roduc ers? How many and can he name some? -ION. W. PAAASIUK: Madam Chairpers on, it would be >rema tur e to name compan ies when one is at a stage 111 here the companie s want to be anonymous, but we :er tainly have had discussions as recently as about wo weeks ago with respect to Manitoba's potential as l site for aluminum smelti ng. !lA. H. ENNS: But the Minister can 't name the Jarticular compa ny of which there aren't many in the Norld tha t are primary produc ers of aluminum.

He is 1ot prepared to name any specific com panies that would ;uppo rt the quote that is attributed to Mr. Fetterolf with respect to the province's ideal position as a site and/ t>r the state ment tha t the Autho rity is con tinuing :jisc ussions with a number of them. HON. W PAAASIUK: As I said, it would be premature lo do so at this time. These compan ies are looking at Manitoba as well as other sites. I think that the y would like that und erta king to be kept confidential until such time as the y would say, yes, we don't mind if the public knows that we are looking.

I think that's a normal way of doing business with people who are looking at potential com pe titive sites. MA. H. ENNS: Madam Chairperson, I have to accept the Minister's state ment. I just want to assure him and put on the record that my cons tituents at Balm oral are as interested as ever in a future dev elopme nt of this kind, and persist in asking me whether or not this govern ment is doing anything about it. MA. M.

ELIESEN: Madam Chairperson, just to provide some additional information without naming names of companies, I can confirm that we have had and we are con tinuing toda y to have discus sions with a number of poten tial companie s who would be interested in 98 es tablishing an aluminum smelter in the Provinc e of Manitoba. What is encoura ging, without raising expec tations too much, in the context of the future is further confirmation of Manitoba being a very attractive site for the est ablishment of such a facility.

This has been confirmed not only by our own studies and our previous discussions and negotiations, but unfortunately due to a change in priorities by Alcoa, the y decided basically to further remo ve thems elves from the pri mary aluminum busine ss and go to into more of the fabrica ting side and go into other non-alu minum busi ness, which the y are pr es entl y doing, of a diversifica tion and that was a decision that they took in a very shor t period of time.

But they did conf irm, and it's reflected in the state ment made by the presi dent, that from their own analysis - and they spent a heck of a lot of money looking at us jointly together - that Manitoba has to be one of the lead ing contenders for the es tablishment of a smelter in the future. This will in the future, incr ease because of what's happening with the aluminum industry toda y which is, of course, in a cyclical downturn with the prices following the kind of development that took place with copper .

But more and more hig h-cost cap acity is being squeezed out, squeezed out in Japan, sque ezed out in the United States and, particularl y, in the -northwest where the y have es tablished historically quite a large capacity of aluminum smel ting, that continues to be sque ezed , and you will see greater com petitiveness for a Manitoba site develop ser vicing North American markets as deve lopments proceed. MADAM CHAIRMAN: The Mem ber for Pem bina. MA. D.

ORCHARD: In your negotiations on aluminum smelting and the possibility of loca ting a smelter in Manitoba with Alcoa's withd rawal from fur ther negotiati ons, your indication is that you are pursuing Eu ropean and Asian aluminum prod ucers; have there been no further discus sions with Alcan , the Canadian Aluminum Company? MR. M. ELIESEN: Madam Chairpers on, we have from time to time raised the possibility of having discussions with Alcan .

For the informa tion of mem bers of the committee, Alcan have changed a lot of their plans with regard to the long-future smelting in Canada, and dev elopments which they had announced would take place in the Province of British Columbia at Kitimat have now been cancelled comple tely. They had two or three smelters that they had announced they were going to build. The only major aluminum building that is taking place in Canada today is in Late rriere, in the Province of Queb ec, where they are building a smelter to replace some of the old smelter facilities at Arvida as a repl acem ent.

Even in that context just recently , last week, I noticed that they deferred major capital expe nditur es, that is, are stre tching out that sched ule. So they, like other aluminum produc ers, are presently watching the kind of cy clical devel opments that are taking place in the world with aluminum and , from time to time, do have discussions with us. HON. W. PAAASIUK: I might ad d, last autumn I had a mee ting with senior people in Alcan in Montrea l, and

Tuesday, 4 Jun e, 1985 the y in fact confirmed that, after having spent I think some $52 milli on on looking at British Columbia, given the situation at the markets, that the y have decided not to proceed and, in a sense, not to have that contingenc y on their books. That was in line with the explanation that the y had given us with respect to not having any type of contingent liabilities on their books with respect to Manitoba.

One of the reasons why com panie s are doing that is that when they are deal ing with major institutional investors who do make large purcha ses of stocks, the y try and keep their books looking as lean as possible, especially in this difficult time, because aluminum prices right now are in the order of 50-51 cents. They had thought that at this stage they would be 80 cents a pound, so there is that type of difference. They also explained the Laterriere situation where they have been under a long obligation to provide a new plant to repla ce an old one that has a lot of environm ental proble ms.

When they were replacing that plant the y were bringing in some improvements to their te chn ology which allowed them to be more energy efficient, which meant that, for the same amount of ene rgy, the y would be building a plant that would be somewhat larger than the plant that they were rep lacing at Arvida. But the y also informed me that, given the mar ket situation, the y would be postponing the com pletion of that particula r facility and stre tching out its building prog ram over quite a bit longer time period than the y originally envisag ed.

We cert ainly agreed to keep each other informed from time to time as to what has been transp iring. Just the other day, for exam ple, I saw a se nior Alcan of ficial at the Econ omic Conference that was held in Winnipeg just last week. MR. D. ORCHARD: The Minister mentioned earlier on, in response to some ques tions as to the tendering process that Manitoba Hydro is using, did I hear the Minister correctly in saying that the guide lines for the tendering process are being formula ted right now? HON. W.

PARASIUK: There is a public ation we could give to you right now on tendering guidelin es that has been form ulated , it has been announced to the public, and busine sses ha ve been sent copies of this information. We have had a chance to have discussions with them. As I said, the feedback that we have received from Manitoba firms has been exc ellent. MR. D. ORCHARD: Yes, I would appreciate see ing that document. The Telephone System back approximately 18 months ago, I bel ieve that does not exist any longer, but the y had a 5 percent Manitoba prefer ential in their tenderi ng.

Has your tendering proced ure, and I trus t that this document will not indicate that, but do you have a guideline which you are following similar to what the Manitoba Telephone System had formal ized in their tenderi ng? MR. M. ELIESEN: No, Manitoba Hydro do es not have a formalized basis, other than the competitive tendering syste m. lt do es look at, obviously, Manitoba-sourced items when bids come in, but there is no formal ized figure related to this area. 99 MR. D.

ORCHARD: So then, presumab ly, the guidelinE are open enough that if a supplier could indicate th1 by rec eiving approval to se ll a given component to th Lime stone project that his emplo yment and economi activity in Manitoba would generate several hundr e thousands of dolla rs in terms of payroll tax, in terrr of sales tax, in terms of perso nal income tax paid, thl that would be of significant importance to Manitob Hydro and influence their decision? MR. M.

ELIESEN: Madam Chairpers on, I am sor ry, cer tainly didn't want to leave the impres sion that ther was no tolerance with �egard to the decision-makin process on the ac tual tenders. There is always a sligl tolerance, keeping in mind that we try to get the be1 kind of produc t for the less costly price. At the sam time, and particul arly now in the context of Lime stor wher e we are attem pting to maxim ize Manitot benefits, Manitoba sour cing, there is an opportuni· for Manitoba Hydro to look quite seriously at this are and to make decisions r