The Association of Major Power Consumers is a not-for-profit organization that advocates for competitive energy rates for industry in Ontario.
AMPCO President Adam White, recently was invited to appear before the Ontario Legislature’s Standing Committee on Justice Policy. Below is a transcript of Adam White’s appearance before the Committee on November 5, 2013.
ASSOCIATION OF MAJOR POWER CONSUMERS IN ONTARIO
The Chair (Mr. Shafiq Qaadri): Chers collègues, j’appelle à l’ordre cette séance du Comité permanent de la justice. Ladies and gentlemen, colleagues, I call the meeting to order. I invite our first presenter to please come forward, Mr. Adam White, president of the Association of Major Power Consumers in Ontario, who will be sworn in by our wholly able Clerk.
The Clerk of the Committee (Ms. Tamara Pomanski): Do you solemnly swear that the evidence you shall give to this committee touching the subject of the present inquiry shall be the truth, the whole truth and nothing but the truth, so help you God?
Mr. Adam White: I do.
The Chair (Mr. Shafiq Qaadri): Thank you, Mr. White. Your five minutes for opening remarks begin now.
Mr. Adam White: Thank you very much, Mr. Chair. It’s my pleasure to be here today and to accept the invitation of the committee.
By way of opening remarks, I thought I would just introduce the Association of Major Power Consumers in Ontario to you, briefly. We are a not-for-profit organization. We represent the interests of Ontario’s industrial power consumers. We have 43 members, which together represent about 10% of energy demand in the province and spend about $1.5 billion a year on electricity. We represent Ontario’s leading companies in mining, pulp and paper, iron and steel, petrochemicals, cement and automotive. We like to say that we’re not just major power consumers; we’re major investors, we’re major employers, and we play a major role in the communities in which we operate.
Those are my opening remarks.
The Chair (Mr. Shafiq Qaadri): Thank you. We’ll begin with the Conservative side for questions.
Mr. Bob Delaney: I think it may be me.
The Chair (Mr. Shafiq Qaadri): Thank you. To the government side, Mr. Delaney.
Mr. Bob Delaney: But you’re welcome to, if you want to.
Ms. Lisa MacLeod: We’ll have some questions.
Mr. Bob Delaney: All right. Mr. White, thanks very much for being here today. As I’m sure you’ve been briefed, part of the mandate of this committee is going to be to provide recommendations to the province on how we can improve siting for large-scale energy projects going forward, in the future. We’ve asked you here as a government witness because you’ve had a long career working in the energy sector and extensive experience with government and regulatory bodies on behalf of the largest power consumers in Ontario, both in your current role and in the past as president of the Ontario Energy Association.
Just before I start in with my questions, could you perhaps expand a little bit on your career in the energy sector?
Mr. Adam White: Well, I’ve actually been following the electricity file in Ontario since 1990. When I first graduated from university, I worked here in Toronto for the Energy Probe Research Foundation and we put forward some testimony at the Ontario Energy Board in response to a rate application of Ontario Hydro. That would have been the summer of 1990.
Since then, I’ve had a lot of different jobs. I’ve worked in government at the Ministry of Environment and Energy and the Ministry of Energy, Science and Technology. I’ve worked for TransAlta during the development of TransAlta’s investment in Sarnia, the Sarnia regional co-generation project. I worked briefly, in 2002, as a power marketer with an American company called Mirant. Then I was the vice-president of public affairs and external relations with the Ontario Energy Association for a number of years and had the opportunity to serve as the acting president of the OEA for a short time. And for the last eight years, I’ve been the president of the Association of Major Power Consumers in Ontario.
Mr. Bob Delaney: As the president of the Association of Major Power Consumers in Ontario, you work to promote the development of an electricity system that’s reliable and affordable. As such, you would have knowledge, I assume, of provincial energy issues in Ontario.
Mr. Adam White: We do try to follow what’s going on. We are a lean organization. Our mission is simple: It’s to do what we can to advocate for lower delivered energy costs for industry. We seek electricity costs that are competitive here so that we can attract investment and jobs into the province.
Mr. Bob Delaney: How does Ontario’s current energy system compare to what we had at, say, the turn of the millennium?
Mr. Adam White: Do you mean in 2000?
Mr. Bob Delaney: Yes.
Mr. Adam White: It has been said that the electricity grid in North America is the most complex system ever devised by man. It is a complex system. Ontario is interconnected with its neighbours, as you will all know, and Ontario has a diverse supply of generation and a very robust high-voltage transmission grid. There has been significant investment in the sector since 2000, as you say. There is a saying: May we be blessed to live in challenging times. There is no end of interesting things to explore in this sector.
Mr. Bob Delaney: If you’re a major power consumer in Ontario today, are we better off now than we were 10 years ago?
Mr. Adam White: I think that’s a subjective assessment and it depends on one’s priorities. Our concern is that the costs of electricity have risen over the last decade. If Ontario benchmarks high relative to jurisdictions with whom we compete and if our forecast is for escalation in electricity rates, that is of concern to major power consumers.
Mr. Bob Delaney: If the price is a function of the variables of supply and demand, in planning over the long term for electricity demand, are there benefits to having a surplus of supply?
Mr. Adam White: The rules around electricity system investment, the North American rules around reliability, require that all control areas—Ontario being a control area—are able to meet peak demand during the peak times, as well as provide a contingency or operating reserve amount. Because of its very nature, the fact that it is generated and consumed in real time and isn’t stored except for minor exceptions, it is intrinsic to the electricity sector to want to have some surplus of supply. The question really is how much. We have said recently that the most expensive generation is the generation that we do not need. Our concern is that there is an appropriate amount of contingency to have in the system, but beyond that, the costs really are and can be a burden to consumers.
Mr. Bob Delaney: You used a term that perhaps it would be helpful to define. You used the term “control areas” in North America. Could you just expand on the meaning of that term?
Mr. Adam White: I’m not a physicist or a power systems engineer, but the way that the electricity system is organized in North America is subject to regulation and there are overriding regulatory authorities in Canada and the United States. There is something called the North American Electric Reliability Corp., which sets standards for the reliable operation of the interconnected grid.
In Ontario, we have a system operator here that operates the grid within Ontario and directs the operations of the grid in Ontario, and the IESO interacts with other system operators. So “control area” is a term that refers to—for example, there is a system operator in New York that operates the New York power system, and New York would therefore qualify as a control area, and Ontario would be a control area and so on.
Mr. Bob Delaney: Okay. So when you use the term, you use the term mainly to apply to control on a regional level.
Mr. Adam White: That’s right.
Mr. Bob Delaney: You talked earlier about an electricity supply. Accepting what you said, that electricity is both generated and consumed in real time—in other words, the electrons are consumed in the same instant that they’re generated—and allowing for fluctuations in demand at peak times and the fact that generating plants are either offline because of an event or offline for plant maintenance, have you any thoughts about, system-wide, what level of slack is needed in the system to provide the optimum in reliability?
Mr. Adam White: There’s a lot in that question. First, it really relates to what is the optimal level of reliability. Not all customers require the same level of reliability. At home, for example, we can easily tolerate having some power outages in a year. The only inconvenience is to reset the clock on the microwave. But in some industries, especially those where electricity is part of critical environmental health and safety systems, such as underground mining, power outages really are much more risky. So the question, really, is what level of reliability for which customers and how that best is provided.
Most of the outages, actually, are related to issues that occur on the grid, not issues that relate to generation, so planning for reliability on the generation side, typically, is to provide enough generation capacity to reliably meet peak demand plus operating reserve, and providing for the single largest contingency on the grid, which would be the loss of a large generating unit.
Mr. Bob Delaney: You might be aware that the Ministry of Energy was recently consulting with Ontarians to discuss the future of our long-term energy plan. The last time I checked, the ministry had received more than 2,000 responses. Did you participate in any of the consultations?
Mr. Adam White: Yes. We consult with government on an ongoing basis. We have been, over the last number of months, looking into issues around long-term energy planning in Ontario and consulting with our members, as well as with people in government, about what our analysis finds with respect to long-term energy planning in Ontario.
Mr. Bob Delaney: What type of input or feedback have you offered to the Ministry of Energy in terms of the makeup of our energy supply?
Mr. Adam White: As I said, the challenging issue for the association is to make sure that we’re accurately reflecting the views of our members. We typically do not meet over the summer months. We did meet in September, we did meet in late October, and we are planning to meet again in November. We’ve shared our analysis with our members, and we are in the final strokes, I hope, of preparing the brief for our membership.
Our submissions to government really are focused on policies that will allow industrial customers to achieve competitive rates so that we can attract investment and jobs. There are two ways to reduce cost of power to customers: One is to reduce the cost of the system overall, and the other is to put policies in place that allow customers to reduce their own costs by more efficient demand management. We advocate along those lines.
Mr. Bob Delaney: What recommendations do you have with regard to diversity in the supply mix and its impact on the system?
Mr. Adam White: We haven’t made any specific recommendations about diversity of supply mix. I think it’s common sense that diversity in a portfolio is a way to mitigate risk. I like to think that we take a practical approach. The generation supply mix is what it is. The generation supply mix we have is the legacy of decisions that have been made in the past. We want to be sure, of course, that the system can operate effectively, and we are assured that the system can operate effectively. I don’t think there’s any magic to how much of the supply side should be met by any one generation source. The question is, with the sources we have together, can they be managed in a way which is effective to meet the overall purposes of the system, and we believe that they are.
Mr. Bob Delaney: Have you followed the levels of investment in power generation and transmission in Ontario’s electricity system over, say, the last decade?
Mr. Adam White: Yes, we have.
Mr. Bob Delaney: What do you think of the level of investment by the province in electricity generation and transmission during that time?
Mr. Adam White: Well, the province has made significant investments in generation: for natural gas plants to support the phase-out of generation using coal, to refurbish nuclear reactors, and to increase the amount of renewable energy in Ontario. All of those investments have been significant, and there have been significant investments as well on the transmission system and by distributors on distribution systems as well.
Mr. Bob Delaney: One of the things being considered by this committee in particular is the cancellation of the two gas-fired peak power generation plants in Mississauga and Oakville. Were you aware of those two cancellations?
Mr. Adam White: Yes.
Mr. Bob Delaney: Okay. Have you followed the work of this committee at all?
Mr. Adam White: Not very closely, I must say. I do read the newspapers in the morning, and so that’s been my primary source of information.
Mr. Bob Delaney: Are you at all familiar with the siting process that’s used by the Ontario Power Authority?
Mr. Adam White: I would say perhaps superficially. I do have personal experience working for a large generation company involved in siting and permitting a facility, as I said, in Sarnia, so I do have some knowledge of the process from that perspective. We haven’t followed very closely the work that the OPA does in terms of planning for and siting new generation. Our concerns are those of our existing industrial customers and the cost of power delivered to them.
Mr. Bob Delaney: Have you seen any indicators from the province that suggest that the agencies responsible are looking to improve the siting of generation infrastructure?
Mr. Adam White: Well, we have said that we support the government’s recent efforts to move in the direction of more regional planning, with more local involvement. We support that. It is a complex system and it operates on multiple levels. There is the high-voltage grid which serves the province overall, and then there are local areas served by local distribution companies and transmission assets and generation. We think that it is appropriate that these local needs be considered on a local and regional basis.
Mr. Bob Delaney: Have you had an opportunity to provide your input through any or all of the Ontario Power Authority, the Independent Electricity System Operator or the Ministry of Energy?
Mr. Adam White: Yes. I mean, my job, really, is to represent our members’ interests with the government and public sector agencies, so that is where I spend a lot of my time.
Mr. Bob Delaney: Anything you want to expand on in that?
Mr. Adam White: Well, I am a member of the IESO stakeholder advisory committee, which meets a number of times every year to advise the board of directors and senior management of the IESO on the development of market rules and the evolution of the market. I’m a member of the Ontario Power Authority’s advisory committee on conservation. The work of that body is to advise the OPA board and senior management on policies to promote conservation and more efficient demand management.
Mr. Bob Delaney: Have you been involved in any information sessions or other things that might be helpful for this committee?
Mr. Adam White: Over the summer, the Ministry of Energy sponsored a number of stakeholder sessions and public meetings. I did attend one of the public meetings in Toronto.
Mr. Bob Delaney: What role do you think public consultations could play in the siting of energy infrastructure?
Mr. Adam White: My personal view is that it’s essential, and I think the matters that are before the committee help to support that point. We live in a society in which people expect to be involved in decisions which affect their lives and their communities. That expectation is basic and I think it’s powerful. The perils of improper or inadequate consultation, I think, are obvious to most proponents.
Mr. Bob Delaney: How could the various parties involved in public consultations—the regulators, industry, major consumers and the general public—maximize the process of public consultations and the siting of energy projects?
Mr. Adam White: I’m not an expert on planning and siting. Most of my views on this are from personal experience or instinct. My personal view is, given that Canadians and Ontarians expect to be consulted, they expect to be involved, they expect their views to be considered, that, as a proponent or as an agency considering an investment in infrastructure, there really is no alternative to early and often consultations with local communities. I don’t think there is a single right way to do it. I don’t think there is a formula to maximize it, as you put it. It will depend on the community. You know, we have willing host communities and unwilling host communities. People’s views on issues can change. It has to do with how comfortable they feel with what’s being proposed and how they feel it will affect their lives and their communities. I think it’s important to recognize that expectation and to work with people in local communities to make sure that their issues are heard and addressed.
Mr. Bob Delaney: How best could industry and the various agencies of government most effectively engage municipalities on siting decisions?
Mr. Adam White: Well, I’ve talked a little bit with folks at the Ministry of Energy about this. I think, as I said, we support the government’s recent efforts to promote more local involvement in siting decisions. I think that there are opportunities as well to improve local accountability for decision-making. I think it’s important that municipal planning processes take into account the need for electricity infrastructure to support those plans. I understand that the government’s efforts are moving in that direction.
The Chair (Mr. Shafiq Qaadri): One minute.
Mr. Bob Delaney: Okay. Anything else you want to expand on in that last answer? Talk about your understanding of what the government is doing to move in that direction.
Mr. Adam White: I don’t have specific knowledge of the details of the government’s plan. I understand that the OPA and the IESO worked together over the summer to prepare a number of recommendations and that those have been accepted by the government. As I said, I don’t have detailed knowledge of that, but I think that it’s important and it’s movement in the right direction to encourage more local involvement.
Beyond involvement, I think it’s important that local people feel that they are empowered in these consultations, that they are not simply being told what is happening but have an opportunity to affect the outcome. That is certainly our calculus on advocacy. We generally choose not to advocate on issues where we think we’ll have no ability to influence the outcome, and I think the same is true of local people. It’s important that there be clear processes and expectations of people involved in these processes, and that their concerns will be addressed—
The Chair (Mr. Shafiq Qaadri): Thank you, Mr. Delaney.
I’ll pass it to the PC side. Mr. Yakabuski, the floor is yours.
Mr. John Yakabuski: Thank you very much, Chair. Adam, thank you very much for joining us this morning. It’s always good to see you. I appreciate the work that you do in this industry and your association and the contributions they make.
I’m just going to pick up a little bit where Mr. Delaney left off. I’m not going to put words in your mouth, but I am going to make a little bit of a statement. If the government was to actually do what they say they’re doing with communities with regard to consulting them and allowing for more input with regard to the placement of energy projects, then it would be a positive development, but unfortunately, that doesn’t appear to be the case. If you talk to communities that are under siege by plans for the government to erect massive wind farms, you will get a different answer from those communities. We have at least 74 in the province today that have passed resolutions defining themselves as unwilling hosts.
When you look at the numbers, they’re still planning at least 5,000 more megawatts of wind. I think a reasonable question is, where are the willing hosts left to accept these kinds of developments into their communities?
One of the biggest concerns, I know in my time as energy critic—and we had many, many conversations over those years. The concern for your people, the number one concern, is the cost. They’re major power consumers. Power, electricity, is a significant portion of their operating overhead.
Just for the purpose of understanding here, Adam, where does your association membership come into play? Who qualifies to be a member of AMPCO?
Mr. Adam White: Our eligibility requirements are set out in the by-laws of the corporation. Membership is—
Mr. John Yakabuski: Is there a power usage threshold? That’s the one I’m getting at.
Mr. Adam White: Yes. Membership is open to companies that are engaged in industrial activity in Ontario with an average monthly demand over one megawatt.
Mr. John Yakabuski: An average monthly demand over one megawatt?
Mr. Adam White: That’s right.
Mr. John Yakabuski: To simplify that, most people involved in heavy industry, even medium industry—forestry, mining, manufacturing—those would be where your membership would come from.
Mr. Adam White: That’s right.
Mr. John Yakabuski: Some of those—for example, in forestry, probably 30% of the cost of doing business would be electricity. Would that be somewhere around the number?
Mr. Adam White: I don’t have the detailed knowledge of what the composition is. I know my members—it depends on the industry and it depends on the industrial process. I know in pulp and paper and ground wood operations it’s a significant cost. I know that in iron and steel, electricity is a significant cost as well. It depends on what industry and what process.
Mr. John Yakabuski: Right. What is the view of your membership, with respect to the effect on the cost of electricity, of the government’s Green Energy Act and the—
Mr. Bob Delaney: Chair, on a point of order.
The Chair (Mr. Shafiq Qaadri): Mr. Delaney, a point of order.
Mr. Bob Delaney: I am looking very carefully at the mandate of the committee and the Green Energy Act isn’t in it.
Mr. John Yakabuski: Chair—
The Chair (Mr. Shafiq Qaadri): Thank you, Mr. Delaney. The point is well taken. I would invite you to confine your remarks to the mandate, although I do appreciate that it is a generalized energy question.
Mr. John Yakabuski: It is a generalized energy question, Chair, and we gave the government side an awful lot of latitude, which we could have been injecting with points of order on almost every question that Mr. Delaney did about the history of Ontario and some of the silliness of the Liberal policies. We tried to be respectful. If they choose not to, that’s fine, but we’re going to continue with the questions that we have to ask Mr. White. If Mr. Delaney wants to act like a child and inject points of order, I welcome him to do so.
Mr. Bob Delaney: Chair, you may not impute motive on behalf of a member any more here than in—
The Chair (Mr. Shafiq Qaadri): Thank you. I’d invite us all to observe parliamentary decorum.
The floor is yours, Mr. Yakabuski.
Mr. John Yakabuski: Thank you very much, Mr. Chair.
If I could ask you again: the view of the members of your association, particularly those people to whom the cost of power is of paramount concern to them being able to remain in business. What are their views on the cost of energy as driven up by the policies in the Green Energy Act?
Mr. Bob Delaney: Chair, on another point of order: The Green Energy Act is not being considered in this committee.
The Chair (Mr. Shafiq Qaadri): Thank you, Mr. Delaney. Mr. Yakabuski, thank you, and please continue. And I once again invite you to confine your remarks to the mandate of the committee.
Mr. John Yakabuski: The energy policies of the government that have driven up the price of power, which Mr. Delaney talked about quite a bit—you talked about the price of power in one of your responses to one of his questions, saying that one thing is certain: the price of power is way up. How do the members of your association view the policy decisions of this government? The relocation of, for example, the Oakville plant is one of those policy decisions, one that has added $513 million by itself. The cost of moving the plant to Napanee is a $513-million touch because of the gas transportation costs, the energy transportation costs returning etc. It’s a $513-million bill. What is the view of your membership with respect to those kinds of government policies, including the generation decisions of this government and how they affect their ability to manage their businesses?
Mr. Adam White: Well, as I said, I wouldn’t say that electricity costs are my members’ first priority, but it is the association’s first priority. I haven’t canvassed my members specifically on their views or opinions related to policies of the government of Ontario. We take an agnostic view to generation technology and fuel type. There is a wide range of generation technologies and fuel types that could be used, hypothetically, in Ontario to meet demand. Ontario isn’t blessed with the natural endowment of other provinces, such as Manitoba, Quebec or British Columbia. We just don’t have the topography and hydrogeology to support the kinds of electricity system outcomes that they are able to. We are in a situation of making difficult choices.
I do advise my membership that there are positive attributes of renewable energy. With wind power, for example, the fuel is free. The marginal cost of energy, once the generation is in place, is virtually zero, and we like that cost. The question is how the fixed costs are to be allocated.
We understand as well that this is a complex system and the decisions around it are complex. Electricity supply decisions are made for a variety of reasons, including social and environmental reasons, and we accept that. These are choices that Ontarians can make. I think that there are political decisions and there are policy decisions in some cases, and this might be the case with the cancelled gas plants. There are also the decisions of local communities.
Mr. John Yakabuski: Well, they weren’t the decisions of local communities. I think they may have had the opposition of local communities, but the decisions to cancel them were the government’s, and the government’s alone. They have the power and the authority to make such decisions. But that is a $1.1-billion bill, if you look at Oakville and Mississauga in total. That will be passed on to your members, correct?
Mr. Adam White: Well, there’s only one customer at the end of the day.
Mr. John Yakabuski: That’s right.
Mr. Adam White: Yes.
Mr. John Yakabuski: So are you suggesting they’re agnostic about that bill or they have no opinion on that bill, or do they have an opinion on that bill that they’re going to receive as a result of this?
Mr. Adam White: Well, I haven’t canvassed the AMPCO membership specifically on their reaction to the matter of the gas plants. We do talk about what the total cost of power is and what comprises that cost. There are policy choices across the spectrum of generation technologies and fuel types, as well as on the grid side, that affect future costs. I would say we are business people and we support business decisions. If there was a case for investment, even if it drives costs up, if the business case is made, then we will support it. It’s not just about lowest cost at any price; it’s about what is the business case for generation. Given that the gas plants were cancelled and the decision was taken to relocate them, then there are costs that naturally flow from that.
Mr. John Yakabuski: Would you have supported this business case, to relocate the gas plant to Napanee?
Mr. Adam White: Well, I haven’t seen a business case for it, so—
Mr. John Yakabuski: You haven’t read the auditor’s report on the relocation cost of either Oakville or Mississauga?
Mr. Adam White: No, I haven’t.
Mr. John Yakabuski: Okay. Thank you very much. I’m going to pass the questioning over to Ms. Thompson. Thank you.
The Chair (Mr. Shafiq Qaadri): Ms. Thompson.
Ms. Lisa M. Thompson: Thank you very much, Chair.
I’m interested in some of the work your association may have done. You said earlier that your membership represents companies with an average monthly usage of over one megawatt, and I would imagine an association looking at the ever-increasing cost of energy would be doing their own analysis as to, if energy goes up the projected 50% over the current price—well, 150%. Have you done an analysis over the scale, that as energy prices go up, a number of jobs, a number of companies leave Ontario. Have you done research and an analysis in that regard?
Mr. Adam White: No, not specifically
Ms. Lisa M. Thompson: Not specifically? Then, can you touch on the work that you have done to date?
Mr. Adam White: I think the most recent sort of macroeconomic analysis we’ve done was a number of years ago. Broadly speaking, one is likely to find correlations between input costs and investment and jobs, and electricity is one of those inputs. It’s not the only input.
I think as well, it’s fair to say that Ontario has seen a transformation in the nature of the economy and this is a long-standing phenomenon. It’s not new that Ontario has replaced jobs in heavy industry with jobs in knowledge-based industries. I don’t think that’s a new phenomenon. We are concerned that there are key industries in Ontario which we should seek to retain, and to do that, we need to find ways to deliver them their inputs at a competitive price.
Ms. Lisa M. Thompson: What industries would those be?
Mr. Adam White: Well, the industries that we represent: pulp and paper, mining, iron and steel, petrochemicals and automotive. Those are key industries. They are the backbone of Ontario’s economy.
Ms. Lisa M. Thompson: What kind of timeline do you feel is associated with retaining those industries? When will it be too late?
Mr. Adam White: Well, I’ve been in the file a long time, and people will be debating these issues long after I’m gone, I am sure. I have a strong sense of urgency that anything we can do now, we should do now, and the plans we make for the future should look at ways we can reduce the delivered cost of power for industry.
Ms. Lisa M. Thompson: Do you think the government’s listening to that?
Mr. Adam White: I do. I think governments of all stripes are attentive to the issues facing major industries. How to attract investment and how to create jobs in Ontario—I think those are important issues. I do think that the government has been receptive to our advocacy in the last number of months.
Ms. Lisa M. Thompson: Interesting. I want to talk about your concept of willing versus unwilling communities as well. It’s a file that I’ve spent a lot of time on. You talk of the most recent decisions to listen more to communities. Well, for goodness’ sake, with the amount of application and the amount of approvals that are happening right now on the renewable side, let’s be real: The government has realized their target number. So the idea of listening—
Mr. Bob Delaney: Chair, again, on a point of order—
Ms. Lisa M. Thompson: —be it gas plants or any other—
Mr. Bob Delaney: We are here, according to our mandate, to talk about the cancellation and relocation of the Mississauga and Oakville gas plants. There is a time and a place to consider any aspects of the Green Energy Act, but this is not that time or place.
The Chair (Mr. Shafiq Qaadri): Thank you, Mr. Delaney.
Ms. Lisa M. Thompson: You were speaking about willing and unwilling communities. Give me a break.
The Chair (Mr. Shafiq Qaadri): I would simply ask that the remarks be confined to the agenda, but once again, we are talking about energy policy, and if you can relate this to the committee’s mandate, Ms. Thompson—
Ms. Lisa M. Thompson: That’s where I’m going.
The Chair (Mr. Shafiq Qaadri): —then I would allow the question.
Ms. Lisa M. Thompson: So with that, we’ve realized some target numbers, and looking at gas plants, willing versus unwilling, don’t you think the fact that they’re saying the words but they don’t need to walk the talk is disingenuous, and that they are just smoke and mirrors with communities?
Mr. Bob Delaney: Chair, you cannot use an unparliamentary word in committee any more than you can in the Legislature.
The Chair (Mr. Shafiq Qaadri): Thank you, Mr. Delaney. I think “disingenuous” is probably one of the more benign words, but, please, go ahead.
Ms. Lisa M. Thompson: Thank you, Chair.
Mr. Bob Delaney: In fact, Chair, that very word is not one that the Speaker or the deputies will allow you to get away with.
The Chair (Mr. Shafiq Qaadri): I would invite the Speaker to review his vocabulary. Ms. Thompson.
Ms. Lisa M. Thompson: Thank you, Chair.
Mr. Bob Delaney: I’ve been yanked to order on that very word, Chair—
Mr. John Yakabuski: “Yank” is a word that’s coming into my mind.
Mr. Bob Delaney: —and that word is not permitted in the Legislature, and should not be permitted in our deliberations here.
Mr. John Yakabuski: Chair, this is unacceptable.
The Chair (Mr. Shafiq Qaadri): Thank you. Ms. Thompson, the floor is yours.
Ms. Lisa M. Thompson: Okay. So let’s talk about the willing and unwilling host communities for any source of energy in Ontario. When should we start listening to folks? Do we need to take a look back in our rear view mirror and see what has not worked and see if we should be listening to those communities that have already been imposed upon? I’ll cut to the chase.
Mr. Adam White: Well, I think it’s fair to say that the way we go forward ought to be informed by the way we have proceeded in the past. Part of, I think, what Ontario is dealing with now is a function of legacy assets and legacy decisions. To the extent that contracts have been entered into based on permitted sites, then their commitments have been made. So, really, the question is on a going-forward basis, to the extent we’re contemplating entering into new contracts or permitting new sites for generation. I think that the lessons of the past couple of years are an indication that things can be done differently and perhaps things can be done better with more local involvement and perhaps more local accountability.
I would say, my members themselves have a great deal of experience. Some of the industrial plant in Ontario is as old as some of our electricity infrastructure, and some of my members have some of the oldest electricity infrastructure in the province. The things that were tolerated 100 years ago in planning and siting are simply not tolerated today, and I think that that’s an ongoing process.
Ms. Lisa M. Thompson: Okay—interesting. With regard to the location of gas plants, last week we heard from the OPA that Napanee was at the bottom of their list. In your opinion, what could have been done differently in terms of making sure that electricity was located in a manner that spoke to keeping costs down, keeping the source of electricity closer to the consumer to manage costs a little bit better? In your opinion, did the government drop the ball by not listening to the OPA?
Mr. Adam White: Well, there are two gas plants, and the story of each is different. The original site of the TransCanada plant was chosen by the OPA. I wasn’t privy to the decision-making on that. I’m not knowledgeable of the details of the decision, why that site and proponent was chosen over other potential sites and proponents. I know that there was a competitive tender for the supply of generation in the area, electrically speaking. As part of the legacy of our infrastructure, if you want to build a natural gas generator, you have to situate it close to natural gas supply and also approximate to the electricity infrastructure to deliver the power to market.
Again, I don’t have the detailed knowledge why the Oakville site was originally chosen, why other sites were not chosen and why the Napanee site was chosen subsequently. I’m not sure of the details of that.
Ms. Lisa M. Thompson: Okay. When did you figure out, as many of us did, that the projected $40-million cost was nothing but hogwash?
Mr. Adam White: Well, without responding directly to your question, I don’t think it has come as a surprise to us that the price tag was what it was. At the very beginning, when the decisions were made, we knew from published accounts what the total contract value of the plants was going to be. And so I advised my members that in the worst-case scenario, the province could be liable for paying out the liquidated damages on the contracts.
The Chair (Mr. Shafiq Qaadri): One minute.
Mr. Adam White: That seemed to me like a worst-case scenario. So we weren’t surprised that the number fell somewhere between nothing and the worst case.
Ms. Lisa M. Thompson: Who do you think led the charge to bury the true cost of relocating the Oakville gas plant?
Mr. Adam White: I have no opinion on that.
Ms. Lisa M. Thompson: Okay.
The Chair (Mr. Shafiq Qaadri): Thank you, Ms. Thompson. The PCs yield their time.
Just before we offer the floor to Mr. Tabuns, just with regards to some of the exchanges, I would invite you all to review the agenda; I presume you’ve all internalized that by now. I would just simply encourage you to—Ms. Thompson, Mr. Yakabuski and to my other colleagues, whatever questions you’re asking, be they on wind or nuclear or other matters, if they can be made relevant to the committee’s mandate, then it is game here.
Mr. Tabuns, the floor is yours—20 minutes.
Mr. Peter Tabuns: Thank you, Chair. Good morning, Mr. White. Thank you for coming.
Mr. Adam White: Thank you.
Mr. Peter Tabuns: Following on your last answer, what was your worst-case estimate for the cancellation of the Oakville plant, in terms of financial damages to the province of Ontario?
Mr. Adam White: I can’t say that we made a comprehensive review of it. I wasn’t privy to or didn’t make myself knowledgeable of the details of the contracts. My understanding is, to my recollection, that our guess was that the total liquidated damages would be in the range of $1.2 billion.
Mr. Peter Tabuns: Okay, which is consistent with an internal email that I saw going between the Ministry of Energy staff and the Ministry of Energy political staff.
Were you ever consulted on the cancellation or relocation?
Mr. Adam White: No.
Mr. Peter Tabuns: Okay. By anybody on either side of this deal?
Mr. Adam White: No.
Mr. Peter Tabuns: Which demand projections do you rely on to give you a picture of where demand is going in Ontario in the next decade, and how would you characterize the demand picture?
Mr. Adam White: We make our own projections of demand on an aggregate, annual basis for the purpose of policy analysis simulation, more than anything else. My members do appreciate having our forecasts for production scheduling and informing investment decisions. Our demand projections are based on historical data and trend analysis, and my view is that demand is likely to be relatively flat in the coming rest of the decade, and has the potential to decline. Frankly, we see a lot of economic efficiency opportunities in managing demand more effectively than it has been in the past, to reduce peak demand during the peak periods in the summer, for example, and to increase off-peak demand during periods when we have surplus power.
Mr. Peter Tabuns: Okay. In your projections, will the Sarnia and Napanee plants be surplus to Ontario’s needs?
Mr. Adam White: Not necessarily. The gas plants that Ontario has contracted for, from a planning perspective, as I understand it, were not specifically procured to provide baseload or intermediate energy. They are there to meet peak energy needs. The reason that gas plants are suitable for that is that they have a low capital cost and then you take the risk on the fuel price to run when you need them to run.
Ontario, over the next number of years, is going to be managing through the refurbishment schedule of the Darlington and Bruce sites. As well, we are going to be integrating renewable energy, which produces power intermittently. We need gas plant capacity to provide insurance that Ontario can meet peak demand and balance demand, given those—I don’t want to say contingencies, but given the very abilities that we can see in the future.
Mr. Peter Tabuns: We’ve put a lot into these gas plants. We’ve spent a lot on nuclear refurbishment. Would you think that investment in conservation might give us some more cost-effective return on our investment?
Mr. Adam White: Well, the OPA’s numbers suggest that conservation and energy efficiency is less expensive than other forms of generation. Of course, you know, as some say, you can’t power industry on conservation, but what we can do in Ontario is manage electricity demand more efficiently, to use less on-peak and use more off-peak, improve the asset utilization of electricity infrastructure overall and reduce the total cost of power to consumers. That is our priority, looking at policies that can lead to lower costs for customers.
We certainly think that with emerging digital technologies and their application to the grid, and with the emerging sort of policy and regulatory framework—not just here in Ontario, but elsewhere—that there are new and emerging opportunities to engage customers more effectively, and we certainly support that.
Mr. Peter Tabuns: Thank you. I have no further questions.
The Chair (Mr. Shafiq Qaadri): Thank you, Mr. Tabuns.
Back to the government side: Mr. Delaney, 10 minutes.
Mr. Bob Delaney: Thank you very much, Chair. Mr. White, talk to me a little bit about the importance of government’s role, either directly or through such agencies as the OPA and the IESO, in the siting of projects such as gas-fired peak power plants.
Mr. Adam White: Well, I’ve worked in government and I’ve worked in the private sector, in the not-for-profit world. Government has a role to play in Ontario. Government is accountable and has constitutional authority to make decisions in this area. We have framework legislation that guides that, and it is the purview of the Legislature to make law.
Our form of government does provide prerogative to the crown in making decisions, and I think that’s an important level of accountability, that these decisions are made in a political context. I think that is what Ontarians want. They understand that the job of elected officials is to represent their views, and I think that is the way it works in Ontario.
Mr. Bob Delaney: Okay. To bring the matter down, then, specifically to the two projects—out of 21 similar ones—that didn’t go well, in both cases there was a call for proposals. In both cases, the entities awarded the contracts, had responsibility to find a site zoned by the municipality for either industry or power production and to acquire the site. In the case of Mississauga, the city of Mississauga actually approved the use of the site for the purpose for which it was zoned: power production.
How would you recommend, in going forward with siting such large energy projects, that either the OPA or the IESO or the government better engage with municipalities on those types of projects?
Mr. Adam White: As I’ve said already, I think local involvement is important. I think that it makes sense to consider opportunities for more local accountability in decision-making. After all, this generation, this electricity infrastructure, is being built to supply the needs of communities, and the needs of communities are defined to a great extent by official plans and decisions of the municipality. I think it’s important when municipalities are planning their future that they consider the need for electricity infrastructure to support those plans. I think that’s the important thing.
I will say, though, that it’s difficult upfront to predict how the local people who live in the community are going to react to these proposals. Sometimes you’ll propose a piece of infrastructure and you’ll get a lot of local support, and other times you’ll propose the exact same piece of infrastructure and you’ll get a lot of local opposition, and that can change over time.
There is not, I don’t think, any magic formula for how to do that right or wrong. I do think that there are opportunities to do it better, and I think, generally speaking, it is through involving people in communities early and often in the planning process and making them understand that there are trade-offs. In many cases, there are choices—and difficult choices—that have to be made, and I have a great faith in Ontarians. Ontarians make good choices, generally speaking, and to the extent that we can inform Ontarians about the choices that are before us, I think we can count on Ontarians to make the right decisions.
Mr. Bob Delaney: Both the city of Mississauga and the town of Oakville had municipal plans that, at the time they were drawn up, had explicitly approved these sites; in the case of Oakville, for heavy industry, and in the case of Mississauga, it was zoned “industrial/power plant.” But in neither case were the municipal plans regularly reviewed.
In looking at the siting of energy infrastructure, or indeed, the siting of energy-intensive industry, have either you or your membership given any thought to recommendations to municipalities on reviewing their municipal plans to ensure that energy infrastructure, for example, is given the same weight as waste removal or water or sewer?
Mr. Adam White: I can’t speak to what my members may have considered or what work they may have done with local municipalities. I know that community relations are a very important component of the conduct of my members’ business. Our industrial assets are like electricity assets: They are long-lived. They do need the ongoing support of the local community in which they operate to continue to operate. That is the social licence that they need to seek and sustain.
Mr. Bob Delaney: In looking at the siting of energy infrastructure, do you have any recommendations that, in the future, could lead either the province or proponents or the IESO or the OPA to avoid making any siting mistakes?
Mr. Adam White: To go back to Mr. Tabuns’s questions around conservation, our advice to government in avoiding the difficulties associated with siting new supply is to focus policy choices on managing demand better. The less demand we have on peak and the more customers are engaged in managing their demand to support the needs of the grid, the less supply we need, and the less siting decisions are required. Those are superior outcomes for all of us.
Mr. Bob Delaney: Are there any jurisdictions that you know of, whether in Ontario or outside Ontario, that you feel Ontario could learn from regarding the siting practices for energy infrastructure?
Mr. Adam White: I don’t have any specific knowledge of that. I would say, though, that these are choices made by Ontarians in the communities in which they operate. There are checklists, there are processes and there are generic approaches to this that are used in other jurisdictions. I tend to think that Ontario has evolved a fairly sophisticated approach to permits and approvals for major infrastructure, but attitudes change. The attitudes of communities change and the attitudes of Ontarians change in terms of what they’re willing and unwilling to support.
Mr. Bob Delaney: Do you have any other recommendations for the committee on improving the siting of energy infrastructure in the future?
Mr. Adam White: As I’ve said, I’m not an expert on this. It’s not something that I’ve devoted a lot of time to. I do hear from my members. I do understand the importance they place on community relations. I think that is key. There are good proponents and there are bad proponents, and you can have two identical pieces of infrastructure that encounter completely different reactions in the local community. I think it’s important to note that these issues aren’t always generic. Some companies are better at this than others, and there are some communities that are more receptive to this than others. I think the key thing is to consult early and often with local people to design processes so that people have a legitimate expectation of what the outcome will be and how their views will be considered.
Mr. Bob Delaney: How would you compare and contrast a good proponent and a bad proponent?
Mr. Adam White: I think it has to do with—this is going to sound vague—a spirit of openness and empowerment of local people. We’re not here to tell you what we’re going to do; we’re asking your advice on what we might do. Those are two different approaches to the same kind of issue. Our members, I know, pride themselves on their community relations, and they work very hard to seek and obtain social licence for their investments. These are complicated facilities, with a range of potential effects in local communities, and they work very hard to make sure that local people are engaged and empowered to consult with them.
I think part of the challenge of this is that the general public tends to not be very aware of the implications of this infrastructure until they see it in their backyard, and then the question of how to inform and engage those people in that decision-making is a challenging one.
The Chair (Mr. Shafiq Qaadri): One minute.
Mr. Bob Delaney: Thank you, Chair. I think we’re done. Thank you very much, Mr. White.
The Chair (Mr. Shafiq Qaadri): Thank you, Mr. Delaney. To the PC side: Mr. Yakabuski, 10 minutes.
Mr. John Yakabuski: We have no further questions.
The Chair (Mr. Shafiq Qaadri): Thank you, Mr. Yakabuski.
To the NDP side: Mr. Tabuns.
Mr. Peter Tabuns: No further questions. I thank you for coming here.
The Chair (Mr. Shafiq Qaadri): Thank you, Mr. Tabuns, and thanks to you, Mr. White, for your presence and testimony on behalf of the Association of Major Power Consumers in Ontario.