LEGISLATIVE AS SEMBLY OF MANITOB A THE STANDING COMMITTEE ON PUBLIC UTI LITIES AND NA TURAL RESOURCES Thursday, 13 June, 1985 TIME - 10:00 a.m. LOCATION - Winnipeg, Manitoba CHAIR MAN - Mr. C. Santos (Bur rows) ATTEN DANCE - QUORUM - 6 Members of the Committee present: Hon. Messrs. Harapiak, Parasiuk, Plohman Messrs. Enns, Harper, Malinowski, Manness, Santos, Scott APPEARING: Manitoba Hydro-Electric Board: Marc Eliesen, Chairman of the Board J.J. Arna son, President and Chief Executive Officer R. Murray Fraser, Executive Vice- Presi dent, Corporate Services R. 0.

Lam bert, Vice- Presid ent, Custome r Service MATTERS UNDER DISCUSSION: Annual Reports of Manitoba Energy Author ity and The Manitoba Hydro-Electric Board. MR. CHAIRMAN: Will the Com mittee on Public Utilties and Na tural Resources please come to order? We have reserved and withhold judg ment on the passing of the Report of the Manitoba Energy Author ity in case there are questions. In the meantime, we are considering the Report of the Manitoba Hydro-Electric Board. The Mem ber for Lakeside. MR. H. ENNS: Mr.

Chairman, I suppose it would be reassuring to know tha t Manitoba Hydro is in a position to continue providing electr ical service after th is morning despite what happens in some Supreme Court. MR. CHAIR MAN: Anybody care to ans wer the questi on? Mr. Mini ster. HON. W. PARASIUK: Certainly. - (Interjection) - That's right. We'll treat this like liquor, you see, there are legal ways and illegal ways of providing necessary services and we'll certainly do our best to ensure that the needs of Manitoba ns are provid ed, but hopefully we'd like to do it in a legal way. MR. H.

ENNS: There's a small reference to it which seems to be occupying many people's minds this morning. 136 Mr. Chairman, through you to the chief executive officer, the President of Manitoba Hydro. Since last this Com mittee met there has been a reasonable amount of statements made in the public domain wit h respect to the need for the requirement of future rate increases. I recall in the last Comm ittee, one of the officers of Hydro, Mr. Duncan, I believe, or pardon me, Mr. Fraser provided us with charts that indic ated the requirement tha t Manit ob a Hydro would have to do two things.

Primar ily, to carry out the di rection that Mr. Arnason, chief executive officer, referred to it in his report with some pride, that is to make sure that the utility operates on a level wher e reven ue recover costs. it's understandable to cite vari ations from time to tim e, but tha t is, I think, the express direction that I think is supported by all of us that the utility should essentially recover, through its revenue base, appropriate costs of running the utilit y. The graph also ind icated that in order to maintain a reasona ble rese rve - I appreciate the word 'reasonable' is open to

interpretation, but I acknowledge and accept the interpretatio n that Hydro experts put on it - as I understand it a reserve fund from Hydro's point of vie w is adequate if it can offset the severe fluctuations of two bad water years, two drought years, and that the reserve fund then would be of size and substance to withs tand any fluctuatio ns in consumer and in general rates in Manitoba Hydro. it's my clear understanding from what I have listened to in the media reports since the last comm ittee meeting and from my recollectio n of last meet ing , the Hydro spokespersons, principally Mr.

Arnason is indicating tha t a 5 percent annual increase is required to make the se stated ob jectiv es by Manitoba Hydro. The Minis ter and the government have indicated otherwise and again in the public doma in. As recently as a few days ago in the House, I had occasion to ask the Minister this very same question. My question really is this, and I direct it in the fi rst instance to Mr.

Arna son: The Minister and the government are indic atin g that it is their hope and their belief that future rate increases will be possible to be const rained to below inflation costs, holds out the possibil ity that if inflation costs are running lower, the n the figur e would be that particular one; if inflatio n costs are highe r, it would of course be another one.

The point that I'm gettin g at, and this is what troubles me - I would lik e to believe that the 5 percent fig ure that Manitoba Hydro officials gave us was not just an arbitrary fig ure reached out of the sky that looked good, but indeed met specific requirements of Manitoba Hydro and were required to meet a specific obje ctive of replenishing a reserve fund to a speciic level that Hydro, in their best wisd om, agreed to as being an appropriate one. it has nothing to do - of cou rse it has something to do with inflation rates, but the se were revenue recoveries that Hydro felt were necessary at a particular level.

Thursday, 13 June, 1985 I simply would ask the President of Manitoba Hydro to further elaborate on the method, the choice of the figure that was presented to us by Mr. Fraser tha t indicated that those specific 5 percent rate increases would be required to meet stated Hydro objectives. MR. J. ARNASON: Mr. Chai rman, to refresh our memorie s a little bit, as the question er has indicated, Mr. Fraser did provide information relative to reserve of balances at the last meeting and indic ated that we did have certain minimum target reserves object iv es of $200 milli on.

The prima ry purpose of that reserve would be to, first of all, withs tand two consecutiv e years of drought and after that level was reached that it would gradually increase to approxima tely $400 million. He emp hasized the fact that this would be a minimum level and that the reserves should be increased beyo nd this point for reasons other than protect ion against low water conditions.

In our int egrated financ e plan project ion that was subm itted to the board in Nov emb er/December of last year and approved by the board, we did have in our project ions, annual rate increases that we expect will be at or below the average long-term rate of inflation. The purpose for those rate increases, of course, besides the purpose stated by Mr.

Fraser, which is the primary purpose, and naturally those rate increases have to take care of normal inflatio nary increases in operating costs and of course the provision of the reserves and, in the wisdom of the board, the reserves can be very useful in order to deal with the im pact of new generation. As those costs are transferred from the capital accounts to the operating accounts, there is an im pact on new generation, whether generation comes on in '92 , '9 1 or '90 , there is an im pact and it's a question of how one might deal with that impact.

In management 's opinio n, and we have recom mended this to the board, that prudent financial management would consider annual rate increases at or below the rate of inflation. We have used in our project ions 5 percent because the long-term average rate of inflation over the period we' re talking about last year was estim ated at 7 percent.

These are reviewed on an annual basis and, based on the experience after a year's experience. we will be making further recommenda tions to the board in conj unction with our new budget tha t we will be preparing this fall and subm itting to the board once again in November /Dec ember. So it can be a movi ng target and it's reviewed annually and it's subject to decision by the board. MR. CHAIRMAN: Mr. Eliesen. MR. M. ELIESEN: Mr.

Chai rman, if I can provide some further information in thi s area from the perspective of the Board of Manitoba Hydro - the board has consi dered the whole question of reserve levels very seriously over the last short while. We'v e reviewed the his tory of the reserve levels of Manitoba Hydro.

There was a situation where the reserve levels had reached $14 0 mil lion in the 19 79-80 fiscal year period, gradually being built up, and because of a financial policy by the government at that time to have no rate increases, the reserve levels were drawn down - and drawn down very substantially - to the tune of about $70 milli on to $80 million. 137 The purpose of reserve levels in the past as in t future, is to provide that kind of meaningful suppj to the ratepayers of Manitoba Hydro to avoid the ki of fina ncial di ffi cult ies tha t can take place wh Manitoba Hydro can or could experience one or t1 consecutive years of drought.

The board has decided to accept managemen recommendations to gradually increase our reser levels to ensure tha t that kind of protection is provid· in the future to Manitoba ratepayers. We have not, this point, accepted any specific target figurE mana gement have made their recommendations $200 million and $400 million respectiv ely, particula when the new generation station comes into play, t we have adopted manageme nt's recomm endations gradually increase the reserves.

No w, to wha t degree those reserve levels increa really are reviewed each year depen ding on tl numerous variable s tha t im pact the operat ions Manitoba Hydro.

They take into account all kinds facto rs, such as load growth, such as the rate inf lation, interest rates, drought conditi ons, any maj im pact on Manitoba Hydro's operating statements, su• as a major storm which took place last year with tl utili ty, which cost us about $5 million or $6 mi llion. ' those variables are brought to the attention of the boa and are reviewed by Manitoba Hydro in determini l what kind of rate increases and what kind of reser increases are required for the future.

We are pleased with our current situation in whij Manitoba Hydro m anagement have informed the boa that with their current assumptions, and we can go in the assumptions of interest and inflation which rig now, personally in my judg ment are a bit high , b th ose are the ones we have worked with over the la year of the 12 percent interest and the 7 perce inflation, that even with those assumptions we can ha• rate increases and gradually build up our reserves a 5 percent level, which is two points below the ra of inflation.

That will gi ve us, not only sufficient reserves to de with tho se drought conditions , but it will also ensu1 tha t Manitoba Hydro has a rate structure, at least, th. is the lowest in North America. MR. CHAIRMAN: Mr. Minis ter. HON. W. PARASIUK: I believe that much of the sarr was said last year to the commit te e, and I w� wondering if there's a Hansard - I see a Hansard the1 - I think that virtually the same type of statements we1 made to com mit tee last year in terms of the char· tha t were presented. Does anyone have a . MR. M. EL IESEN: Mr.

Chair man, yes, there's n difference in the presentations tha t were made th year compa red to last year by Mr. Arna son and M Fraser. Both dealt with the question of long-term forecast: both referred to the question of building up the reserve that would "wi thstand the effects of two consecutiv years of below normal river flows "; both dealt with th question tha t reserves should be increased to provi d "for the internal generation of funds prior to the additio

Thursday, 13 June, 1985 lf new generati on "; and both presentations dealt with, md this is an important area I want to stress, the Juestio n that these forecasts are based on assumptions hat are used in the then fi nancial forecast. I want to quote what Mr. Fraser said last year, and r.that he said this year before the commi ttee: "Th ese 1ssu mptions are important, because a change in any )ne of them could have an sig nificant im pact on the 'orecast of operating results.

In fact, it is virtually certain ihat actual conditio ns wi ll differ from some of our 1ssu mptions and the fi nancial forecast wi ll have to be 1djus ted according ly, because we recognize actual �ondi tions wi ll diffe rent from assum ptions. We do a �onsiderable amount of sensitivity analysis as part of our fi nancial forecast process to determine the impa ct of changes in the se assumptions. " That's why the board really has to review these matters on an annual basis, which is our current policy. MR. CHAIRMAN: The Mem ber for Lakeside. MR. H. ENNS: Thank you, Mr. Chairman.

Coming back to the origi nal questio n, the Executive Officer of Manitoba Hydro in dicated to us, which I accept, that the utility has to take into account, in these project ions, the normal inflation plus a reasonable provisi on for the reserve fund, which in the opinion of Hydro and according to the statement just made by the Chairman of Hydro, the board, that a mo dest recovery of that reserve fund position is desirable. But we' re talking about 5 percent increases, which were used by Mr. Fraser yesterday and put on the record to this commit tee.

I find it difficult to fi nd where in that projected increase of 5 percent is there any allowance, for instance, for what the President of Manitoba Hydro just referred to a few moments ago, which I also concur with, tha t it's prudent for management to plan in advance for any impa ct of when new and additi onal generation comes on to the regular system 's rates structure. I believe the President of Manitoba Hydro described it more directly by - and I gi ve him this opportunity to correct any reporting of him in the media that may or may not be correct. Mr.

Chairman, you know that tho se of us who work in thi s arena are not always accurately reported in the media. I must confess this has happened to me, too. The President of Manitoba Hydro talks of a concern, of a shock of im pact of Limes tone's new generation costs coming on to the system , in the same paragraph or in the same context of defending the necessity of at least a 5 percent annual increase in hydro rates to the year 19 94. From what has just been said by both Mr. Eliesen and Mr.

Arnas on, I have diffi culty when we' re talking about a 5 percent rate increase and ack nowledging that a 5 percent fi gure for inflation costs has been used in the projections when the figure is 7, but in the long term, ok ay, that only complicates my questio n, or makes it more difficult for me to fi nd an answer or for me to understand the ans wers tha t I'm getting .

If we' re talking about a 7 percent inflation factor, and if we accept the desirability of im proving our reserve positio n, which has been in dicated has been allowed to reach levels that are not acceptable to Hydro and 138 to the board, and does not give us the protection service tha t a reserve fund is meant to; in other words, to give the insu rance of carrying us through two drought year peri ods at least. I fai l to see any additional allowance when the President of Manitoba Hydro says that, at min imal, 5 percent rate increases wi ll be required until the year 19 94.

I can't see any allowance that Hydro has made for that im pact on rates that new generation wi ll cause. Can somebody indicate to me where allowances have been made in the suggested - and I appreciate we'll deal with that later - the utility has suggested that 5 percent rate increases till 19 94 will be required.

I'm right now dealing with that figure because in that figure, wit h the inform ation that's just been put on the table today, that still doesn't in dicate to me and to the mem bers of the com mittee any mo nies that are being set aside to cushion a future rate shock as a result of new generation coming onstream. HON. W. PARASIUK: If you have inflation of 7 percent MR. H. ENNS: Mr. Chairman, on a point of order, have no ob jection. I usually find it ... MR. CHA IRMAN: A point of order? Wi ll the memb er state the point of order? MR. H.

ENNS: . . . quite pleasant to discuss these matters directly wit h the Mi nister, but I was aski ng the question directly to the President of Manitoba Hydro. I would hope that the President of Manitoba Hydro would have an opportunity of answering it. HON. W. PARASIUK: Oh, no doubt about it.

Since the question was also asked in the House, I think I'd like to just say what was said in the House, namely, that if you assume a 7 percent inflatio n, which is the assum ption over a long-term projection, you'v e got to try and pick a numb er for a longer-term project ion on one's best estima tes and th ese were done last Nov em ber. They'r e done on a yearly basis but there wi ll be another estimate as to what the long-term inflation rate wi ll be when Hydro goes through its whole process again this Novem ber, but it was that 5 percent, given a 7 percent long-term inflation rate.

Five percent rate increases would not only build up the reserve but allow a cushion to deal with any type of bring ing onstream of any generating stations, so it 's built within the 5 percent, assuming a 7 percent inflation rate. If, in fact, it ends up being a 6 percent inflation rate, then I would expect that the rate increases would be less tha n 5 percent. MR. H. ENNS: Mr. Mini ster, maybe it's too early in the morning for me but I'm havi ng trouble with the sim ple arith metic.

If the utility is dealing with its current costs of operations and projecting - and currently dealing with a 7 percent rate of inflation or cost, and I'll accept the projection of an averaging out of 5 percent - and we go back to the original intent of the utility is to operate at cost , then I would think that if it 's go ing to cost the uti lity 5 percent more on an annual basis to

Thursday, 13 June, 1985 run their operation, then they have to increase their rates by 5 percent. That seems to be fairly straightf orward. That 5 percent, in my judgm ent, still doesn't even replenish the reserve fund, much less set asi de mon ies to cushion any future shock of putting new generation on plan, or is the formula tha t is calculated into what constitut es Hydro's operating costs inclusive of these matters? HON. W.

PARASIUK: If you have a general rate of inflation in the province or in the country of 7 percent, Hydro, with export sales, with an attempt I think to imp rove efficienc y over the last few years, which it has done, with respect to project ions of demand and what it'll be sel ling here, wha t it'll be selling elsewhere, through its analysis, comes to the conclusion tha t if you have a long-term 7 percent inflation rate in the country, a 5 percent increase will be enough to meet its costs as a utilit y, replenish reserves and, over the long run, build up a bit of a cushion as well, with respect to new generation.

I t hink that being able to do it with, in this project ion, two points less than the assumed rate of inflation , is pretty good management on the part of Hydro, but Mr. Arna son may want to just deal with it. MR. J. ARNASON: Mr. Chairman, I have reformed the projecti ons that we did make and with the 5 percent rate increase we do show a stream of net revenues that exceed expenses each year over the total period of the project ion to 19 95 and tho se net revenues accumulate and eventually reach a reserve balance due to the annual accumu lation of about $246 milli on in the year 19 90.

That's ba sed on annual project ion on the scenario we just described with the revenues exceeding all expenses by a considerable margin each year and when thos e are accumulated, we can see very clearly what the reserve balance will be at any point in time. That's based on the criteria we talke d about. There is a clear indication of revenues exceeding expenses, based on a 5 percent annual rate increase in ... MR. M. ELIESEN: Ju st to add, Mr.

Chairman, and to reconfirm that we are dealing here with a forecast over a 10 -year period which has assumed a 12 percent interest rate which has assumed a 7 percent inflation and what we are pointing out to the com mittee that, with a 5 percent rate inc rease, which is 2 percentage points below the rate of inflation, that Manitoba Hydro will cover its expenses in the operations of its busi ness during that period and, furthermore, have adequate reserve funds to mitiga te any poten tial disaster tha t may occur as a result of a major drought in our system.

In addition, we would have suffic ient reserves to cushion any major rate increase. When I say "ma jor" here, I'm talking about anywhere from 8 percent to 10 percent, which in our con text, is major, given the fact that we are projecting a 5 percent; so let's say "ma j or" is defined as double the 5 percent rate, assuming a 7 percent inflation, we would have suffici ent reserves at that time for the one or two years when new generation comes on stream and for us in Manitoba Hydro, that's a very desirable position to be in.

In fact, we don't kno w of any other utility in North Ame rica that can 139 forecast a declining real price in electricity and at tt same time build up your reserves to an adequate lev to mit iga te the kind of drought conditions. Of course, if inflation or interest changes, let's assurr it decreases. Well, we won't need 5 percent ral increases; we will need rate increases at less than th• if inflation goes down.

We've worked out one scenar which has been presented to the com mittee and I gue! there are a numb er of others which we could ha\ presented, in terms of the sensitivity analysis that M Fraser indicated in his opening remarks, but that w� the current forecast that we went with, as part of 01 integrated financial forecast, and we are reviewin! obviou sly, in the con text of right today of declinin inflatio n and declining interest rates what kind of mor mean ingfu l figure should be utilized with regard to t� future.

But the bottom line is that we are able to proje• for the future adequate reserves based on rates thl will be at or below the rate of inflation. MR. CHAIRM AN: The Member for lnks ter. MR. D. SCOTT: Mr. Chairman , I'd like to address question to Mr. Arna son. I'm referring to the reser� forecast that he has with the 5 percent rate increas• which is 2 percent less than the forecasted rate < inflation over the fiv e years between now and 19 90. I am wondering if that reserve includes or exclude any mon ies or subsid ies from the province by way < the Hydro Rate Stabil ization Fund.

From what I ea get out of the Annual Report, it only goes back tw years. In 19 84, that was $2 1. 9 million, the year befon $6.5 million, the previous year substantially hig her. went up . . . one year it was $45 million, if my memo r serves me correctly. MR. J. ARNASON: To answ er tha t question, M Chairman, in a general way, from informatio n we'v received from the Fin ance Department the advanta g to Manitoba Hydro of The Energy Rate Sta bili zatio Act totals $12 2 mil lion si nce that act went into effec MR. D.

SCOTT: So, in effec t, during the years th� we had this so-called hydro rate freeze on for the peopl of Manitoba, the people of Manitoba were subsidizin Hydro, since 19 79 , to the tune of $12 2 million whict in effect, is the province whose taxation regim e i probab ly, I wou ld susp ect , gi ven the bulk of th population and the average incomes of the provi ncE this $12 2 milli on probably would have, in effect, bee a hig her tax, enforced hig her taxes in the Provi nce c Man itoba towards a su bsid izat io n of the hig he! consumers of electricity in the provi nce.

I'm doing somE I guess, mental arith metic without figu res here, but i a taxation system which, by necessity, charges, throug sales taxes and income taxes and all the rest of it, th bulk of the tax load is of course paid by those wit, family incomes probably less than $25,000, wherea your hydro rates, at least a person can have som control over how much they' re going to pay for thei hydro according to how much they consume.

We have, in effect, by having a hydro rate freez, been subsid izing people who both conserve and ever subsidizing to a greater extent those individ uals in thos' industries who have not been attempting to reduc1 their consumption of electricity.

Thursday, 13 June, 1985 MR. M. ELIESEN: Mr. Chairman , I think it would simply be useful to indicate what is reported by Manitoba Hydro in its Annua l Report, where we indic ate that The Energy Rate Stabil izat ion Act which came into force April 1s t, 19 79, provides for the Provi nce of Manitoba to relieve the corporation of the costs associated with the foreign debt of Manitoba Hydro by replacing them with a Canadian equivalent cost based on Canadian rates for similar terms as at the date the debt was incurred.

The Province of Manitoba has confirmed to the corporation that, had the Province of' Manitoba not assumed the cost of foreign debt at April 1s t, 19 79, the valuation of the long-term debt of the corporation, as at March 31, 19 84, would have been increased by approxima tely $358 million when translated at the year end rates of exchange s." No w that quote comes directly from the Annual Report. As Mr. Arnason has indicated, there would have been a cost of approxima tely $12 2 milli on so far that the province has assumed as a result of assuming the burden of foreign exchange costs. MR.

CHAIRMAN: The Mem ber for Min nedosa. MR. D. BLAKE: Thank you, Mr. Chairman. This may have been answered before, seeing as I hav en't been sitting in the Com m ittee meetings, but I wonder if briefly the general mana ger of Hydro could run over the different rate structures in the province and how it differs, say, in Northern Manitoba from other areas. MR. CHAIRMAN: That's a new question. Mr. Arnason. MR. J. ARNASON: Mr. Chairman, I think we'd asked Mr. Fraser to cover the details of the rate structure.

There was some indication at the last meeting in chart form, a comparison of rates, but this question is specific relative to the rate structure itself and it might be useful if Mr. Fraser went into that detai l. MR. CHA IRMAN: Mr. Fraser. MR. R. FRASER: Thank you, Mr. Chairma n . I did ha ve an overhead slide prepared, but we don't have a projector set up here this morning to display that. I would like to make the first point that there is no difference in rate structures between Northern Manitoba and Southern Manitoba.

The rates we have, as I believe I had mentioned last time, are divided fundamentally into residential and non­ residential categ ories. The non-residentia l is further subdivide d into the smaller ones, which we call general service and the larger ones that we refer to as power custome rs. In the residential area, there are three different rate zones which depend upon meter density. The City of Wi nnipeg is clearly the most densely populated area in the province and there is one rate referred to as R- 1 th at provides for residential service in Wi nnipeg.

The second category R-2 provides for what's referred as medium density; tha t is 10 0 metered services or more within a line density of at least 15 customers per kilome tre of di stribution line. 140 The third is referred to low density which is less than 10 0 meters in a group and of density less than 15 customers per kil ometre. Now, the energy rates are the same at the so-called runoff or the balance rate. The differentials are all found in the ini tial charges, the basic charge plus the fi rst block charge.

The difference, and here I'm between R- 1 and R-2, I believe, from mem ory the dif ference is in the neigh bou rhood of $2 and that difference then is constant throughout regardless of usage, because, as I' ve already said, the energy run-off rate is ident ical and the difference between the R- 1, Wi nnipeg , and the R-3 zone is around $1 0.00. The justifica tion for the difference in price based on density is a difference in distribution cost required to serve customers on a wide spread basis.

The general service customers are divided into the same three rate zones, but the power class customers are uniform throughout the province. The difference is that the power class customers are primarily fed from the transmission system and they do not incur the added distribution costs that the smaller customers incur on the system . MR. D. BLAKE: Mr. Chairman, the last rate increase on April 1s t, it was what, 5 percent? MR. R. FRASER: Yes, it was designed to increase the utility's revenue by 5 percent. MR. D. BLAKE: Wh at prompts my que stion, Mr.

Chairma n , is that on a recent visit up North there were two or three people figuring their Hydro bills and they felt their Hydro bill had increased about 22 percent. They were trying to just ify the increase in rate. I didn't have the benefit of their meter readings or what happened there. There was an awful lot of them the re convinc ed that they're paying a high er rate for their Hydro than they are in Southern Manitoba.

That may be a common thought in the North that they' re paying more for mo st of their services than they do in the South, which prompted my question, would there be a variation in rates say in Flin Flon compa red with the increases tha t someone in Southern Manitoba might have experienced during that same period? MR. R. FRASER: No. MR. D. BLAKE: So it would have to be an increased user amount of electricity or some other factor wi thin the individual's metered residence? MR. R. FRASER: There would have to be some other explanation, yes. MR. D. BLAK E: Thank you, Mr. Chairman. MR.

CHAI RMAN: The Mem ber for Ai"thur. MR. J. DOWNEY: Thank you, Mr. Chairman . Along the same lines of questioning on rate structure, I notic e Mr. Fraser passed out the graphs the other day and I would lik e to go specifically to the area in which Mani toba is not in the best category with com parisons of Wi nnipeg. I think Wi nnipeg comes in

Thursday, 13 June, 1985 at about fourth lowest next to Reg ina, Vancouv er and Montreal in cost per month. Wha t type of users would use a 750 kilo watt hour? What kind? Would that be small busine ss - people with small welding shops, service shops - what type of busine ss would tha t be? MR. Fl. FFlASEFl: That 's correct, yes. Any very small non-residential custom er. lt could be a corner store or it could be the type of enterprises you'v e described. MR. J.

DOWNEY: Why would it be that with the resource that we have that we'r e not as com petitiv e in that area, because it would seem to me that would be the area in which we WO!.!Id be most com petit ive and want to make sure that people have the best price on the Hy�ro compa red to the rest of Canada. I leave that either to you Mr. Fraser or to the Min ister. I ask as to why we're in that high er cost for those people? MR. R. FRASER: Yes, we have to a large extent inherited the situa tion. I would refer you to the next chart.

If you notice that as consumption inc reases then our position very rapidly becom es very fav ourable. We have very, very few custom ers in thi s category at thi s consu mption, because as you've already pointed out, it is very smal l. lt is, in fact, equivalent to a residential customer not using electric heat. The reason tha t this is shown is because it is the level of consumption that is used in comparison across Canada. lt is a numb er that we can get com parisons readily from the other provi nces. There are very, very few custom ers in the classif icat ion.

You might also wish to compa re, because you can if you compa re slide 3 with slide 1, the bill for the gener al service customer com pared to residentia l customer using the same quanti ty. To a large extent, it is hi storic. We do hope to move tha t particular category into a more fav ourable position. In fact , I believe the com parison that's gi ven this year agai nst Regina is very much closer than the one I gave you a year ago. So that is our intent is to improve because I think of the slides I gave you, this is the only one in which we do not show as being in the mo st fav ourable posit ion. MR. J.

DOWNEY: Mr. Chair man, I appreciate the response, however, I still have a concern for tho se people who are what I would say caugh t in probal:Jiy the most difficult time s, as far as carrying the loads are concerned.

I'll make reference to the comment I made to the Min ister a few days ago in regard to a small busi ness and he can respond, if he like s, as to the back charges, as I understand it, when an indi vidual - and again I think the business was in thi s category - but each month when a person pays their Hydro, as I understand it and as a user of Hydro, when I pay that bill I get a receipt which says I'm "Paid in Full." Then several years later to have Hydro come along and say tha t there's now a bill owi ng, I don't kno w they' re legally - I'm not a lawyer and it would probably have to be challenged in the courts before a decisi on was made - but I really don't think Hydro has a claim agai nst those individua ls.

Again I say that it's happened 141 in most cases in my constituency to indi viduals wh4 are in this category agai n, that they're being reassesse4 and bil led. So I would ask Hydro and ask the Minister if the: wouldn't take a serious look at their policy of goin! back and back billing, because as I said, why woulc one put them through the cost of going to court, when in fact, I don't think they'd have a very good chanc1 of collecting it, particularly at the end of each montl when the customer gets a bill stamped "Paid in Full' or ma rked that all their responsi bil itie s to Hydro an paid.

I would ask for the response of the Min ister ir tha t regard. HON.. W. PARASIUK: I'v e already asked the Chairma r of Manitoba Hydro to do a review, have Hydro do � review of this whole matter of back billing. I asked therr to undertake that in a very detai led, substantiv e way because it is im portant to look at the various categories I wouldn't want to, for exam ple, have Hydro not bac� bill for large users of power who are major industria users, for exam ple; because I certainly wouldn't wan1 to be putting Hydro in a spot of not being able to bac� pill for those types of large accounts.

At the same time, I think that there should be a special look , especially at smaller businesses, whc operate in a different way. VOl.! might have rooming houses, you might have small general stores. Some o1 the se places in some co mmun itie s are almo s1 grandfather-type of operati ons, they may be around, they may not be arou nd.

I'v e asked that that review be undertaken; I' ve asked also that t here be, in a sense, no preci pitous action taken while that review is bei ng undertaken , because it's not an instant review. lt might take a month or two to do, because this would have to be done by the mana gement, then taken up to the board, because boards set that type of policy. I expect that that certainly will be done. MR. J. DOWNEY: I appreciate that, Mr. Chairma n , because one has to appreciate that when you're dealing with Manitoba Hydro you don't have many alternati ve sources to go to.

If they want to play hard ball with the small operators and say it's either pay your back Hydro Bill or else you won't be getting any hydro next month, you're pretty much left out to dry. I do not want that kind of heavy- handed approach used because when I look at wh<�t we've seen, as far as the cost, it would appear tha t a lot of th ese busi nesses that are being reassessed are - comp ared to the rest of the country and the other citie s - actually payi ng a little bit more than the rest of hyd ro users in Manitoba, com pared to their counterparts througho ut Canada, and I think thi s is the same catego ry.

So I do appreciate the fact that special consideration will be gi ven to those smaller users; and yes, when it come s to dealing with major users, I think that if there is a proper explanation and can be justifie d , fine, that it is a negotiable thing that Hydro has. But I come back to the point I made, once a Hydro Bill is ma rked "Paid," and they'v e accepted payment for that amount of hydro used, I don't kno w any clause or any cont ract that's between the user of Hydro - in the smal ler sense, the smaller users - and Hydro, that

Thursday, 13 June, 1985 they have the abil ity or auth ority to come back and back bill. I consider, when I pay a bill to Hydro and I get a receipt marked "Paid, " that my responsibilitie s are over to that point till the next month bill comes. If I'm incorrect, maybe the Minis ter could- if the receipt were to say, "This bill is paid, subject to further review of Hydro and back billing, " then I could understand it, but mos t bills I get, I expect are paid in full. HON. W. PARASIUK: I can't answer tha t specific point on the legal va lidit y.

I believe Hydro's legal counsel says they have the legal abili ty to collect. But I do sympath ize with the mem ber when he says that you don't ha ve an option. I have a busine ss in Quebec and I have to deal with Hydro Quebec and I have to deal with Bell Telephone. Let me tell you that I found that Bell Telephone is com pletely and totally inf lexible. I find some flexibil ity and some consideration of special circums tances when it comes to Hydro Quebec, because someti mes these bills that come down do have an appearance of bei ng arbit rary, and it is im portant that this di alogue and di scussion take place.

Certainly the point that was raised by the mem ber, point s that have been raised by some other people with respect to the back billing have, in fact, led me to ask that this review be undertaken. MR. M. ELIESEN: Mr. Cha irman , I just would like to point out that this policy is not new in Manitoba Hydro. it's a long-standing policy with regard to back billing. Two, it's consistent with the utility practices in other provincia l jurisdictions; and thr ee, we have believed , and legal opinion suppor ts, tha t we do have the necessary authority to seek such a back billing.

However, notwithstand ing the fact tha t it has been long-stand ing practice and policy and consis tent with other utilities, the Min ister has requested, and we've agreed to undertake a review of our policies in this area. Ju st to summa rize our current policy, we've got a six-month back billing period for residential and farm acc ounts; but it's six years deal ing with multiple residential and general service and power. In other words, it doesn't simply apply to the categ ory tha t has been mentioned by the mem ber from the com m ittee.

Our current policy with regard to tha t six-years is th at it's supplied with the understanding that there is di scretion in negotia tions to be used in settling these accounts; and th at the size of the custom er, whether it's a small or large user, is taken into consideration when applying the policy. So we are presently, upon the request from the Min ister, reviewing this particular area and we will eva luate it at the board to determine what kinds of change s are desirable in the context of the future. MR. J. DOWNEY: Mr. Chairman, let me use another compa rison.

Supposing that the users of natural gas or gas from Inter-City Gas in Wi nnipeg or anywhere else in the province were to use their commod ity to heat their house or use as an energy source for many years, and at the end of a period a decision was made to review the charges gi ven for the gas or an individual who bought bulk fuel from a fuel dealer in the country 142 and had it delivered, that the com pany decided to send a bill, back billing him for a mi stake that a meter had made on the distribution of gas or something.

I think it would be very difficult to convi nce that consumer that they had to pay $1 ,000 or $2,0 00 or whatever it was, for that mis take that the com pany made. I would think it would be the responsi bil ity of the company to assume it; in fact I have never heard of any other energy distribu tor that had, in fact , gone back, without a justifiable case but just going in and saying that because of their error. If the Min ister kno ws of one, then I'd appreciate to hear it. HON. W.

PARASIUK: Ju st right now, I'm going to ask Hydro, when th ey're doing this review to check on natural gas and check on water meters, because I' ve heard complaints about water meters; people sayi ng that they'v e had to pay extra on water bills. I'm not trying to debate with the mem ber, I'm just sayi ng I think it's im portant to get all tho se facts out. MR. J. ARNASON: Mr. Chai rman, we can check on the other utilities. I wanted to make a comment relative to the general dis cussi on, that we not only attempt to collect the back billing, according to the description just gi ven by Mr.

Elies en, but there are probably more situations where we have over-bill ed and where we over-bill we, of course, remit the over-billing plus interest. The principle behind the reason for wanting to collect underbillings due to errors is the fact that if we don't collect that money, for which service was received, that tho se dollars would have to be picked up by the rest of the consumers in Manitoba. So we think it's fai r because of that reason.

You can get into a situation where with large customers, there can be a fairly substantial underbilling over a period of years and we are dea ling with that kind of situation right at the moment. That's just a little background on why we' re doing it, Mr. Chairman. MR. CHAIRMAN: The Mem ber for Rupertsland. He has been raising his hand for the last hour. The Mem ber for Arthur. MR. J. DOWNEY: On a point of order. Mr. Chairman, I didn't know it was a rule of your commit tee tha t you had to keep raising your hand every time you wanted to speak - when you're on a series of questions. Can we leave it up permanently?

Is tha t what you're ... MR. CHAIRMAN: To the same order. I lik e to gi ve a chance to everyone, especially th ose who have not spoken yet. The Mem ber for Rupertsland. MR. E. HARPER: Yes, my question is in regard to the rates tha t are bei ng paid especially in remote communiti es, the services being provided by the diesel plant. I'm just wondering what the rate is com pared to the rates being provided in the rural and the city area. MR. R. FRASER: The rates being charged in the remote areas served by diesel are those identif ied as R-3, that is the same as in the rural parts of Southern Mani toba.

Thursday, 13 June, 1985 MR. E. HARPER: Would tha t be substantially higher th an, let's say, in R- 1? MR. R. FRASER: I believe it's a maxi mum of about $10 a month difference. MR. E. HARPER: Yes, and mo st of tho se diesel plants provide to the com munity and the residents, I believe, 15 amp service and it is not adequate to provide tho se services to the residents, because it causes a lot of problems, in a sense, that some electrical appliances because of the services they' re gett ing, they wreck the machin e or some thing goes wrong with it and a lot of tim es you can't really depend on them.

One instance, I can gi ve you an exam ple - I'm from Red Sucker Lake, we had a total inv estment of putting a water line in of almost $1 mi llion. The plant went out and it was never put back into service until the following day, and this was in the midd le of Janu ary and the entire system froze, I believe. I'm jus t making a point here that the services tha t are bei ng provided are not adequate. My question is maybe to the Min ister - are there any plans to provide service to the areas lik e, for instance, the Island Lake area in the near future? MR. J. ARNASON: Mr.

Chairman , we ha ve been discussing this problem tha t has been raised with the federal authorit ies and that has been under discussion for some period of time. We were hoping that we would get a decision from the federal people this year in terms of prov iding a capital contri buti on to extend service to seven communi ties in the area you were just mention ing.

We're talking about a very substantial capital program - some thing in the neigh bou rhood of $38 milli on in 19 88 dollars, and we' re talk ing about a line tha t would go from Kelsey and would serve commun it ies such as Red Suck er, Gods Lake Na rrows, Gods Ri ver, Oxford House, St. Theresa, Wasakama k and Garden Hill. If we get the approval for the contri bution, we will start building that complex. With tha t approval, we consider tim e frames of about 19 88 to about 19 91, '92 would be reasonable in terms of completing that project, but we require the federal contribution fi rst. MR.

CH AIRMAN: Last question. MR. E. HARPER: If tha t information is available to the general public, I was just wondering if I could have some of that informa tion. I kno w we're busy talking to the Federal Government, what information that you have that you could provide me with, I would appreciate. MR. CHAIRMAN: The Mem ber for Swan Riv er. MR. D. GOURLAY: Mr. Chairman, I'm not sure who wants to deal with this question, but with respect to new rural installations and the policy covering those installations.

Each year I get a numb er of calls from people tha t are setting up new home s either on farms or small acreages and they are faced with certain costs and requirements by Hydro. I'm wondering what the cu rrent pol icy is wit h respect to th ose types of installations. MR. J. ARNASON: The policy with respect to service extensions, to a rural residenc e or a small farm, for 143 example, under 200 amps - we provide a ma ximu r construction allowance of three-quarters of a mil e.

T the degree tha t the length of the line exceeds three quarters of a mil e, the resident would have to pay th difference as a capital contribution. MR. D. GOURLAY: What is the requirement with respec to, for instance, where there's a mobile home bein used as a residence or in the case of building a ne1 home? There are certain deposits that the individw has to make and when th ose certain requirements ar made, they get a refund on this mone y? MR. J. ARNASON: In terms of mobil e homes, as recall, we specif y a permanent fou ndation, or foundation tha t would giv e some permanency to th• building itself.

I might have to refer that to our vice president of customer services, Mr. Lam bert, I· elaborate on that a bit. But there's always a concern when you' re talkin! about mobile homes, is tha t they' re here today anc they're gone tomo rrow. To the degree that we' re goin! to make a major capital installation, it would take som< considerable time to recover the costs of !ha installation. There are certain requirements relative tc that specific type of installation and maybe Mr. Lam ber could elabo rate on that for us. MR. R. LAMBERT: Generally, Mr.

Arna son is correct In situations where there isn't a degree of permanenc} and because Manitoba Hydro has an inv estment in the faciliti es by way of the construction allowanes, then we ask for a contribution which is refundable over a perio< of time once we have a return on our inv estment. lt'1 really just insu rance that we get an opportunity to ge a return on the investment that we've made in extend in! the service facilit y. MR. D. GOUR LAY: I can appreciate in the case of 1 mobile home where the situation could change and thE Hydro could be left with a fairly hefty bill . . .

In thE case where a new home is being establ ished and thE power is necessary to enable the construction of a ne11 facili ty, at least it facilit ates building a new home, il there a deposit required in the case of a permanen structure, which is then refundable after the residencE is completed? MR. R. LAMBERT: If the home is being put on � permanent foundation and there is permanency to the installation, there is no deposit required, according tc our policy. MR. D. GOU RLAY: Thank you for those answers.

Aga in, with respect to a mobil e home, is it mandator} that the owner put up a yard pole to service the mobil e home or can the meter be placed right on the mobile home itself? Wha t is the situa tion? MR. R. LAMBERT: As long as the mo bile ho me facili tates the connection of our conductors in the meter, etc., then it could be put on the mobile home. The difficulty wit h the mobil e home quite frequently is thal it's not a solid enough structure to withstand the tens. on of our service conductors and so on. I think tha t we

Thursday, 13 June, 1985 usually do is encourage them to put a pole adjacent to the mobile home on which they can put the meter and then we can extend the service without putting too much strain on the mobil e home itself. MR. D. GOURLAY: Wha t is the situa tion with respect to changing the yard service pole where there has been a change of construction and change of circums tances in a farm residence? Is the onus on the landowner to contact Hydro and have Hydro make necessary change and in stal lation, or is it the respo nsibili ty of the landowner to hi re an electrician to make these changes? MR. R.

LAMBERT: I'm presuming what you're speaking of is the situa tion of extending service wi thin the farmyard beyond the so-called farmyard pole or the Hydro pole. Extension of service beyond that pole which is the point of connection for Manitoba Hydro is the responsi bil ity of the customer. Hydro's responsibili ty ends at the yard pole. MR. D. GOURLAY: One further question. Where it would be advisable to relocate the service pole, then that would be an arrangement with the landowner and Hydro to make that switc h? MR. R.

LAMBERT: If the customer has a requi rement or a desi re to relocate the yard pole, Manitoba Hydro will relocate the yard pole but it will be at some cost to the customer. MR. D. GOURLAY: Thank you. MR. CHAIRMAN: The Mem ber for Arthur. MR. J. DOWN EY: Thank you, Mr. Chairman . A further comme nt and I have another few questions dealing with the billing policies, but a further comment dealing with the back billing before I mo ve on, and that is that there are some concerns dea ling with these small users of Hydro.

I say small users because they pretty much trust that what they are getti ng is proper, that they' re not being under or over billed. it's different than when you get your car filled with gasoline, now you kno w it costs you $40 and you can kind of keep your own eye on it. You don't kno w what it's costing you when you turn your washer or your dryer or your stove on, you have no idea of whether the right amount of fuel is going to it from Hydro, so it is pretty difficult for a person to, on the instant spot the use of Hydro and the consumption of it.

I' ll just make the case that a mi stake made on that individual can some times create severe hardship when, in fact, there is whole trust and confidenc e in the utility company tha t th ings are running properly. I think it's easier for the utility to pick up their mi stake than it is that indi vidual who is struggling. I want to go on further to another area. The Minis ter responded to a letter from one of constituenc y groups.

This goes into the whole area of demand billing and there's a statement made and a comment ma de and a jus tific ati on made by Mani toba Hydro as to the necessity to switch some operations over to demand billing. I'll make reference to it because I'll ask him specific questions in tha t area. This letter goes back 144 to the R.M. of Oakland who continue to be concerned about the demand billing on recreational centres.

I know that there was, through the lotteries system, a program introduced by our admin istration to ease some of the costs of the pressures but it's, agai n, dealing with the recreational centres and the small busi nesses that find thems elves getting into a usage tha t puts them into the demand billing. This statement I'll read and then com ment on it. "The electrical plant is built to meet both the annual energy requirements and the peak load requirements of the system.

The corporation incurs annual cost to pay for operating the electrical system and, therefore, revenues to offset these costs must be col lected from Manitoba Hydro customers on an annual basis. " That's the end of the part that I think is essential to read in. My concern is that never have I seen at the user end of Hydro an increase in plant capacit y. I'v e never seen a chang eover. There may be a different transformer put in. I'm not sure, I' ve ever seen one changed or not. lt appears as if it's more of a book change rather than an equipment change.

If it, in fact, were an equi pment cha nge, the only increased cost would, in fact, not be service charges because I'v e never seen a lot of work other than after an electrical storm or ice. But that plant is in place. it's bought initiall y by the busi ness or by the recreational centre. I think that's a charge not to Hydro but to the people who build the facilit y; that, in fact, the equipment that is putti ng Hydro to that if it's increased size, then it would be an increased interest on the invest ment and carrying charge, not a service charge.

I have some disagreement with their response when they say pay for the operating electrical system and therefore revenues to offset must be collected. I ask, where are the additional operating costs on some of the se small busine sses that have been changed to demand Hydro or to recreational centres. Because to me, there is no visible equipm ent change. As I say, it may take place back up the line someplace at your distribution point, but I don't think to the point of which it's put some of the costs up. Possi bly there are some areas that it has reduced the annual cost of Hydro, but not too many.

Most cases that I kno w of, once you're hooked on to a demand billing, you're paying what seems to be an excessive rate in the off season and is still a pretty rate in the he avy use seaso n. I can 't find out wher e there's justif ication by Manitoba Hydro when they say that they have increased operating costs on those operations. I'd ask for a response because, in some cases, particularly the recreational centres but, agai n, in some of these smaller businesses, these smaller corner stores or small manufacturing plants that get put on to demand billing it does, in fact, create a tremendous amount of hardship.

Wha t is the additiona l operating costs that Hydro have to face other than incr eased in terest charges on the equipment that they have to buy? MR. J. ARNASON: Mr. Chairman , I'll deal with that in a general way. We're talking about loads that require demand billing which is loads of 50 kVa or hig her. As a result of loads of this size in the power classific ation, Manitoba Hydro requires to build generation and build transmission to serve these types of loads. Because

Thursday, 13 June, 1985 these loads place a demand on our system for a relatively short period of time and we have to respond to the total demand and bill generation, once it's built, there are costs incurred tha t cannot be turned off.

Wi thin our rate structure, therefore, we have to have a system whereby tho se people who put that demand on our system have to pay their fair share of costs and we have in our rate structure a minimum demand billing which one component is tha t during the summer months, for example, when the customer's demand is low, he still has to pay 80 percent of the maxi mum demand tha t he establis hed on our system during the winter months. lt's simply a matter of paying for the costs that are inv olved in building generation of transm ission to serve these three phase loads.

These are the heavy demand customers and the 80 percent of our costs are related to servicing the charges on generation and building new transmissi on. lt's as a fair a way as we can determine of having people pick up the costs and it's uniform throughout Canada. In fact, at one time at a public utility board meet ing, there was a sugges tion tha t demand bi lling be reduced to a lower level than the 50 kVa numb er that is presently used in our rate structure. MR. J. DOWNEY: Mr.

Chairman, what would that do lowering from that 50 kV a numb er in general costs? 1t would add an increased cost to the people now on demand billing. - (Interjection) - Really what the answer is that there is - (Interject ion) - MR. CHAIRMAN: Order please. HON. W. PARASIUK: I think I'm . MR. CHAIRMAN: Order please. Does the member want an answer or not? MR. J. DOWNEY: Yes, I do. MR. CHAIRMAN: Mr. Minis ter. HON. W.

PARASIUK: I think you would have mo re people who would then have to be on demand billing. 1t wouldn't increase the demand bills for the people already on demand billing but, say, if you took it down MR. J. DOWNEY: Mr. Chairman , I guess, again the answer is that it's not the plant costs or the carrying costs of an individua l or, it's the full system that has to be built, right from the water generating station back to the user that they' re picking up and if I understood him correctly, 80 percent of the charge comes from the system buildup. Is tha t correct? That's where the 80 percent charge comes from? MR. J.

ARNASON: The di stribution costs thems elves are a relatively small component. it's the generation and the transmission of bringing that power in from the generating plants to the distribution system that are the major costs. MR. J. DOWNEY: In other words, when Hydro take on a major project lik e they are planning and it appears 145 that any shortfall or major di fficulties of increased costs, it will be in fact carried by the general ratepayer of the Provi nce of Manitoba. it will have an im pact all the way across the board with the increased plant capacity for the development of Hydro. HON. W.

PARASIUK: Right now, I think Hydro was projecting internal load growth demand or Man itoba load growth demand to 2.8 percent. I think that's probably a low numb er because of the demand over the last two years and that demand is of two types. One type is a type that uses the power through the whole year and there's another type that comes along and basically adds to peak dema nd, and Hydro, in a responsi ble wa y, ha s to me et peak demand ol Manitobans. That is one of the dilemma s with a hydro generating station. You build it to meet your peak demand.

That's why people do look to thing s lik e seasonal div ersitie s and div ersity exchanges to try, in a sense, to provide for that peak demand withou1 necessarily building generation. MR. J. DOWNEY: The point is tha t when a plan1 capacity is increased, it reflects directly back on all indi vidua ls who are users of Manitoba Hydro. That's the point. All the costs of everything Hydro does is a direct reflection and the demand billing is because ol the increased plant capacity.

I guess I still agree with the statement that's in the letter that the people got that it's not really an operating cost as much as it is a carrying charge on the inv estment to generate the power. I guess if you want to put it in operating costs, fi ne. but it's a little bit of a mi sconception as far as I'm concerned and I'm sure as far as many of the users are concerned and it still doesn't say that they agree with it.

I kno w tha t there are still many recreational centres which are having a pretty tough time in operatin� because of the demand billing process, and I still would lik e to see another look taken at the recreati onal centres as to technolo gy or some other cost-saving measure that mi ght be put in place on building of these plants I kno w that the Energy Department have been doing some work using the heat from the cooling mo tors tc heat their wait ing rooms, to carry out that kind of activi ty.

I'm not so sure whether there's been as much activ e work done recently to encourage units that are alread} in place, recreation centres that are already in place. to cha nge over to that kind of a heating and cooling system work. I kno w that if a new plant were bein� built, I'm sure that the recomm endations would gc forward to look at that alternati ve use, but I say there must be some way in which some of the load could be taken off some of the current places that are nov. operating to assist them.

Maybe the Mini ster or the Hydro have a policy in which they are promoting thal kind of activit y, to take some of the costs off. HON. W. PARASIUK: Through the Energy Conservation Programs of the Department of Energy we'v e been work ing with, I think it's 10 recreation districts in the province where we've done demonstration projects with the recreation facility in those areas, and tried to bring the other people who are involv ed - and most of these

Thursday, 13 June, 1985 people are volunteers who sit on the boards of the various ska ting rinks or curling rinks or what have you - and have them see, by demo nstration, what can be done in the way of energy conservation to use less power and get a bigger bang for your energy buck. That process is under way. I don't think it's been comple ted yet to get all the results. We've tried a numb er of thin gs.

I think the Mem ber for Lakeside is aware of what was done, in terms of a compe tition, between Sto newall and Pina wa where you try and get people inv olved in looking at ways of gett ing a better bang for their energy buck. Certainly what we' re finding is tha t it's often the type of public institutions, churches, for exam ple. Churches were built in an era of cheap energy and they' re massive. They're not necessarily used full-time and that probably is your big gest single operating expense.

Your energy costs are the bigge st single operating expense of a church, possibly outweighing even the cost of the Min ister. MR. J. DOWNEY: Maybe you could promote increased use of it. HON. W. PARASIUK: I try to, yes. MR. CH AIRMAN: Or increase collection plate. HON . W. PARASI UK: In crease col lect ion pla te. Unf ortuna tely, wha t's happened is probably the increased collection plate has driven away some of the usage. We've been work ing with hospitals, schools and recreational facil it ies and we don't have a federal­ provincia l program anymore.

We're trying to evaluate - and maybe we 'll get into this in my Est ima tes - the results of the various pilot projects we've undertaken to determine whether in fact there shouldn't be long­ term programs in place to ensure that you do get a bigger bang for your energy buck and we may not get federal-provincia l agreements on it.

We're talking to the Federal Government about seeing what we migh t do in the long run, but I'm certainly of the belief that as we eva luate the particular pilots tha t we'v e undertaken over the last few years and I think a few of them extended more than th ree years back, that we should then determine whether there are not some things tha t should be undertaken by the Provincial Government; some things tha t might be undertaken by Manitoba Hydro; some things that might be undertaken on a federal-provincial basis, because I can appreciate the di fficulti es tha t recreational faciliti es, schools, churches and places of that nature, com mun ity halls, have run into.

MR. CH AIRMAN: Are we ready to approve? The Mem ber for Roblin- Russell. MR. W. McKENZIE: Thank you, Mr. Chairman. I'd lik e to ask a few questions of Hydro regarding the installation of power in the Blue Lakes area of the Duck Mountain Provincial Park which is a longstanding problem. The Minister's had petitions; I' ve had petitions of a hundred or more people that are long awaiting the installation of hydro services in there.

At this time, 146 Mani toba ha s surplus power and the recreat iona l demands on our socie ty are escalating and for the life of me, I can't figure out why we can't mo ve the installation of hydro services in there. A lot of the people in the area would live there the year round if the installation was forthcoming. I'd just lik e to ask , what plans has Hydro got or is it in this decade or, if at all, are they ever going to be able to make use of the utility in that area? MR. J. ARNASON: Mr. Chairman, we' re prepared to build into that area as soon as we get a capital contribution of some $234,000.00. MR. W.

McKENZIE: Can I ask Mr. Arna son, what are the priorities? Is it because the Blue Lakes area is seasonal? Are there not sufficient customers? Is it the cottage owners in there who are going to have to raise the $234,000 or is it Mr. Collier who is operating the tou rist cam p, ha s he got to come up with the $234,000.00? I don't think there's that kind of income in there. Yet, there are many other tourists camps and lakes around the provi nce that enjoy hydro facilities. MR. J. ARNASON: The correct numb er is 243, just to keep the record straight; I had a couple of digi ts swung around there.

But it's a matter of the contribution that is required because of the extensive construction in tha t area and according to our service extension policy, the revenues simply do not warrant the extension, unless a major contribution is made. That contribution is based on our standard policy of contribution relative to the numbers of customers and the distances involved. MR. W. McKENZIE: I was wondering if Mr. Arnason could gi ve me a breakdown. What's the $234,000 or $243,000, what does that cover, the installation of the line or transformers. it's strictly equi pment and labour? MR. J.

ARNASON: I would have to refer that to Mr. Lam bert to see if he's got a breakdown on that figure. lt would generally cover the cost of building the line. I assume that there would be a fair amount of clearing as well. As I recall that's a pretty heavily -wooded area. I can't remember the distances involv ed, but maybe Mr. Lam bert can elaborate on that a bit. MR. R. LAMBERT: Yes, the last estima te that we did on this was back in 1981 and what Mr. Arna son gave you was just an escalation of the 19 81 price to the 19 85. The mone y that Mr.

Arnason has referred to really only covers the cost of the extension of the line into the area. lt does not include the distribution around through the subdivisions, etc., that would be required in addition to that. MR. W. McKENZIE: Will Hydro go in there and knock on doors and see if they can raise the $234,000, or what trig gers that installation? Because there's all kinds of sum mer resorts in the province that are enjoyi ng hydro services. How do they do it? MR. R.

LAMBER T: In situations similar to th is, we have tried to get the people together in order to come to grips with how we would ge t the total contribution. Our

Thur sd ay, 13 Jun e, 1985 expe rienc e has been tha t it's fairly dif ficult to get all of the int erested parties toget her and to get them to agree amongst themselves to pay a propor tiona te sh are of the total co ntribution, based on how much the y expect to use, etc. But we ha ve done th ose kinds of thin gs in other areas, yes. MR. W.

M c KENZIE : I wonder then, am I the ML A, am I the one tha t's sup posed to go in th ere and organ ize it, or is Hydro prepared to go in and take a trial run and see or ins truct Collier to , or can we assess a levy on the cottage owners in there to rais e the mone y, because the y all want the service. lt's jus t a matter of somebody or some group tak ing the ini t iativ e and see if we can 't provide the service. MR. R.

LAMBERT: Man itoba Hydro will assist in tha t process, however someone has to take the lead in tryi ng to pull it altoge ther so tha t everyone can divide up the amount of co ntribution and everyone make a fai r portion of the contri bution to get the total . We have no auth orit y to levy any thing. I think wha t we need is an agre ement amongst the group tha t the y will all pay their fai r sh are, so tha t we can get the total contribution tha t's req uir ed to extend the service. HON. W.

PARASIUK: I'd jus t lik e to comment, on wha t some ti mes ends up bei ng a small "p" pol itical ma tters that come up in this respe ct. People conta ct me saying that the y'd like to be hoo ked up to hydro. When I look into it, I find tha t in some instanc es ther e's a cottage development tha t didn't real ly start off as a cottage devel opment.

A few peo ple wanted to "get away from it all" and not have power, not ha ve th ese things, and th ey build some cottages out somewhere where it's rustic, where the y' re using coal oil lamps and th ey like tha t; and then th ey sell the cottage to someone else or the y get a bit older or circums tan ces change, and the se people come along then, want ing to have the power, but the y'r e some di stance away from a po wer lin e. They wanted to do tha t in the fi rst pla ce. They might ha ve got the lot very cheaply to do tha t in the fi rst pla ce, and then you run into that type of dif ficul ty.

I' ve always said to them tha t it's im portant for them to make up their mind. Hydr o will determ ine what their costs are, will ind icate wha t the y are. Th ese are fair costs, becaus e the y' re att ri bu ted to everyo ne across the provinc e in the same way, it's the same formula, but that Hydro can't be the proponent; other wise you get one or two local peo ple sayi ng, look, Hy dro's trying to dr ive this do wn my thr oat. I'm going to ha ve to do another $4,000 or $5,000.00.

I think that's up to the group together to make up their mind whether th ey, as a group, want to do it. lt's jus t like trying to put a water li ne in some where. You'll get a few people who want the waterl ine, a few peo ple who don't want the wat erline; or if you 'r e tr yi ng to put a sewer line in some pla ce, some peo ple ha ve septic fields. The y say I want to stay with my sept ic fiel ds, and yet you 'll get some people with septic fields who don't want the unc ertainty of it, don't want to put bales on in the wi nter time and they'd lik e to be hooked up and are willing to pay for tha t.

Usually what happens is that you have some local pro cess of tr ying to sort 147 tha t out. I think Hydr o can be a facil ita tor, provi de tl in forma tion, but not in fact become the proponent. MR. W. McK ENZIE: I thank the Min ister for tl comments. I'm qu ite fa mil iar with the people tha t hE tal king about who lik e to ro ugh it. There's lots of roo in the Duck Mo untain Pr ovi ncial Park for them to rou! it and a lo t of them do; but the se pe ople a concent rated in an area like a villa ge.

Ther e's qui te large concen trat ion of people in ther e who ha· ind icated , by petition, tha t the y are in terested anc suspect tha t if we pu rsue it, when the y put tht signatur es on a petition, the y li kely cou ld contri bu or wou ld contribute to the funds necessary to. So i1 jus t a ma tter of them finding a vehicl e to pur sue it ar see if th ey will react the same way as th ey did in tl petition.

The same rule then appl ies to Lake of the Prairie I have had two requests this week for hydro ins tallation Ther e's a cottage development area that's going there and they' re pr ep ared to go in and build cottage but there's no hydro services. HON. W. PARASIUK: I'll ask Mr . Lam bert to deal wi the Lake of the Prairies, however I jus t wanted to ac one final point with respect to the cottagers. I wou think tha t if they' re living in tha t type of pro ximit y one anoth er, the y mus t ha ve some thing approa chir a cottage assoc ia tion . MR. W. McKENZIE: I suspect th ey have that. HON. W.

PARASIUK: And if the y do, I think the cotta� assoc iation wou ld be the best vehicle. Tha t's the or tha t I'v e usually come in conta ct with in the past, whE ther e's been other gr oups tha t have been approa chir us. Mr. Lam bert do you have a point on Lake of tt Prairies? MR. R. LAMBERT: No, we don't. MR. W. McKENZIE: I have one more ques tion, IV Chairman .

This reg ards a farm north of Ros sburn tha t beside a mun icipal road and there's another farml off about half a mile to the east , and the hyd ro lir tha t serves this other farmer that's about half a mi east of this par ticular road , the hydro line go es rigl across his farmyard prope rty.

I ha ve been tryi ng, for the last th ree or four year to see if th ere isn't some way to solv e this problen because this farmer has this lin e going to his neigh boL When he mo ves his gr ain lo aders, he mo ves h com bi nes, everything tha t he do es around his fa rm, t has to be extremely carefu l because of this feederlir that's running across his proper ty. Is th ere any way pos sibl e tha t tha t could be move up one or two pole lengths, and it wou ld then be cle1 of this gentleman 's farmyard , or is tha t totally at h cos t and expense? MR. R.

LAMBERT: We will mo ve the line, but it w be at the customer's expense. MR. W. McKENZIE: Ho w could you jus tif y tha t whe Hydro put the line ther e in the fi rst pla ce?

Thursday, 13 June, 1985 MR. R. LAMBERT: Presumab ly, when we put the line there we had the right to put the line there. I might just add tha t we get many many requests, hundreds of requests every year to relocate our facilities, under circums tances simila r to the one that you described. Our difficulty is the cost to respond to all of those requests, if we don't have some kind of a mech anism to deter frivolous requests. So our policy is that we wi ll accommoda te the customer, but we feel that it's reasonable and equitable to charge for that service. MR. W. McKENZIE: Thank you, Mr. Chairman. MR.

CHAIRMAN: The Memb er for Lake side. MR. H. ENNS: Thank you, Mr. Chairman. MR. D. GOUR LAY: Mr. Chai rman, if I might intervene. MR. CHAIRMAN: The Mem ber for Swan Riv er. MR. D. GOURLAY: I had a question related to the Blue Lake situation. I'd like to thank my colleague, the Mem ber for Roblin- Russell, who has been looking after that area for many years. I think after the redistribution last ti me, tha t area comes under my constituenc y, but I appreciate the effort that Mr. McKenzie has done in that area. My question is with respect to gett ing power into that area.

Has the Parks Branch contacted Hydro in other areas to maybe partici pate in the cost, or Natural Resou rces who have offices and have di rect concerns in the area? I'm wondering if Hyd ro can recall having ha d particip ation from those other departments, or perhaps even through Destination Manitoba with respect to getting in the Hydro service to various resort areas. Perhaps we could approach th ose departments for some help as well to try and get the Hydro service into say the Blue Lakes area. HON. W. PARASIUK: I think that depends on the particular policies of the departments and what they do.

I don't think Hydro is the one that again - (I nterjection) - MR. D. GOUR LAY: I'm just wondering if Hydro had been approached in the past under simi lar situa tions in other parts of the province. MR. R. LAMBERT: We have reasonably regular contact with Na tural Resources for development such as this and generally they have assisted in the past in faci litating organizing the groups so that we can deal with this question of capital contribution.

I am not sure, but I am not aware, that those people have ever helped by way of contri bution or by way of financi ng, I'm not absol utely sure about that but I'm not aware tha t they have in the past. MR. D. GOURLAY: Mr. Chairman, I'm wondering about the Wellman-Giad Lake area where the Hydro was put in there at considerable cost , I would expect, a few years ago and although they're more cottage owners in that area perhaps the cost was distribu ted over a 148 larger base. I'm not sure. I'm ju st wondering if Mr. Lam bert can recall the situation in that area. MR. R.

LAMBERT: I'm famil iar with the area but I am not fam iliar with the detai ls pertaining to the extension of service into that area. MR. H. ENNS: Mr. Chairman, I just want to indic ate to the Minis ter and to Manitoba Hydro staff that I'v e been under some pressure as Opposition House Leader to provide upon occasion just what's going on right now. I appreciate that in the last numb er of sittings of this Commit tee going back even a year or two, the predomi nant issue of new development, surplus sales has monopol ized the time of this Comm ittee.

I want to take this occa sion to put on the record tha t particularly th ose of us that represent and ourselves that are living in rural areas of Manitoba, Manitoba Hydro and the service it provides happens to be one of extreme im portance and, indeed, is an essential one. While we have registered our concerns in very strong manner in terms of policy directions that we see are ill-founded that should not cloud the issue tha t mo st rural Manitobans do acknowledge, do appreci ate the service that is bei ng provi ded.

I'd say rural Manitoba's is perhaps not in exclusion of urban people but in rural Manitoba, the service that Manitoba Hydro provides is just that much more critical; any storm, any disruption of service brings home that point very quickly to us, th ose of us that are involved in the kind of operation that modern agriculture now call upon, the intensive livestock operations, even a short disruption and it becomes a critical matter of great concern and cost to the user.

The opportunity for my members, particul arly, to express perhaps more mundane concerns tha t we are, I want to assure Manitoba Hydro there are nonetheless as real and perhaps to some extent had been neglected or pushed aside. I'm taking advantage of this particular sitting to allow different mem bers of my group, at least, and of course, the mem bers opposit e to put these concerns that they have heard from their constituents directly to the officials of Manitoba Hydro.

I must say that over my 18 -19 years as a rural MLA that if my representation to me of dissatis faction with Manitoba Hydro were measu red to the normal complaints that I get from different sources whether it's the conditions of the roads this gov ernment is letting deteriorate or the other services that are bei ng provided by gove rnment, my life would be very easy. Wha t I'm trying to say is I don't get many complaints about Manitoba Hydro.

The complaint that I have received surprisingly in the last few years, and I would ask whether or not there has been a policy change - I understand the re may have been - is from new connections. Was there a sign ificant change in Manitoba Hydro policy dating back perhaps a year ago or even two years ago? Wha t I'm finding out is that indi viduals who plan to go through the pr ocess of getting the necessary, in some cases, planning approval in rural Manitoba for a new home and then find thems .elves with what they consi der to be extraordinary costs of the connection. I hadn't experienced this in prior years.

There was a kind of a rule that mo st rural persons understood that called for a particu lar charge for the

Thursday, 13 June, 1985 installation of the numb er of poles that were required to bring tha t service in and tha t seemed to work very well. it's in the last few years that I have had a numb er of complaints. I cite a particular situation where in the small com mu nity of my home town of Wood lands wi thin the subd ivi sion, a person built the home - this is wi thin the unincorporated Village of Woodlands. We don't have a large centre there but what I'm tryi ng to say it's not in the middle of a

section some where, but the person was called upon to put up front several thousands of dollars and was then told that if over the next five years some additional connections were made tha t a refund would be coming to him. I would like some explanation of what is the current practice in this regard? I say this fully cog nizant of the fact that Manitoba Hydro has to have some conditions attached to particula rly new service connections. I understand some of their service connections are pretty clear with respect to mobile homes calling for some permanency of the respective foundation.

I would lik e to ask as well what has Manitoba Hydro's experience been? The need for what I would have to describe for lack of information as approaching punitiv e for the up­ front charge perhaps can be justified to me if officials tell me that Mani toba Hydro loses X num ber of dollars on being called upon, responding to an applicant, going to the cost, putting in a service and then not being able to recover the installation costs because by the time it comes to sending the bill, the applicant has moved on or that there's nobo dy to take responsi bil ity for that.

Maybe that would be the first place to start the answer to the question. Does Manitoba Hydro experience a kind of an ongoing diffi culty in that specific area of responding to a new applicant and then not being in a position to recover their costs? Has that happened to any signi ficant degree that is of concern to Hydro? MR. J. ARNASON: We appreciate very much, Mr. Chairman, the general com ments that led into the specific question about the service in rural Manitoba. Ju st a comment on that before I try to answer your question.

Just to assure the mem bers of this Commit tee that despite the fact that we are movi ng into a heavy capital construction program, I am stressing and I have stressed for a long time that the service to our customer is our No. 1 priority and that will not be ... (inaud ibl e) ... ha ve made tha t change and it was a fairly substantial change because prior to tha t we had, for exam ple, a construction allowance to a new rural residence or small farm of one mil e, and that construction allowance has been dropped to three­ quarters of a mil e.

Then there's revenue- based allowances where the new policy deals with a capital allowance that's equivalent to th ree years estima ted revenue and to the degree that the cost of the service exceeds our three years of revenue, the customer would be required to pay that differential. So in our opinion, it's a matter of costs going up and a policy that had to be changed to more fully reflect the current day situation. So generally, Mr. Chairman, that was the situation which changed in 19 83. MR. H. ENNS: I thank Mr. Arnason for tho se answers.

I wonder if the president can , perhaps with the 149 avai labili ty of his staff, answer specifically what the net result of these changes would be. I appreciate they vary , but if there is such a thing as an average connection - or can we cite a hypothetical case of jus t what tha t means in dollars and cents to an average applicant? Is that at all possi ble to arrive at? Wha t was the case for the applicant in April 1, 19 82 as compa red to what the same applic ant would ha ve to pay subsequent to April 1, 19 83 with these changes in place? MR. J.

ARNASON: I'll deal with one aspect of it and then turn it over to Mr. Lam bert for a fuller response. In terms of one category, seasonal customers, prior to the new policy being im plemented, we had an $800 allowance for a seasonal customer and that is now at $600 and maybe Mr. Lam bert can elaborate on other components of this change in policy. MR. R.

LAMBERT: In the context of the rural residential where we're talking about extending a single-phase line and we reduced the exten sion allo wance or construction allowance from one mile to three-quarters of a mi le, right today, a mile of sing le-phase line to serve tha t kind of a customer is approxi mately $10, 000.00. So that reduction in the policy, which is a quarter of a mi le, would equate to about $2, 500.00. MR. H. ENNS: The other component of the change is the recovery, the net differential of your three year estima ted service costs. That , I would imagine would be . MR. R.

LAMBERT: The reference to the th ree year revenue recovery, that is for a different application. That wouldn't apply to a rural residential, where we gi ve the allowance by virtue of th ree-quarters of a mile of line. That allowance that you reference to a three year revenue return would apply to, say, a general service customer or some thing where it's based on revenue return. MR. H. ENNS: Without quarrelling with the need for these changes, what effort is being made by Manitoba Hydro to commun icate rather substantiv e changes to the new applicants?

I'll tell you the difficulty - the reliance and reputation of Manitoba Hydro is so high, by and large, in Manitoba, that that is very often the last concern that a builder of a new home or a new premis e has. He gets his permit if one's required from his muni ci pality. He gets the subdivisi on, if he requires it, from the planning districts that we now have in many parts of the province.

He builds his home and he has the home up and this has actually happened - and in these kinds of major decisions, often with the concrete basement in place, he makes his fi rst approach to Hydro and then he finds out that, gee, he's got an extra $4, 000 or $5, 000 up on capital to contend with which seems unreasonable to him. How can we overcome this particular problem? I was looking around for your Public Relations Officer who probably should be going on an exercise throughout rural Manitoba. HON. W. PARASIUK: Sinc e the person building would ha ve to get a building perm it, ma ybe that

Thu rsday, 13 Jun e, 1985 :om munication should be made to the people who issue he building permits so that people are made aware 1f that. I think that people should be made aware before hey ma ke their final decision, but that might be one vay. IIR. R. LAMBERT: I'll attempt to comment this way. Jecause of the comp lexity of the service extension 1olicies, we do not publish them, if you lik e.

Wha t we lo though is we try to encourage the customer that if hey' re considering building of any sort that they should :ome to Hydro at an early date so that we can explain he policy that would pertain to his particular application, >ut because of the comp lexity, we do not publish the 1olici es in a broad context. IIR. H. ENNS: I appreciate the difficu lty in how Hydro :an appropriately make this loan to the applicant.

I tlso accept the responsibili ty that the applicant hi mself/ terself should accept, just as they must in many other :ases, they have to enquire as to whether a certain ype of sewage system is permissable or what standards tave to be met in the construction of a new home. ·hat responsibilit y, I agree, rests with the applicant. I think Manitoba Hydro officials will agree with me hough that the changes are substantiv e or can be :ubstantiv e, depending on the person's situation.

If that >erson is totally unaware of it, he tends to view Manitoba iydro with a some what jaund iced eye, and particularly :o when he is building his home beside his brother or tis neighb our who had the same service installed 18 nonths ago at substantially less cost to them. I sim ply put that on the record, Mr. Chairman, to the Ainis ter, to Hydro offi cials, to indicate that in my udgment that is a problem area. I think it's a publi c elations problem area. I think mo st people tcknowledge the high er costs of regular construction, �tc., and that the se costs have to be recovered.

People lon't like to be surprised and someho w we ought to ind some way, whether it's through the issuance of a >uilding permit or whether some greater effort needs o be ma de to tho se who plan it. We have, and I suppose some of us have mo re of his than in other areas where our constituencies lend hemselv es to urban people moving out to small tcreages. They have not experienced any of these tookup charges in an urban setting, in the city, other han the normal connection costs, then find themselv es taving to pay even $1 ,000 or $1 ,300 or having to put 1p front mo ney is totally foreign to them. III R. J.

ARNASON: Yes, Mr. Chairman, we certainly tpprecia te the com ments that the mem ber has made md we agree with them. We' ll simp ly have to try to lo a better job through our busi ness departments to :om municate these kinds of policies to our customers >r potential custome rs and, certain ly, we don't want o gi ve them any financial surprises when the building 5 half way up. We take that constructiv e criticism under tdvisement and we'll try to do better in the future. IIR. CHAIRMAN: Are we ready to approve the report? The Mem ber for Gladstone. III RS. C. OLESON: Thank you, Mr.

Chairman. 150 I have a concern regarding the demand billing for the recreation centres. Earlier this spring, I ... MR. CHAIRMAN: Order please. This has been done to a series of questions before. I don't want to refer to the mem ber not bei ng here, but it has been dealt with. - (Interject ion) - Shall we repeat the questions over and over again? MR. H. ENNS: On a point of order, Mr. Chairman.

I appreciate that the subject matter has been raised specifically by my colleague, the Mem ber for Arthur, but this jus t goes back to what I said a little while ago, that doesn't preclude a particular MLA who has been written by a constituent to try to ask a specific question whether it deals with the same subject or not. MR. CHAIRMAN: If it is a specific client or a specific constituent, a specific case, other than a general broad question that we have already discussed, the mem ber may proceed. MRS. C. OLESON: Thank you, Mr. Chairman.

I had a letter from the Municipal ity of South Cypress who were in support of a resolution by another counci l, namely the one of course, if the Mem ber for Arthur referred to it then it may be a slight duplication but my concern is also for the people in my constitue ncy. The Munici pality of South Cypress wrote a letter to the Premier on the 26th of April suggesting that their support for the position taken by the Municipal ity of Oakland with regard to recreation centres and pointing out some of the problems with demand billing. Now, I'm sure that it's not peculiar to those two muncipalities, this problem.

I'm sure the Min ister is aware that these recreation centres are built at a great deal of expense to the local people and also through government grants. There is encouragement to build recreation centres and to ma ke use of them. There's a great deal of volunteer work and time and energy put into them and they are a valuable asset to the commun ities in which they're located. 11 doesn't seem to me to make a great deal of sense to charge them for Hydro, for instance, in an ice hoc key rink in Ju ly. This is what's happening. They' re bei ng charged as demand billing all year round.

When they're not using the Hydro, they really don't feel tha t they should be paying for it. They would be quite happy to pay for what they actually use but it is causing great financial burden to many of the recreation centres in the province and I'm wondering if the Minis ter has any thoughts of changing the policy on this. HON. W.

PARASIUK: I ask the mem ber to look at the Hansard of today's discussion because I think the Mem ber for Arthur raised the specific case of the Municipality of Oakland and it is not the intent to change the pol icy with respect to demand billing and what you are talking about is, I think, probably named peak demand billing because what you're doing is adding to the peak demand.

The ice hockey rink is a big, big user over a period of time and what we have to do is build a whole system to meet th ose peak demands and our peak demand occurs usually on a cold day and long night some time in Decemb er or January and Hydro

Thursday, 13 June, 1985 has to be able to guarantee power to all Manitob ans in that time. That's a cost. What we have said is tha t we' re trying to look at ways through energy conservation of people gett ing a better bang for their energy buck and I think that's the best way to try and deal with these types of things. We can't change the policy of demand billing which I think is a fair policy and is universal across the country. MRS. C.

OLESON: In reference to the Minister's remark about the energy conservation, I think many of these recreation districts have spent a great deal of mone y and time in tha t very thing and they are trying to be as ef ficient as possi ble. lt is causing a financial strain. Another thing I wanted to ask about. lt's been brought to my attention at least twice and I think oftener by constituents.

They phone com plaining about an extremely high Hydro bi ll and when the problem is traced back it is found that the previous renter or owner or occupant at least of tha t house or farm has left a bill unpaid through some reason or other and it is being charged to the new person. What is the pol icy on the changeover? Is there a slow changeover of name on those for the billing or what is the problem ? MR. R. LAMBERT: I'll attempt to answer the question. MR. CHAIRMAN: Will the mem ber allow Mr. Lam bert to an swer the question? Mr. Lam bert. MR. R.

LAMBERT: I'm not sure whether the question was pertaining to whet her or not we bil led the new customer for consumption of the old customer. If that was the nature of the question, then the ans wer is . . . MR. CHA IRMAN: Mr. Lam bert wants to answer the question. He must be hungry. MR. R. LAMBERT: If the question was related to whether or not we bill ed a new customer for consumption from the old customer, I think the answer is no, we don't do that.

I believe we do have some difficulty though with people moving out of a premises and not adv ising Hydro tha t they have moved out and also new people moving in and not telling us that they're a new resident until they get the fi rst bill and then they start making inqui ries and then we have diffic ulty establishing when the old person moved out and when the new moved in and what the relativ e consumption of the two tenants were. MRS. C. OLESON: Thank you, Mr. Chairman. Well is there is not an overlap that could be caught with the person when they register for Hydro?

There must be a location name or numb er that it could be picked up. The one case in particular was a social assistance case and they're faced with a bill for $600 for a grain dryer and the y don't even farm. lt got to the point of ridiculous. MR. R. LAMBERT: If they register as you refer to it or if they inform Hydro tha t they' re a new tenant, then there is no dif ficulty. The diffi culty is that, in some instances - nor does the old tenant advis e Hydro that 151 there's been a change of tenancy. That 's where tl difficulty arises. MRS. C. OLESON: Thank you. MR. D. ORCHARD: Mr.

Chairman, following up on son of the answers about the new policy on residential ar com mercial installations. Does that policy apply in t1 City of Wi nnipeg as well? MR. J. ARNASON: The same policy applies in the Ci of Wi nnipeg as well as rural Manitoba. MR. D.

ORCHARD: So that in installations I guel previ ous - I'm making an assumption here - previol to 19 83, any new subd ivision in the City of Wi nnipE would be served as a matter of course by Manitot Hydro at no cost to the developer, and hence no eo: to the end consumer, that was built into the lot pric, I ran into the same circumstance in an unincorporate village in my constituency where it was within the villa� limits tha t a house was going in and there was a fair siza ble capital contribution requir ed .

I think th particular one was around - if I'm not mis taken an my mem ory serves me correctly - $7,000 and it w� not tha t many poles. lt wasn't the th ree-quarters of mile we were talking about for a new farm site, tt we a matter of maybe a block and one-half or two bloc� within Roland. Now we resolved that . We got the capital contributio billed down quite substantially from the initial one. 81 I want to echo the com ments made by my colleagu - and I appreciate where Hydro's coming from.

They'r in a tight capital position and tight financial positior but these contributions do represent a fairly sizabl cost to any new consumer, and often end up, as the have, in the laps of the politicians to see whethe some thing can be done. Part of it is again becaus there's no general awareness of the change in polic: because people automatically made the assumptio before. I know we put another house in our yard back abol five years and there was no cost. lt was sim ply a reques a new customer, and part of the service that Hydr provided. I'd like to follow-up on two other areas if we hav time this morning.

Fi rst of all, I come from a

part c the country that's fast becoming notorious for their ic storms. We'v e had about three or four in the last coupl of years. This one last fall was unique, in that it wa below the escarp ment rather than ab ove th escarpment, and it wi ped out a whole new area tha formerly had been relativ ely immune from those kind of ice storms.

No w I think it would be reaso nable for anyone t< assume that probably underground installation woul< resolve some of that problem, but Hydro is faced witl an im media te problem, particularly if it's in the fall witl a fall ice storm , of havi ng to restore service and that' much easier to do with ab ove ground rather tha1 underground if you're in the middle of winter.

But ye1 I kno w that some of th ose lines southwest of where live have been, I think they' re on their third replacemen1 some of them, since I'v e been an MLA, which is onl• seven-and-one-half years. lt's been an unusual, mayb ; quite unusual series of weather patterns.

Thurs day, 13 Jun e, 1985 But is there a method of establishing, for at least eve ral mil es, a tempo rary hook up to get you over from he fall, or maybe more convenient ly, through a late .pring storm , with a temporary hookup, of say ab ove­ lround laid cable, to provide tempo rary service, so hat you can plow underground instead of going to the :apital costs.

Your problem , once you esta blish service, ·ou'v e got a brand new line in place. lt doesn't make 100d economic s to come along beside it tha t summ er tnd plow in un derground cable and tear down the line hat you'v e just put it that's brand new and theoretic ally :erviceable for 15 or 20 years. Is th ere a method - and it would not resolve the 1roblem but over a numb er of years it would probably 1elp to resolve the problem - of putting tempo rary in tnd then going to underground installation? III R. J. ARNASON: Mr. Chairman, I'll try to respond o tha t in a general way.

You're absol utely right when •ou mention that ice storms seem to be more prevalent ecently than they have in the past. Certainly, we had wo major ice storms in a period of 13 months, which :ost this utility $8 million. The last one, in April of 19 84, vas just over $5 million. We have internally establis hed a task force tha t was o review the total problem of how do we deal with hese major ice storms and improve the reliabil ity of >ur system in the areas affected? We have come up vith a number of recom mendations which we are m plementing over a period of five years.

There doesn't seem to be any one answer to the >roblem. lt seems to me it's a combi nation of many actors. We have attempted to do tha t in our program, 111 hich will cost the utility in five years, some $25 million. n other words, we' re prepared to spend $5 milli on a 1ear in these affected areas to reduce the duration of :he outage experienced last time around and also to ·educe the amount of repairs that are required from :hat kind of a storm , and the things tha t we are going :o do is, we' re going to beef up the main supply to the uea.

One of the problems we found in the last ice storm Nas tha t it was not only the distribution system, the ·ural lines, but our main system supply into the area Nas down; therefore that becomes a priority. We are :�lso planning on increasing the amount of underground :m our system . We are reviewing the design standards. As you 11embers from rural parts realize tha t we have over t>uilds, where we might have a 66 kV line with a secondary circuit underneath and maybe a sky wire, :�nd there are ti mes when the sky wire might break and �ome down into the secondary circuits.

So we are reviewing designs of the existing lines as wel l. Other factors that we are looking at is early detection systems. We have information com ing to us, weather reports thr ough comput ers th at will giv e us early in forma tion on weat her pa tt erns. lt's extremely tmportant that we get our crews out as early as possible to attempt to get the work in progress before the ice builds up too quick ly.

An example of that is, last time around, we had people just outside of Morden, at 2 o'clo ck in the morning last April - that's a year ago April - when the storm hit us, and by 5 o' clock in the morning our lines were 152 down. There was really no major problem at 2 o'clock, but th ree hours later our lines were down. The other thing we're doing, Mr. Chai rman, is we are im proving our facili ti es and our abil ity to melt ice on transmission lines. We're putting some dollars in the substations so we can isolate the system and the line, so that we can put shorts on and melt the ice off.

So th ose are some of th e things tha t we are undertaking and we believe that that will greatly improve the reliabili ty, reduce the outage time, and reduce the repair costs after the storm strikes. MR. D. ORCHARD: Mr. Chairman, like I'v e been talking to the local hydro fellows at home and I kno w that you'v e been dead shorting a numb er of lines along there to prevent that, so that you can melt ice and that sort of thing. I have to tell you that the Manitoba Hydro crews, they just put in gargantuan effort when those ice strorms hit.

I mean no one could fault any of the system employees for the kind of effort they put in to restore service. The public ima ge of Manitoba Hydro and its employees in rural Manitoba, you' re well served by the vast majority of your employees out there. They carry a good ima ge for the corporation. They work under really tough conditions and do their very best and their utmo st to restore that service. But that one was so ma ssive and so rapid that there was virtually nothing you could have done to resolve that particular problem.

Undergrounding does appear to be - at least on some of it - the answer, but I realize the quandary that the system is in, because on mile after mile of that rural distribution - I'm not talking mainline - you've got brand­ new lines in place now, that were put in place after the ice storm, and to then embark on what would be a fairly subs tantial capita l program to plough underground and tear those lines down would be viewed as probably not a wis e inv estment, but with the frequency of these storms, it may well be over the long run something the System has to conside r.

I'm pl eased to hear that they'v e got a numb er of areas of study under way. Mr. Chairman, another topic, if we have time to discuss it today. In a numb er of areas in North America now, indi viduals are generating their own electricity. I had the opportuni ty of seeing some of the wind farms down in Southern California in the recent past. lt's my understanding that through various policy changes and even some court tests, that a numb er of utilities in the Unit ed States have been required to, I guess it's called dual meter.

You'v e got an in and out meter, I don't understand the mechanics of it, but basically if I'm an indi vidual who's set up a wind generator, I can generate electricity for my own use and anything that's surplus can go into the system and at ti mes when there's no wind, and run the meter backwa rds basically to build me up a credit on my farm or my busi ness, and then if there's no wind any energy that I purchase from the system is ran off against that which I contribut ed on the windy days. There is wha t appears to be a very substantial move in certain parts of United States to tha t kind of electric ge neration.

We're not there yet, because we enjoy relativ ely low hydro rates in the provi nce, but with the rate in creases tha t are projected prior to the

Thu rsday, 13 June, 1985 comm issioning of Li mestone and no doubt the rate increases that are going to be required after Li mestone, people who are thinking ahead are already talking about the possi bil it y of generat ing their own sou rce of electricity. Has the Hydro System gi ven any consideration as to how they would handle such an approach by an indi vidual, who would have equipment that would deliver to the System the right type of power so that it is compa tible with the System and in surplus ti mes, are the y conside ring a reverse me ter - I'm sure you understand what I'm gett ing at?

Has there been any consideration to the es tablish ment of a policy to allow those options to indi vidual customers? MR. R. LAMBERT: We recently developed a policy in­ house to deal with that kind of a situa tion. The policy at the moment pertains prima rily to small users. We have th ree customers who have very small windmill s, and we have a policy tha t caters to their using that windmill in parallel or connected directly to our Hydro System.

The way it works, because it's very sma ll, is that we don't have a dual metering system, but rather what happens is that any power they generate with the wind, it just reduces the amount that they take from the utility, because their windmill is very smal l.

Our policy also cov ers the situation for a larger installation in that it says tha t if there was a customer that wanted to make tha t kind of a installation, we would look at it on an individual basis to see what we cou ld do, because it becomes considerably mor e com plex in terms of the mete ring and so on and so forth, and the type of rate that we might want to consider, you kno w, for purchase of that power. MR. M. ELIESEN: Mr. Chairman, I can further comment in an overvi ew. We don't envisage any kind of rapid development of tha t taking place in Manitoba. In fact, we see just the opposite taking place.

With a renewable resource in which we are project ing a real declining price for that resource comp ared to the systems in other parts of Canada, and even more so in the United States, we don't see that kind of development taking place. We see escalat ing incr eases , substa ntially escalating increases taking place in thermal generation, and of course nuclear, where there are no moratoriums, the regulatory and fuel increases prohibit sign ificantly generation com ing on stream, and when it does the costs are triple or quadruple tho se of the original estima tes.

Gi ven the fact tha t we are basically a Hydro System, the kind of prices that we see for the future in real terms will be a decrease from the present structure today, and of course at the present structure today, we do have the lowest rate structure in North America. So we can see a conti nuation of that trend with less opportunity or development for alternati ve generation, because of its prohibiti ve expense. MR. D. ORCHARD: Mr.

Chairman, following on, not the last answer, but the previous answer, the System then has an agreement for a very small windmill system, but nothing of the capacity where you don't have any agreement with any owner of a generating system, a 153 wind genera ting system for in stance, of sufficien capacity that it would be supplying surplus electricit to the System then, at this time? MR. M. ELIESEN: No. MR. D.

ORCHARD: Now, I'm going by memory here but it seems to me, I'm not sure whether this was il Southern Al berta, and maybe some of the officials o Manitoba Hydro - I thought it was in the last Farm Light and Power, but I believe someone in the Pinche Creek area, where the winds are pretty steady, prett: reliable, have a system with , I guess, tha t would bt Calgary Power whereby they do have this two-way mete system, where they develop a negative credit and an only bil led when the meter becomes posit ive and ther I don't kno w whet her they settle monthly or quarter!� or annually for any money owi ng by the utilit y to tht farm customer or vi ce-versa.

That's my understanding and I believe it's the system in Pi ncher Creek, that the� are using the System's rates, nothing different, so tha if a customer decided that he can, over a period o time, justify wh ateve r the capital expenditure is, at 2.• cents a kilo watt hour runoff rate, I guess, or 2.5, tha that's the customer's decision and the utili ty is no paying him less for electricity than wha t they chargt him for it. Is that the envisioned application of the policy shoulc you be approached by a somewhat larger generatins capacity windmill or simi lar installation? MR. R.

LAMBERT: We haven't crossed that bridge yet but what we wo uld have to do if we had a largE installation, we would have to look at the meterinc requirements to accom modate it, and we would alsc have to look at what kind of a rate would be reasonablE to accommoda te the situa tion. We have not crossec that bridge yet. MR. D. ORCHARD: I apprecia te you haven't crossec that bridge yet, but does the policy as structured wan to pay, or is the Hydro system's phi losophy on thi s typE of generation to pay the customer less than what thE runoff rate is, or to pay him an equivalent amount? MR. R.

LAMBERT: I'm not sure what we would comE up by way of a rate, but I think our phi losophy woulc be that if a customer wanted to do that, we wouldn' l take steps to discourage him from using his owr windmill or whatever source of power he wants to use MR. D. ORCHARD: Pardon me? MR. R. LAMBERT: We would not want to try tc discourage him. MR. D.

ORCHARD: I kno w that the rates are somewha1 hig her in the Southern California area than they are here, but to go down there and take a look at some of the desert flats and the sides of their so-called mountains down there, they' re glorified hi lls, to see them covered with windmi lls is just an unbelieva ble thing to see. No w I did not take the time to find someone who could provide answers to tell me whether those are owned by Edison or whome ver as a corporate

Thur sday, 13 Jun e, 1985 experience, or whether someone has put them in on a com mercial basis. There's no question tha t th ose windmill farms probably got a fairly substantial generating capacity down there - (Interjection) - yes, you'd ha ve to have a go vernor on them on Saturday. I foresee there will be ci rcumstances where part of a farmer's future capital invest ment is going to be a windmill despite the talk about, in real terms, the rates going down.

Farmers are kind of unique people, they'v e been used to declining values in real terms for the last ten years, only it hasn't been on what they buy, it's been on what they sell. You could ha ve hydro rates stay absolutely even over the next number of years and the re would be some who would want to cut costs, because their product prices have been declining in real values to them and they' re look ing at any kind of an installation. 154 Besides that, I believe that in terms of taxation system tha t there's tax considerations for those kinds of installations that can be very attractiv e to some farms.

I'm glad that there's a policy in pla ce and I'll look forward to further discussions on that, because it is some thing that I believe we 're going to see mo re requests of the system made. MR. CHAIRMAN: Are we ready to approve the report? MR. H. ENNS: No, commit tee rise. HON. W. PARASI UK: The Ho use Leader will be informing the House as to when the comm ittee will next sit. MR. CHAIRMAN: Comm ittee rise. COMMITTEE ROSE AT: 12 :32 p.m.