The Nova Scotia Legislature

The House resumed on:
September 21, 2017.

HANSARD

NOVA SCOTIA HOUSE OF ASSEMBLY

COMMITTEE

ON

PUBLIC ACCOUNTS

Wednesday, October 20, 2010

LEGISLATIVE CHAMBER

Department of Energy

Printed and Published by Nova Scotia Hansard Reporting Services

PUBLIC ACCOUNTS COMMITTEE

Ms. Diana Whalen (Chairman)

Mr. Leonard Preyra (Vice-Chairman)

Mr. Clarrie MacKinnon

Ms. Becky Kent

Mr. Mat Whynott

Mr. Howard Epstein

Hon. Keith Colwell

Hon. Cecil Clarke

Mr. Chuck Porter

[Mr. Brian Skabar replaced Mr. Clarrie MacKinnon]

[Mr. David Wilson replaced Ms. Becky Kent]

[Mr. Allan MacMaster replaced Mr. Chuck Porter]

[Mr. Harold Theriault replaced Ms. Diana Whalen for a portion of the meeting]

In Attendance:

Mrs. Darlene Henry

Legislative Committee Clerk

Mr. Terry Spicer

Assistant Auditor General

Mr. Gordon Hebb

Chief Legislative Counsel

[Page 1]

HALIFAX, WEDNESDAY, OCTOBER 20, 2010

STANDING COMMITTEE ON PUBLIC ACCOUNTS

9:00 A.M.

CHAIRMAN

Ms. Diana Whalen

VICE-CHAIRMAN

Mr. Leonard Preyra

MADAM CHAIRMAN: I'd like to call the meeting of the Public Accounts Committee to order for this morning. We have guests with us this morning from the Department of Energy. I will begin the meeting with introductions, please, of our members.

[The committee members and witnesses introduced themselves.]

MADAM CHAIRMAN: Thank you very much to our guests and welcome. I'd like to begin, as we usually do, with an opening statement, if we could, from Mr. Coolican on behalf of your department.

MR. MURRAY COOLICAN: Thank you very much. Good morning, I appreciate the opportunity to make a few comments before we move to questions. I didn't realize when I was here back in June that I'd be back here again so soon. I'm sorry that Nancy Vanstone isn't back with me to share the load but I'll try to see what I can do.

I am privileged to work with Scott and Richard on a regular basis and I think the government is well served by the officials in the Department of Energy. Scott and Richard are two examples of some of the best in the department. They've done a lot of work recently, particularly around the renewable electricity plan. I'm sure we'll get to that a little bit in the questions and answers.

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[Page 2]

The invitation that we received specifically referenced a discussion on future power rate increases. That really sets the stage and is the reason for the direction the government is taking in regard to Nova Scotia's long-term energy portfolio. The government has said the fiscal path the province is on is not sustainable and we need to get back to balance. The same thing can be said about our energy supply, it is currently not sustainable and we need to ensure that we have balance in our Energy portfolio.

When it comes to power rate increases it's difficult to predict the future, but there are a few things that we do know that place a responsibility on government to plan for the longer term and adopt a path that provides a secure, sustainable and affordable electricity supply into the future. That is what we are doing with the Renewable Electricity Plan released in April and the subsequent policy decisions that have been made since that time.

We know the price of coal will continue to escalate, given the ever-increasing demand from China and the cost of emission controls to meet environmental standards. Using cleaner, lower-sulphur coal to meet environmental targets increases operating costs. These are things we know.

We understand the challenges and issues associated with energy security given our reliance on imported coal, which makes us vulnerable to market price fluctuations and supply. It also puts us in a difficult position in meeting our environmental emission targets. Supply and emissions are very real issues and we need a plan to deal with them.

The lowest cost, long-term option to meet our supply needs and environmental targets is moving towards renewable sources of energy, as outlined in the Renewable Electricity Plan. In the plan Nova Scotia has set the most aggressive renewable energy targets in Canada, and some of the most aggressive in the world, in committing to be producing 25 per cent renewable electricity by 2015 and 40 per cent by 2020.

It's also important to think about where we come from in our large dependence on coal. Other provinces across Canada, with different energy makeups, don't have as significant a challenge as we do in reaching such strong renewable targets. The Integrated Resource Plan filed with the Utility and Review Board also identified renewable energy sources as a cost-effective and flexible means of meeting future electricity demand and air emission requirements in Nova Scotia.

Nova Scotia Power works jointly with the board, consultants, government, environmental organizations and customers to model the long-term electricity demands for Nova Scotia, and then develop scenarios to help the utility determine the best way to meet that demand. This IRP process supports the path the government is taking. The cost of not doing anything is greater and it compromises our energy security as a province.

[Page 3]

The price of solid fuels is projected to increase while air emission caps are being lowered. The supply is not local, the benefit is going elsewhere. We will need to meet increasingly stringent environmental targets. Electricity rates are increasing as a result of the global reality we are living in. Electricity prices will increase more over the long term and we will be in a much more difficult spot in relation to energy security and emission targets if we do not take a renewable approach.

The province is in a transition between coal dependence and moving to renewable sources of energy that provide greater stability to Nova Scotians in terms of price and supply. As the price of coal is projected to continue to increase, the price of wind and other renewables is constant. The transition includes the up-front capital costs involved in building renewable energy projects. Still, during this period Nova Scotians are being employed and are directly benefiting.

We are trying to balance opportunity and affordability. That balance is behind our most recent energy-related policy announcement, our new Renewable Electricity Regulations and the accompanying community-based feed-in tariff. These regulations provide the support and incentives for independent power producers, communities and not-for-profit groups to get involved in developing community-based renewable energy projects.

We are trying to achieve diversity of supply and stability of rates. While we cannot predict future energy pricing with certainty, we can forecast where we anticipate energy supply and demand to be and chart a path to ensure our supply is sustainable and secure, meets environmental standards, and provides more price stability for consumers.

There are costs associated with moving in this direction, especially up front. We expect an increase of 1 per cent to 2 per cent per year on electricity bills in the short term as a result of our renewable direction, but in the long run Nova Scotia will be better off. We will have a far more diverse, secure energy supply on fixed-price contracts that will help stabilize rates.

I'll end there and try to answer any questions you may have. Thank you.

MADAM CHAIRMAN: Thank you very much, Mr. Coolican. We will begin our first round of 20 minutes with each of the caucuses. We'll begin with Mr. Colwell.

HON. KEITH COLWELL: Thank you, Madam Chairman. First, just a couple of quick questions. What does Nova Scotia Power pay to the renewable energy, the wind generators, or anyone else that sells power to Nova Scotia Power? What do they pay them per kilowatt hour?

MR. COOLICAN: Those are our contracts between the independent power producers and Nova Scotia Power. I don't have the details on those prices, they are the result of

[Page 4]

competitive processes that have taken place to ensure that they are the lowest cost options that are available.

MR. COLWELL: It's my understanding, talking to the renewable energy people, that it's substantially less than what Nova Scotia Power charges the consumer, is that correct?

MR. COOLICAN: Well, the price that the consumer pays is made up of a lot of different charges, including distribution and transmission costs. It's a question for an independent power producer who is supplying electricity to Nova Scotia Power. It's at the spot either where there's a distribution or a transmission connect, then you have to have a whole system to move that and there's a cost related to that. In the same way, if you look at the cost of the generation of what Nova Scotia Power is generating through its coal plants or its other facilities, that cost is lower than the cost to the consumer because of all the costs of transmission and distribution.

MR. COLWELL: I understand that. In your renewable energy program, are you going to allow the renewable energy companies to sell directly to the consumer?

MR. COOLICAN: No.

MR. COLWELL: Why is that?

MR. COOLICAN: There are two aspects of electricity that are important: one is supply and the other is the duty to serve. As consumers, when the switch is turned on we all want the lights to come on and there's a cost associated with that and there's a whole system that needs to be in place that allows that to happen. That's an obligation that we're maintaining on Nova Scotia Power. For example, if there's a renewable operator with a wind turbine and the wind isn't blowing and he's not supplying the customers with wind at that point, who has the responsibility to do that? It's Nova Scotia Power.

MR. COLWELL: At the present time under the monopoly situation they have, correct?

MR. COOLICAN: It's a regulated situation where Nova Scotia Power supplies all, with the exception of some of the municipal utilities in the province.

[9:15 a.m.]

MR. COLWELL: Yes, basically a monopoly, that's what we're talking about, that was set up by a previous government.

I've talked to some of the renewable energy people and they have solutions for that problem. Has your department discussed that with any of the renewable energy people?

[Page 5]

MR. COOLICAN: We've been talking extensively with renewable energy people as we develop the policies that we're putting forward. There are a number of jurisdictions over the last 15 or 20 years in the electricity business that have gone to an open market. In most of those jurisdictions - in fact, I think all of those jurisdictions - costs have gone up at a greater rate than where utilities are regulated. The government's view is that a deregulated market is not the right direction for consumers.

MR. COLWELL: You indicated in your opening remarks, I believe you said a 1 per cent or 2 per cent increase in power rates for renewable energy the way you're planning it. Did I hear that correctly, am I quoting you properly?

MR. COOLICAN: Yes.

MR. COLWELL: Will that be in addition to any increases Nova Scotia Power already has or applied for?

MR. COOLICAN: Well, Nova Scotia Power is not applying for a rate increase at the moment, they are involved in a fuel adjustment mechanism hearing which is going to result in an increase, as a result of fuel. But we expect overall that the impact of the renewables will be 1 per cent to 2 per cent above other reasons for Nova Scotia Power either through fuel adjustment increases or other increases they might require. The other example is the demand- side management charge which is resulting in a 2 per cent increase as well.

MR. COLWELL: Isn't it also true that typically renewable energy such as windmills or other types of renewable energy such as that are pretty long-term, fixed costs?

MR. COOLICAN: Yes.

MR. COLWELL: So in other words, once you get them up and operating, you won't be faced with rate increases from them as you would from a fuel that you discussed in your opening comments here, that we're open to the costs of coal, oil, whatever is being used, so those costs will go away, increases - if we could all be renewable and that's not practical, I know that . . .

MR. COOLICAN: Costs don't go away, but it's stable, yes.

MR. COLWELL: It's fixed, it's stable. So in order to generate a good, solid economy in Nova Scotia we need stable, reasonably priced electricity, and you said that in your opening statement and I couldn't agree more. So why isn't the government really pushing this forward? Renewable energy makes so much sense. You've got companies out there willing to invest in it, the government doesn't have to invest in it. Why isn't this being pushed forward really hard, I mean not just talking about goals in 10 years time? There are

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people out there willing to do this right now. Is the holdup Nova Scotia Power or is it the province?

MR. COOLICAN: Well, first of all, we're talking about quite an aggressive target for 2015 and as a way to get there the province has outlined targets that Nova Scotia Power must meet in 2011, 2013 and 2015, so we are moving aggressively. We also have to balance that with the question of affordability, we have to balance that with the question of learning to use a new technology, such as wind, and how to balance it in the system. Most of the people we've talked to in the industry agree that our targets are aggressive but they're responsible.

MR. COLWELL: Are they going to be floating targets, the same as the emission standards? Have they changed the goals - the NDP Government just recently changed, dropped for Nova Scotia Power, which Nova Scotia Power requested? Is the same thing going to apply to this, so the renewable energy will be shoved out again further if Nova Scotia Power decides they don't want to do it or they say it's too expensive for them to do it or whatever other excuse they come up with?

MR. COOLICAN: I'd just like to back up for a minute because that was an important issue and an important decision that the government made. First of all, as you will be aware, fuel is not a - Nova Scotia Power doesn't earn additional money based on fuel costs. It is really a pass-through, so it doesn't increase the money Nova Scotia Power earns to pay more or less for their fuel.

I think when Nova Scotia Power came out with an assessment of what their fuel costs would be for next year and the impact on rates on some industrial customers, that looked to be about 18 per cent and for average consumers that turned out to be about 12 per cent. The government heard from large industrial consumers about the size of the increase but also heard from groups representing low income consumers and also heard from small businesses as well, that that level of rate increase was not acceptable.

The government looked at the issue and looked at, is there a better way to achieve the same target, in terms of mercury emission reductions, in a way that is more affordable for the province. We expect there will be announcements in the very near future where Nova Scotia Power will outline how it intends to meet those targets in a way that is affordable.

One of the problems with the strategy that was being used previously to meet those targets was that it was based on operating costs, fuel costs, so they were looking for lower mercury coal and they were looking for (Interruption) sorry, lower sulphur coal and the cost of - is it deactivated carbon? (Interruption) activated carbon, not deactivated carbon, that resulted in operating increases. As a number of jurisdictions were moving towards a lower mercury environment, those costs went up fairly dramatically, compared to what had been anticipated when the regulations were put in place. What we're trying to do is to move away

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from a solution where the costs would continue to go up in a dramatic way, to a solution that allows us to achieve the same targets but that does it in a less expensive way.

MR. COLWELL: Would that include, again, the renewable energy strategy?

MR. COOLICAN: Well, the renewable energy strategy becomes part of our emissions strategy because as the amount of renewables goes up, over time, the emissions start to come down quite dramatically.

MR. COLWELL: Exactly, and that's all the more reason that I think you should really hopefully don't change your goals on this, as they did with the emissions standards for Nova Scotia Power because they come to you and say they can't do it.

MR. COOLICAN: They didn't come to us and say we can't do it. I think we've got to be . . .

MR. COLWELL: Well they did indicate that they are going to save $60 million a year . . .

MR. COOLICAN: That saving goes throughout the economy of Nova Scotia. That's not a saving to Nova Scotia Power, that's a saving to every customer, to every business, to everybody who buys electricity from Nova Scotia Power because they don't earn any profit based on those fuel costs. Those are straight costs that go from Nova Scotia Power to the supplier of the coal and the transportation costs and all those sorts of things. They don't earn money on that so the saving of $60 million does not accrue to Nova Scotia Power, it accrues to you and every other consumer in the province.

MR. COLWELL: But Nova Scotia Power does save money because they don't have to meet these standards, there's no question about that.

MR. COOLICAN: No, I'm sorry, the savings is on the fuel costs, the deactivated carbon.

MR. COLWELL: That's not what I'm talking about. What I'm talking about here is if they don't have to meet these standards it is money they don't have to spend. If they don't have to spend the money they save money, bottom line. It has nothing to do with the fuel they've got at the present time.

MR. COOLICAN: No actually it does have to with the fuel, that's the whole point that I'm making. It's not a question of Nova Scotia Power earning or not earning, the savings are as a result of the change the government made, it results in savings to consumers. It doesn't result in additional profit to Nova Scotia Power.

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MR. COLWELL: Well if they've got to spend money to resolve this problem and now they don't have to spend the money, it does make a difference to Nova Scotia Power. They will make more money, it's that simple. If you don't have to spend money where you had to spend money, all of a sudden you save money.

In the ChronicleHerald today - you probably read this already - Colin Gubbins of the U.K., a coal consultant, testified that he could not find any evidence that Nova Scotia Power is even trying to negotiate the coal supply contracts, renegotiate them to a lower cost, so why would they bother? I mean here is Nova Scotia Power with a monopoly in Nova Scotia, trying to put the prices up again. This is the sixth increase they've gone for in nine years, sixth increase, sixth time. Here a consultant has come in and said they didn't even try to renegotiate the coal, even though we shouldn't be buying the coal, we should have gone into renewable energy a long time ago so we could have at least eliminated some of this.

Where are we going with this? If you have a monopoly like Nova Scotia Power has, why doesn't the government push them harder for renewable energy? Most of the renewable energy companies have moved out of the province, they have given up on Nova Scotia. We've seen a structure for property taxes that would almost put them out of business and then the previous government came up with a bill that was supposed to have alleviated that but any new company doesn't fall under that. It's a horrible situation, this has got to change.

Halifax today, if you were listening to the radio, is in 89th place in the country to do business, 89th. Both Moncton and Charlottetown are ahead of us and Charlottetown has higher power rates than we have. So if we don't get power rates under control and other things in place and a better regime in this province, this provincial government, to help businesses grow here, we aren't going to have any jobs. We can't survive without private industry. We cannot survive in this province without private industry.

You can defend Nova Scotia Power all you want with the rate increases they've done - and I'm a little bit shocked about that because the fact is this province is supposed to be trying to help promote lower-cost energy, cleaner energy. By moving those goals - did anybody ever do an analysis to see if these mercury goals that have been changed and the sulphur content in the air, how it has affected our health care system, the cost of which is growing exponentially in this province. Soon we're not going to have anything in the province to pay for it. Don't worry about your department being there, there is going to be no money to operate it. You want to really seriously look at this. When the government dropped these standards down and allowed Nova Scotia Power to continue with this, it makes you wonder what is going on.

We look at this appliance buyback thing that they did, which I understand is only in HRM, from Nova Scotia Power; it's not a bad idea, but why would a power company do that? Well, they did it because they're getting paid by the consumer to do it. They are not

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doing it because they want to save energy, because Nova Scotia Power is a company that makes money selling energy - not saving energy, selling energy.

Can you assure us, as Nova Scotians, that your department is really going to push Nova Scotia Power to put renewable energy in place in this province, as it should be, and work with the companies that are trying to do it, that will finance it themselves, doesn't cost the province anything and set up a tax regime that those companies can come here and they can work and provide lower, reliable power, in conjunction with Nova Scotia Power, that consumers can be assured over the next 20 years they are going to have a reasonable power rate. I can tell you right now with the way the power is going up here and the way the tax structures work in this province, no company in their right mind is going to come to Nova Scotia and that is going to create hardly any people. If it wasn't for the fact that we had the federal government in this province and the universities and the other things that bring things in here, this province would be in bad shape.

The more I talk to businesses out there, the more disgusted they are every day with what is going on in Nova Scotia. So as the power rates go up, another 1 per cent, 2 per cent on the power rates, next year what is Nova Scotia Power going to want for increases, and the year after that and the year after that? We're soon going to be out of the market here and when that happens, we've got a major problem on our hands. So if we do not move forward on a solid basis, we're not going to be anywhere in this province.

[9:30 a.m.]

I'm getting really nervous about what's happening here. You are seeing more and more businesses close up, they are quietly going away and moving to other countries or other provinces. It is just crazy, I mean everything that is going on. I'm really worried about Nova Scotia and I hope that you share this concern because if you don't share this concern, as a deputy minister, and your staff doesn't share this concern, we're not going to survive in Nova Scotia. Our debt is increasing, everything - if you were running a business the way this province is run today, we'd be bankrupt, it's that simple.

MADAM CHAIRMAN: You have a minute and a half left, Mr. Colwell, so perhaps Mr. Coolican would like to answer.

MR. COOLICAN: I think in my opening remarks I underlined the targets that we're setting for renewable energy, which by 2015 is a firm target. We think it's an aggressive target. We've laid out in the Renewable Electricity Plan and the regulations, a way to get there. At the news conference when the regulations were announced, there were a couple of people there; one is the president of a local business that is involved in renewable energy and building wind turbines, who is very positive about the framework the government has set for renewable energy. He indicated in his remarks that he had been on the phone that morning with someone in Europe who was questioning where Nova Scotia was.

[Page 10]

When Mr. Barry explained to this gentleman the new regulations that were coming out, this gentleman said, it's encouraging to see that Nova Scotia is moving in the right direction. In fact, Mr. Barry referred to Nova Scotia as someone that the world is looking at because of the aggressive targets we've set, because of the policy that we put in place to encourage renewable energy and because of the regulations that we have put in place. There was also, at that news conference a . . .

MADAM CHAIRMAN: I'm sorry to interrupt you, but the time has elapsed for the Liberal caucus and I'd like to turn the questioning over to the Progressive Conservative caucus. Perhaps they'll want to pick up on the same points you are at, but I do apologize for interrupting you.

Mr. Clarke, for the Progressive Conservative caucus, the next 20 minutes.

HON. CECIL CLARKE: Thank you, Madam Chairman. Indeed, I will try to pick up on some of the points that my honourable colleague has raised. As you recall, Madam Chairman, the last time our good witnesses were here before the committee we recalled that the Premier went up the Pictou mountain to see all he could see, with great fanfare and great expense to the taxpayers, to announce a strategy and a plan for renewables.

Where we find ourselves months later, and at the last meeting we talked about how they called it a strategy but I recall that I was concerned that there were no numbers, there was no costing, there were no specific timelines, but we have what the government calls targets. We don't have goals or objectives, we have targets we want to meet by certain dates and times, which leaves it pretty wide open for the government to try to stumble through a lot of process and, at some point, hopefully come to the promised land of meeting those targets, but we don't have a plan. I think that was what Mr. Colwell was talking about, in part, that there is no plan that the government set forward.

In the presentation today by the Department of Energy, we have some words on paper but no specifics with regard to numbers. You can set a target, but what follows that target? What are the objectives, what are the plans? If they are there, they have not been presented in a formal way that we have seen.

That leads to some of the other public confusion because as was indicated, we now have a process that's going to increase rates for consumers in this province, both household and commercial, under the fuel adjustment mechanism. I don't think it was ever meant to be a secretive process because we don't know what's going on behind closed doors right now about information that's being shared or disseminated because, as evidenced, we don't have the benefit of that information and what case Nova Scotia Power is making as a result of the fuel adjustment mechanism.

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We know consumers are getting demand-side management charges added to them. Costs are going up and, at the same time, the understanding of the public of what is going on by government, the regulator, and the utility is getting more confused. As the deputy had indicated, the Department of Energy likes to consult with the board, the utility, consultants, environmental interests and customers. What's interesting is and it's probably not deliberate, but customers are last. Rather than a process that puts the customer first, this government is consulting with everyone else when it gets down to the end user and, indeed, the provider of the resources that come. So there's something that is missing here.

The reason why it's very difficult to address some of these things is that the fuel adjustment mechanism, as Mr. Colwell talked about, had legitimate points because in the previous process with the URB, we found out that it was Nova Scotia Power's incompetence or lack of planning that they didn't properly purchase coal a proper way, it drove up costs by the millions and the utility wanted to transfer that to the public.

In fairness, it's not just about costs going up, it's about not knowing where the utility is and what they're doing. Are they being prudent, are they being astute with management of that?

We also see a process where the government had to cave on mercury emissions for international coal coming in at a premium, yet when there is a domestic supply through the Donkin reserve and what Xtrata was trying to do in terms of mixed use, it was a no-go. A company willing to spend over $300 million to open up a domestic coal supply and recognizing that if it would get an okay, they would invest in the washing process and the mixing of coals and a number of things that would make sense to do that. That was pushed aside until an imminent concern comes up and the utility and government then cave and try to come up with some other outcome. But that wasn't strategic, that was necessary because they had no other recourse. It wasn't planned, it wasn't a strategy because the strategy was to say no to it. So that's impacting the consumers in the Province of Nova Scotia.

Now we have what I find interesting in all the presentations, that traditional power generation is dirty, it's costly, it's inefficient; yet we don't talk about clean coal technologies. We don't talk about how at Point Aconi on Cape Breton Island we have one of the cleanest burning power plants in the country, across the harbour from Lingan that, admittedly, is the dirtiest polluter in the country. It goes to highlight but we need that power, so therefore we're putting up with it. Emissions are part of what we have to contend with because we need a reliable, consistent, major flow of power and, as highlighted, renewables present some challenges.

What I don't hear the government talking about is clean coal technologies, recognizing our resource base, a province that has been built on resources, yet walking away from what may be very efficient and reliable long term. We know the United States has spent hundreds of millions of dollars in clean coal technology because of their reserves. We also

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know that the utility has a long-term commitment because it would be illogical to walk away from those plants that provide consistent, reliable power. So that's a component of the challenge.

Now we get into renewables. We have all this fanfare, whether it's the Premier going up on the Pictou mountain to declare, at great cost to the taxpayers, all this great insight they have - which they don't - and then we go to the TrentonWorks plant where we have Daewoo, which is great coming in, and we talk about building wind turbines. Then we have companies in this province that are willing to partner - and I complimented the Minister of Energy the day it was announced about the fuel adjustment mechanism and heralded that that was a good next step, it was very important.

Then we have communities coming together with outside investors willing to put hundreds of millions of dollars into this province and are told no, sorry, the grid doesn't cut it; you can't do it from Cape Breton or you can't do it from that region, our grid can't handle it, we don't want to do it. It's not the Nova Scotia Power imposed one where like Nuttby Mountain, you wait for something to fail to pick it up and pretend that you're saving something, when it looks like a strategy to starve them out and then take over a project because that was in the master plan of Nova Scotia Power or Emera.

So what we have are communities wanting to deal with targets. So you set a target as a government, you set certain measures out and people come to the public table recognizing that we need the long-term benefit, we need to move to renewables. No one disputes the merit, the value and the prudence of going in that direction, but when people step up to the plate, as they are now, and people who are coming to the Liberal caucus and our caucus after the government doors have shut on them are saying, what's with this? In Ontario, in the United States, they welcome us in the door. In Nova Scotia, they're telling us you're taking up our time and, you know what, you're wasting valuable time in having a meeting.

Deputy, what is the strategy and months later, can you give us more than just targets, but specifics that bring all of these things together to provide confidence to the customer, both residential and commercial, in a province where competitiveness is waning, in a province where we're driving business away from our borders? What can we say to individuals and investors that say this government, with its targets, has a plan that's integrated and we can see it?

MR. COOLICAN: I think we had this discussion the last time I was here and I think there's still somewhat of a difference of opinion. The government has set out a very clear policy and clear regulations for Nova Scotians and other businesses and people who want to come here and invest, what the rules are going to be for investing in renewable energy. The feedback that we've received from that is very, very positive. It's giving communities the opportunity to invest in local projects in their area, in renewable energy; it's giving small-

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mill operators the opportunity to do combined heat and power projects in their facilities; it's giving First Nations an opportunity to do that.

Are we going to tell each community what the projects should be and where it should happen in their community? No, we're not going to do that. We think we should allow the creativity of communities across the province to come up with what works best in their communities and encourage Nova Scotians to get involved in meeting the targets that have been set.

As I mentioned last time to Mr. Colwell, he asked me, are we going to meet the target? My simple answer then was yes, and my simple answer today is yes. It's pretty clear to us at the moment that we see a clear path to meeting the 2013 target, and we see a clear path to meeting the 2015 target that has been set. I think it's the positive reaction of Nova Scotians, both businesses and community organizations, to the policies that have been set out by the government that are going to achieve those targets.

MR. CLARKE: Thank you, Madam Chairman. Deputy, with all due respect, you're not getting a positive response from Nova Scotians, you're not getting a positive response from business. You might want to read the paper today alone, or the papers that reflect how the customers in this province feel about process and the lack of transparency and openness about the fuel adjustment mechanism, about the government strategy.

Let's talk about communities stepping up to the plate. Well, communities have, to a door that has been shut on them. We have companies and communities looking at, for instance, biomass projects - and I'll leave that to my colleague - that look at if there is going to be a process to deal with NewPage lands that have established road networks, is there an ability then to put in wind energy projects so that you've mitigated costs, that you have established transportation for maintenance, that if you're doing clear-cutting, especially with a lot of downed trees with the spruce problems - and people think clear-cutting is always negative when, in fact, it can be very healthy for the environment and for industry - so that while you're rejuvenating a forest, you can have positive impact from green energy, from wind turbines being utilized in those various sites and the very network, which is a win-win scenario.

Whether that's building in Wreck Cove and those areas, whether that's over in the Mira, people have come with money to talk to communities - and First Nations communities - that have come to look at investment and have money on the table, but they're being told about all the impediments and the reasons why they can't do things. One of them is the grid, it keeps coming up constantly; Nova Scotia Power tells them that, the department tells them that. Yet at the same time we talk about all the tidal energy that's going to try to be developed in the Bay of Fundy, because it makes sense. We talk about Lower Churchill and subsea cable and, of course, that will need infrastructure, but nobody in the government, Madam Chairman, can give anybody any specifics.

[Page 14]

[9:45 a.m.]

I don't know who you're talking to, but I would welcome, if the deputy would present and provide to this committee, details of people in these communities who are saying yes, this is working. I'd welcome that information and I'd welcome the opportunity. This is a great opportunity for us to follow up on what months ago, as the deputy indicated, we talked about. But months later there isn't one piece of paper more, not one number that has been able to be provided, not one good statistic that we can rely on to move forward.

We've talked, should there be an independent system operator? Is the government talking about that so that the utility is out of that and the wider objectives of allowing for community-based, for the feed-in tariffs, for them to have access, the utility is not saying yea or nay but, in fact, the region is saying that. So is the government at least looking at an independent system operator as a means of allowing for greater transparency and more movement of people into investing in projects and indeed that the consumers will have greater confidence that we have a long-term, strong system with integrity?

MR. COOLICAN: I'd like to spend a minute or two on the fuel adjustment mechanism process. I haven't been at those hearings the last few days, so I can't comment on the specific issues that are coming up in those sessions. But I can say, from the conversations that I've had with customers and consumers first, in some recent consultations that we were holding, that the customers of Nova Scotia Power view the fuel adjustment mechanism process as quite transparent. A number of them now feel that they have as good information about the fuel requirements of Nova Scotia Power and the decisions that are being made as Nova Scotia Power does and they're able to participate fully in the discussions around the fuel adjustment mechanism. So this process is working quite well.

I think anyone who was involved in the process, such as the Consumer Advocate, there may be certain parts of the hearing that go into confidential hearings, but the Consumer Advocate as a participant in the process, or anyone else who was a participant in the process who signed confidentiality agreements, would be part of that process. It's a protection of commercial interests, not Nova Scotia Power, that is the reason for going into that.

MR. CLARKE: But deputy . . .

MR. COOLICAN: If you allow me to finish, I think the member had a long statement and raised a number of issues that I'd like to respond to and that was one of them.

MR. CLARKE: Actually no, I want to stop you for a moment and you can come back to those, deputy. You talk about a confidential process and people who sign off for confidentiality reasons.

[Page 15]

MR. COOLICAN: No, I'm sorry, I didn't talk about a - it's not a confidential process. The process is open but at a certain point the board has decided - not Nova Scotia Power, not the government - the Utility and Review Board, working with those other interveners, has decided that it's important to go into confidential meetings. The whole process is quite open and transparent and customers are quite open to be able to participate in it.

MR. CLARKE: But deputy, when you have a utility that is a monopoly, versus an open market, which we don't have here, what is there not to disclose for the public's benefit of seeing those numbers and that goes back to what Mr. Colwell is saying, why wouldn't that be available for people?

As I said, what we have seen in the past, when it has been more open and transparent, is the fact that we've been able to note shortcomings and deficiencies of the utility that they were transferring on to the consumer that actually were the shortcomings of the corporation and they had to bear that cost.

MR. COOLICAN: But this is the same process and I have confidence in the chairman of the Utility and Review Board, he is the one who makes the decisions about the meetings and the process. It's the same process that has been carried on in the past and it's quite a good process. The customers that we talked to when Nova Scotia Power initially came out with its proposals for a 12 per cent increase, we went and talked to customers first and the customers we talked to said two things: they said that the 12 per cent is not sustainable and we'd like the government to do something, but they also said, when we asked them about the fuel adjustment mechanism process, they said it was transparent and it allowed them to get as good an understanding of Nova Scotia Power's fuel costs as Nova Scotia Power or anybody else.

They were very confident in the process and the way the process was working. They have confidence in the process and they have confidence in the chairman of the Utility and Review Board, as do I.

I want to talk a little bit about the independent system operator. It's an important issue in terms of how the system operates, especially how the system co-operates with other provinces in the region. As the member may know, the government has been doing a lot in recent months to encourage co-operation among the four Atlantic provinces. In that process we are looking at upgrades to the transmission system. The member may have noticed the letter of intent between the Government of New Brunswick and the Government of Nova Scotia and the New Brunswick utility and the Nova Scotia utility, to examine upgrades to the transmission system between New Brunswick and Nova Scotia.

The upgrade to the system is important because as you move to more renewables, the strength of the transmission system becomes very important to support that. You need the larger the area that you are serving through this transmission, because of the variability, for

[Page 16]

example, in wind, if it's blowing in Nova Scotia but not blowing in New Brunswick, working together we can help to balance both areas, or vice versa. So in terms of our strong move to renewables, that kind of improvement in the transmission system is very important and the kind of co-operation that is being built between New Brunswick, Nova Scotia, Prince Edward Island ,and Newfoundland and Labrador is going to be very important in the future.

One of the items that is on the agenda for those discussions is the creation of an Atlantic-wide system operator who would serve as an independent system operator. That is something that the government, through this process of co-operation with the four Atlantic provinces, is looking at that issue. The first step to doing that is an improvement in the transmission system, particularly between New Brunswick and Nova Scotia and, in the longer run, between Newfoundland and Labrador and Nova Scotia as the transmission at the moment between those two provinces doesn't exist. In terms of renewable energy, that kind of improvement in the transmission system is going to be very important.

MADAM CHAIRMAN: Thank you, Mr. Coolican. Again our time has elapsed and I will turn it over to Mr. Whynott for the NDP. Just one point on the questioning and I think, Mr. Clarke, that you had asked for a list of the consumers who were consulted who were feeling favourable so we'll put that on the list.

MR. CLARKE: Yes, and I would like, Madam Chairman, if they could provide for the feed-in tariff, all of the details around specific projects or interests that have been identified. I have asked about the fact that people are approaching the government and presenting projects and they are saying they can't be done. I'd like a list and the rationale why they can't.

MADAM CHAIRMAN: Our clerk will make a note of that and we'll add a minute on, so that you have a little extra time. Mr. Coolican.

MR. COOLICAN: I'm happy to give you a list of the organizations we've consulted with, but in terms of the community projects and the feed-in tariff, it's not the role of the government to say yes or no or to close the door, which we haven't been doing, on projects that are eligible for the feed-in tariff. The way the feed-in tariff works is that . . .

MADAM CHAIRMAN: Mr. Coolican, perhaps we could have that discussion at the end of the meeting when it comes to the request for information, only because the other caucus is waiting to begin, they have perhaps an entirely different line of questioning. I'd like to turn it over to Mr. Whynott, if I could. You have 20 minutes.

MR. MAT WHYNOTT: Thank you very much, Madam Chairman. I'd actually like to hear the comment that the deputy minister was about to make, so you can continue if you'd like.

[Page 17]

MADAM CHAIRMAN: Very good, that's your choice. Mr. Coolican.

MR. COOLICAN: Thank you. The way the feed-in tariff works is that we have set out the rules for any project. The Utility and Review Board is being asked to set the feed-in tariff so for a project, how much is that project going to be paid for the electricity that it supplies to system? For example, the Utility and Review Board will look at, for small-scale wind projects, what the costs are likely to be, what is a reasonable return in addition to those costs, to allow the project to go forward. That will set a rate.

Then the community project can begin, subject to the policies that have been set. It is not up to the government to say yes or no to this project or that project. If it is connecting to the distribution system in the area where it exists, if it is satisfied that the feed-in tariff set by the Utility and Review Board will provide it with sufficient return on its investment and they decide to go ahead, they go ahead.

MR. WHYNOTT: Thank you very much. First of all, thank you for being here today, it's great to see this topic coming forward to the committee. I just want to make a few comments and then I'll start asking some questions. I think Nova Scotians can be happy to know that the government committed to taking the HST off home electricity costs. In fact this year Nova Scotians are seeing a decrease in their costs by 10 per cent, which is a positive step forward.

I find it interesting you noted in your opening remarks around getting back to balance - the Minister of Finance is using this term when the government talks about getting their finances back to balance and it is interesting that you use the same analogy and the same term with regard to getting our electricity and our energy consumption back to balance.

Also, Nova Scotians are happy to know - I know I've talked to many people in the constituency that I represent who have said that Nova Scotia is a leader in setting these targets; hard targets of 25 per cent by 2015, 40 per cent by 2020. In fact, Nova Scotia was recognized as a leader for that by the international community at Copenhagen; I believe that both the Minister of Environment and the Premier have that award in their offices. That's something that Nova Scotian families should be proud of.

We, in Nova Scotia, have such great resources, especially when it comes to wind and tidal. When Nova Scotians travel to beautiful Cape Breton Island or they travel to Amherst or Cumberland County, I know I go up there often to where my family cottage is, and windmills are going up like crazy. This is just one more step along our road to get our energy consumption back to balance, so I'm glad to hear you say those sorts of things.

I do want to touch a little bit - I'd like you tell us more about the public consultation process around the renewable energy regulations and how the Department of Energy ensured that the feedback was considered in developing these regulations.

[Page 18]

[10:00 a.m.]

MR. COOLICAN: Thank you very much. Certainly, I think as I've travelled the province, I've noticed the same thing as the member has of the number of wind turbines that are going up. I recently had the opportunity to visit another mountain, Nuttby Mountain, and stood in the tower of a wind turbine that was being commissioned and it was up to one megawatt of production, there was a good wind that day. If it had been fully commissioned, it would be producing 2.2 megawatts of electricity, given that wind. It gives a certain reality to what we're talking about that these aren't just goals for 15 to 20 years from now, they're actually targets that we're in the process of achieving now. It's being done by Nova Scotia companies and it's being done by some companies from outside Nova Scotia that are investing in the province, and that's good to see.

In terms of the regulations, when we released the regulations in the early part of the summer, late Spring, we invited Nova Scotians to participate in the process. We asked people to submit their views to us in writing. We held meetings across the province and I don't have the details on every meeting and the numbers that came out, but we had a very positive response. I'd be happy to get information to the member about the number of people and the different interest groups that were there.

We've had a good and engaged conversation with a number of different groups across the province. We met with the owners of mills in the province because they had a concern that the way the community feed-in tariff was set up would not allow them to participate in a combined heat and power development. So we changed the regulations to enable them to participate in that because it makes their operations more efficient. It's from an environmental efficiency point of view that combined heat and power is also a more efficient way to make electricity, rather than direct firing of biomass. It was an important step that we took in response to the feedback that we heard.

The other thing I should mention is that we also invited feedback from First Nations, and the Mi'kmaq indicated to us that they weren't ready for that consultation over the summer. So we gave them a commitment that we were willing to enter into consultations with them this Fall, which has begun, and that we would make further changes to the regulations if we came to an agreement on changes that were necessary. The government feels that it's important that First Nations communities, as well as other communities, be able to participate in the increase of renewable energy. We expect to be coming back with further changes to the regulations.

The other thing I might add is that the people we talk to in the communities and the companies that are involved in doing renewable projects talk about the learning, say that this is a new area for them, for the province, in many cases they're new industries, and they want to make sure that we remain open to changes as we learn what's happening.

[Page 19]

Our department is certainly going to monitor the success of the community feed-in tariff because we're learning, as was mentioned by one of the participants at the news conference, the community feed-in tariff is something - the name COMFIT is a made-in-Nova Scotia name because there's nothing like it anywhere else that we're aware of. So it's a unique contribution of Nova Scotia to the development of renewable energy on a community basis.

MR. WHYNOTT: Thank you. Would you say that the Government of Nova Scotia is listening to Nova Scotia families and businesses?

MR. COOLICAN: Yes, I think the changes that were made to the regulations after the consultations indicate a willingness of the government to listen. I would also say that after the initial proposal for a 12 per cent increase, as a result of the fuel costs, the government listened to low-income customers, to small businesses, as well as to the large businesses on which a lot of employment in this province depends.

MR. WHYNOTT: Thank you. I'd like to talk a little bit about the goals that were outlined in the renewable energy plan. Can you tell us a little bit about that, some of the goals that were outlined and also, what has the province done since then regarding creating green jobs and growing the economy in Nova Scotia?

MR. COOLICAN: Yes, certainly. The largest objective of the Renewable Electricity Plan is the target for 25 per cent renewable by 2015, which as I indicated, the province is on track to meet that target. We've also set a goal of 40 per cent renewable by 2020, and as we learn over the next few years from the kinds of responses that we're getting to the targets and goals and to development, we'll begin to zero in on a plan for the 2020 goal, as we've set a plan for the 2015 target.

The other targets that we set in that are for the larger renewable projects, which are important to help us to balance the costs of doing this, as the larger projects can be brought in at a lower cost. We've set out 300 megawatts for Nova Scotia Power through its process with the URB, and we've set out 300 megawatts for independent power producers through a competitive process that the government will manage through a renewable electricity administrator. So we've taken in the past, Nova Scotia Power has made the decision through the competitive process; now it will be the government that makes it. I'm being told that's 300 gigawatt hours, not 300 megawatts. We're learning.

What we hope to do at the end of the process is to see if we can do a better comparison between which is the most effective and cost-effective way to achieve our renewable targets and we'll take that learning forward into the 2020 time frame.

The other target that we set was 100 megawatts from community projects - is it megawatts or gigawatts? - megawatts. We're not saying that if community projects come in

[Page 20]

at 120, that will be okay, it's not a fixed limit. Those projects will be subject to a feed-in tariff that we think will help those projects get off the ground. So those are the various targets that we've set.

In terms of green jobs, I think there was mention made to DSME and their development. The Premier is in Korea at the moment and has had meetings with DSME. I think the letter of intent that has been signed between DSME and Nova Scotia Power indicates the support for the green jobs in Trenton. Our department has also had a business and technology group in the department that has been, for the past number of years, focused on how you get jobs from supporting the oil and gas sector and that group is starting to look not just at the oil and gas sector, but it's starting to look at the renewable energy sector and has recently completed a study on where some of the opportunities are not just in Nova Scotia, but in other parts of the country.

We recently had a meeting with an American company that is interested in investing in offshore wind development. When they talk about the skill sets that they're looking for to help install their facilities, to help construct their facilities, it's the same skill set that Nova Scotia companies have developed dealing with the marine environment for the oil and gas sector. Cherubini is a good example of that where they've done some work on the OpenHydro-Nova Scotia Power tidal turbine that has been put in the water, because the skills they've developed in the offshore industry also apply to certain aspects of the renewable industry.

MR. WHYNOTT: I'd like to ask you about how high electricity prices have gone up over the past 10 years as a result of fossil fuel prices.

MR. COOLICAN: Well, it's difficult to do an exact calculation of what's the responsibility of fossil fuel prices, but if we look at the fewer requirements for Nova Scotia Power, it's about 40 per cent to 50 per cent of their revenue requirement, if you look at the increases over the last number of years. Now a portion of that is natural gas which is carbon, but it's not solid fuel, it's not coal, so you'd have to separate that out. Certainly it's a significant portion of the costs and when you look at the fuel adjustment mechanism and the impact that's having on rates, that's a result of the costs of coal and it's a result of some of the costs of the additions that are made to help meet emission requirements.

MR. WHYNOTT: Any guesstimation on possibly how much those prices have gone up over the past 10 years?

MR. COOLICAN: I don't have that with me, but I'll get that for you.

MADAM CHAIRMAN: Perhaps that could be provided to the committee. Thank you.

[Page 21]

MR. WHYNOTT: I guess in regard to those rates, if this plan wasn't put in place, how would maintaining the status quo affect ratepayers? If we had stayed the status quo, what would have happened?

MR. COOLICAN: If we stayed the status quo without the move to renewables, I think we would see (Interruption) As Scott is suggesting, we wouldn't be able to meet the emission targets, or it would be extremely expensive to meet the emission targets. In addition, we see coal prices as going up over the next number of years, at a fairly dramatic rate.

When you look at the demand for energy in world markets, the commodity that is expected to increase the most over the next 10 to 15 years is coal. That's as a result of the demand in China primarily, so we see a continuing increase in the cost of coal. As one of the members mentioned previously, once you've invested in a wind turbine, the cost of wind is not going to go up. You've fixed your costs because your costs are primarily the cost of capital, as a result of the construction. We think it will have a stabilizing impact on rates over time, as we move to more and more renewable.

MR. WHYNOTT: Thank you. I think Nova Scotia families would be happy to hear that. When I talk to people in my constituency that's what they want to see, that not only is the government doing something about it now, which they did by removing the HST off home electricity costs by 10 per cent, but for the future, moving this province forward to ensure that price stabilization is key for them because a lot of low income - not only low income but middle income, small businesses as you mentioned, every little bit of savings will help. They can at least now plan their own budgets, both in the household and within business, to move forward in their own planning for the future.

[10:15 a.m.]

I do want to say thank you for coming today and it has been a learning for me to hear some of your comments and I want to say thank you very much.

MADAM CHAIRMAN: Thank you very much, Mr. Whynott. We'll begin the next round then. We have 11 minutes for the next round of questioning. I'll turn it over to Mr. Colwell.

MR. COLWELL: Thank you. In the summer of 2010 the NDP Government announced they would delay bringing in the cap on mercury emissions for four years. This is the only province in Canada that has done that. Could you tell me where the direction came from within government to do that? Was it something initiated by the Department of Energy or was it another department?

MR. COOLICAN: It was a decision of the government.

[Page 22]

MR. COLWELL: The government moved that to 2014, it just happens to coincide with when the next election is probably going to be and we can move that away. Nova Scotia claimed that it would increase the cost to people in Nova Scotia if they could meet them but at the same time, what I understand from reports we've seen, Nova Scotia Power was already on track to meet those requirements this year. Is that correct?

MR. COOLICAN: Well, the strategy that Nova Scotia Power decided to take to meet mercury emission targets was to go for a higher quality of coal and to go for the activated carbon addition as the flue gases were coming up. What happened was - and this is something that meets the mercury emission targets, allows them to meet the mercury emission targets - the costs of doing that turned out to be far more than had been thought because of other jurisdictions that are looking for the same strategy, had adopted a similar strategy. So it's the old supply and demand, about the only thing I learned in economics in university, so as the demand went up the costs went up considerably. That was going to have an impact of a dramatic increase of 12 per cent in the electricity rates for average Nova Scotians and 18 per cent for the industrial customers.

The government decided that that kind of cost to the economy of Nova Scotia was not something that was sustainable, so it set a different strategy to achieve the same targets for mercury emission reduction over time, as was there in the first place, but to do it in a manner that would save the Nova Scotian economy in the range of $50 million to $60 million a year. As I mentioned earlier, that's a cost saving to the businesses of Nova Scotia, that's a cost saving to the electricity consumers of Nova Scotia. It does not accrue to Nova Scotia Power or its shareholders.

MR. COLWELL: Yes, I understand that, but again, as I said earlier, it does affect the health of Nova Scotians and those costs are growing exponentially.

Did you have any input or did any government official have any input into this decision to move out the cap on mercuries to 2014?

MR. COOLICAN: It was a decision of the government.

MR. COLWELL: Were you asked by the government for any advice on this, before the decision was made?

MR. COOLICAN: There were a number of officials in the government who were involved in providing advice to the government. The Department of Energy provided advice, there were other departments that provided advice to Cabinet and they made the decision.

MR. COLWELL: On this specific issue?

MR. COOLICAN: Yes.

[Page 23]

MR. COLWELL: Was your advice in line with what the government finally decided to do?

MR. COOLICAN: The advice I give to the government is given in confidence.

MR. COLWELL: That's what I thought. It just so happens that 2014 is probably about the time the new election will be and they can be clear of this by then.

Your department is also creating a new section, which is Efficiency Nova Scotia. Is that in place yet? When it's all in place, how many staff will be involved with that?

MR. COOLICAN: Efficiency Nova Scotia was set up as an arm's-length Crown Corporation, and as I recently dislocated by shoulder about a year and a half ago, I always say it's arm's length and my shoulder is dislocated. So it's not something where I have - it's not something that the Department of Energy is supervising the staff or the number of staff who have been hired. I can tell you that they have a number of key staff. They've hired the CEO and they're in the process of hiring now. They advertised for a number of jobs and I believe that hiring will be complete by the end of the month.

MR. COLWELL: Efficiency Nova Scotia would respond to you, as deputy minister, and to the minister, even though they're a Crown Corporation?

MR. COOLICAN: No. Efficiency Nova Scotia comes under the Minister of Energy but Efficiency Nova Scotia reports to a board that has been created, they don't report to me. The government will be making a contribution to help Efficiency Nova Scotia with non-electric efficiency projects, so if you think about Efficiency Nova Scotia and the demand side management funds, those are intended for electric efficiency projects, to decrease the amount of electricity that's being used.

One of the aspects that has been talked about here is the cost to consumers and the demand side management program, and the contributions that the Department of Energy and the government will be making to the non-electric efficiency will be invested in businesses and consumers across the province. If you think about your own home, if you invested a certain amount of money in improving the energy efficiency of your house, the reduction as a result of that, the cheapest form of energy is the energy that you don't use. So if you're heating your home with electricity or if you're lighting your home with electricity, if you are using energy-efficient light bulbs, you are saving money in the long run. The impact of increasing energy costs will be much less for you because, again, the electricity you don't buy is much cheaper.

MR. COLWELL: I understand that. I'm going to ask you another question. What energy conservation programs will remain with the Department of Energy?

[Page 24]

MR. COOLICAN: The energy conservation programs will be run through Efficiency Nova Scotia, not the Department of Energy.

MR. COLWELL: There will be none left in the Department of Energy at all, it will be strictly . . .

MR. COOLICAN: There aren't any in the Department of Energy now.

MR. COLWELL: When is the new Crown Corporation supposed to be up and fully going? What is the mandate that was put forward to them to do that?

MR. COOLICAN: I don't have a firm date on that at the moment, I can get that for you.

MR. COLWELL: What kind of funding is the province going to provide for that organization?

MR. COOLICAN: The province will be providing significant funding to Efficiency Nova Scotia, but until the budget is set for next year, I don't have a specific number I can give you.

MR. COLWELL: Will the overall budget for the Department of Energy and the new Crown Corporation exceed the existing budget or does it now?

MR. COOLICAN: Well, the increase in demand-side management funds available to Efficiency Nova Scotia will be quite significant so that will bring an increase to the amount of money that is being spent on energy efficiency in the province.

MR. COLWELL: What type of programs are they mandated to consider?

MR. COOLICAN: They'll be looking at a range of projects that encourage the efficient use of electricity and other forms of energy, in homes and businesses.

MR. COLWELL: With really no set date or target for the government to set this organization in place, which I think is a very important organization because if we can save energy, as you say, the kilowatt hours that you don't burn, you don't have to generate and don't cost.

MR. COOLICAN: I might just add that while the process of Efficiency Nova Scotia being established is happening, it doesn't mean that energy efficiency projects have stopped. Conserve Nova Scotia is continuing to offer the programs that it offered previously, and recently there was a new program announced for the construction of new homes. Also, the

[Page 25]

demand-side management being offered by Nova Scotia Power has continued, so nothing has stopped while Efficiency Nova Scotia is being set up.

MR. COLWELL: Will Conserve Nova Scotia be dissolved once the new organization is in place?

MR. COOLICAN: Yes.

MR. COLWELL: When do you anticipate that is going to happen?

MR. COOLICAN: I anticipate the dissolution of Conserve Nova Scotia by the end of this fiscal year.

MR. COLWELL: That would be the end of April 2011?

MR. COOLICAN: I'm not all that familiar with fiscal years in government. (Interruption) The end of March. I better learn that.

MADAM CHAIRMAN: Mr. Colwell, your time has almost elapsed, you have a few seconds to maybe wrap things up.

MR. COLWELL: I just want to thank you for coming today and for some of the information you provided.

MADAM CHAIRMAN: Thank you very much, Mr. Colwell. Again, for 11 minutes, we'll turn it over to the Progressive Conservative caucus. Mr. Clarke.

MR. CLARKE: Just to start, Madam Chairman - and I know one of our colleagues may be taking the Chair later on - specifically with the Department of Energy and information requests that I'm looking for and for the benefit of the clerk, one would be just all documentation associated with the renewable energy strategy, the targets, goals, objectives, projects and time lines, that that information would be available.

The second would be a list of all stakeholders consulted as part of the feed-in tariff initiative, as well as a list of proponents that have approached the government to introduce a renewable energy project or initiative in the province. The third would be any documentation with regard to the state of Nova Scotia's transmission infrastructure and any of the costings associated with the current grid, any new capacity or projects, any regional projects such as the Lower Churchill project that they would have consulted on and independent system operator dialogue and any time lines that they would envision.

[Page 26]

I would ask for that information, I would hope we wouldn't have to have a Freedom of Information and Protection of Privacy to have public money go into answering something that the public department could provide. Thank you.

MADAM CHAIRMAN: Thank you, Mr. Clarke. Mr. MacMaster, you have some time.

MR. ALLAN MACMASTER: Thank you, Madam Chairman. Energy is very important for the area that I represent because the NewPage paper mill consumes 10 per cent of the province's electricity; one-third of the operation's costs are energy. I can tell you that if we ever lost NewPage, the Strait area would be significantly affected and that would reach out into Antigonish, Guysborough, even as far as Pictou Counties. It would certainly reach into Inverness and Richmond and Victoria Counties and even beyond, so energy is something I think about a lot.

I guess the focus of my questions today will be on renewables and on the price of energy and where it is going. I want to say right off the bat that I am supportive of renewable energy projects in this province; they create jobs and I'd like to see our world moving in that direction. Some of my questions highlight my concerns for how quickly we move in that direction and what effect that may have on our economy because if we start to lose significant numbers of jobs in the province, again our priorities will change and they might become more like a developing nation would be where, if we look around the world, a lot of developing nations don't place as high a priority as we do in this country because of our standard of living.

[10:30 a.m. Mr. Leonard Preyra took the Chair.]

The first thing I'd like to get into is the input costs for energy. If we look back to the summer of 2008 we saw a spike in energy costs and I think it was driven, from your remarks earlier would concur with this, from China and other countries and the path of growth that they had been on, supplying primarily the United States. When the stock market crashed and the U.S. economy collapsed because of the housing bubble, I think the commodities collapsed likely because they predicted the U.S. consumer wouldn't be consuming as much. So we saw energy rates go up and come down, now they're going back up again.

The rates in this province for users, they go up on more of an even pace. Is that because we have a system to smooth out the cost of energy for things like coal and oil and other inputs?

MR. COOLICAN: That's a good question. I think members will notice that over the last year, and I think that Scott may be able to help me on this, there was a reduction in the fuel costs, I think reflecting some of the decrease in fuel costs worldwide. I think there was

[Page 27]

an over-subscription to that refund or reduction and that is being recovered at this time. (Interruption)

Scott mentioned it was an offset to the DSM charge. So while I guess rates would have been higher than otherwise, the system is, because of the fuel adjustment mechanism, responsive to changes in primarily coal and natural gas prices because those are the two main fuel sources that are used.

You mentioned the importance of NewPage in your area. I think one of the things about our renewable electricity strategy is that it is a strategy that will bring economic activity and development to all parts of the province, so the recent approval by the URB of the NewPage biomass project is going to have a big impact in your area, both in terms of improving the efficiency of the NewPage mill, but also in terms of direct employment as a result of the additional harvesting that is going to take place in the area.

I think when you look at the wind map of Nova Scotia, it's not such a big deal in Halifax. I mean there is some wind around but also neighbourhood concerns and that sort of thing. You see the wind projects happening primarily in areas in the rural parts of the province. I think that is seeing some job creation in different parts of the province. The renewable strategy and the importance of the community feed-in tariff as well leads us to a policy that will encourage development throughout the province.

MR. MACMASTER: Thank you. I was very pleased with the URB's decision on the biomass, it will mean a lot for the area. I have a lot of questions, but I don't have a lot of time. I guess one of the themes I was going to talk about and I've kind of talked about it already and I would agree with my colleague down the line here about the fossil fuels. The price is going up, they've dropped down, but we're likely to see a trend where they're going to continue to go up. One of the reasons why coal is going up in price is also because of carbon penalties, there's countries around the world, so there are some man-made costs. I can see the benefit in that because perhaps we're including the cost to the environment of those types of fuel and how they do cause damage to the environment.

I guess what I would like to do is try to balance that with our need to keep energy affordable for Nova Scotians. We all have to drive a car, most Nova Scotians are in a rural area and even people who live in the city here, everybody is using cars and we have industry. A lot of our manufacturing is moving to countries like China because they have cheap labour and they have cheap energy. One question I would ask is, do we look around the world to see if other countries like China are looking at renewable energy?

MR. COOLICAN: Yes we do and for example, one of our officials has been invited to Korea - all expenses paid by the way - based on our expertise that we are developing around tidal energy. We try to maintain contacts with organizations that do bring us information about international trends.

[Page 28]

The recent core conference, for example, brought in Ian Cronshaw from the International Energy Agency and he had an opportunity to meet with officials in our department as well as with the Premier, to talk about some of those issues. So we are watching what other countries are doing and while our plan is not based on solar, there's a lot of evidence that the Chinese have taken huge strides in terms of the solar industry, both in terms of supplying components to the solar industry, but also in terms of development in their own country.

MR. MACMASTER: Do we know what the cost per kilowatt is to generate - if you were to generate it by wind power, what would be the cost per kilowatt?

MR. COOLICAN: I thought that would be the answer that we would get - it depends.

MR. MACMASTER: Yes. Is there an average?

MR. COOLICAN: It depends on the wind regime, it depends on the scale of the project (Interruption) Scott is telling me that some of the initial projects came in at the seven cent range and now prices have increased and we're in the 10 cent range.

MR. MACMASTER: May I ask, what would be the cost per kilowatt generated by coal?

MR. COOLICAN: Again, the answer is, it depends.

MR. MACMASTER: Is there like a range or an average for the last couple of years?

MR. COOLICAN: I'd say four cents.

MR. MACMASTER: I don't have much time left, but I guess where I would continue to go with questions is, and I'd like to put it on the record - I'm concerned about how quickly we move to renewables, if the technology is not yet developed, or it has become as cheap as say coal, this is before any carbon penalties are taken into account. I think we need to make sure that Nova Scotians have affordable energy and that Nova Scotian companies remain competitive in the world.

My colleague has mentioned about a plan and I know things are always being planned, but I would like to put that on the record today. I hope that we don't see surprises like we saw this year when the government backed off on their renewable targets because energy prices were going to go up 12 per cent to 18 per cent because energy prices were going to go up 12 to 18 per cent because if we're not careful, we could do damage to our economy.

MR. CHAIRMAN: Mr. MacMaster, your time is up.

[Page 29]

MR. MACMASTER: Thank you for your time.

MR. CHAIRMAN: Thank you. We'll move to the last round of 11 minutes, starting with Mr. Epstein.

MR. HOWARD EPSTEIN: Thank you, Mr. Chairman, and deputy, thank you for your presentation. We've covered a lot of ground and it's not surprising, I guess, when any discussion on energy takes place, it could lead virtually anywhere. I do want to go back and ask you some things that occurred to me on the basis of some comments you made in the first round of questioning, in response to my friend Mr. Glavine.

I want to start with the comment you made that we have to learn how to manage wind in the system. It seems clear that as we move towards greater reliance on renewables in Nova Scotia, that is going to mean wind. I appreciated your comment but I'm wondering if you could really explain what you actually meant by that, that we have to learn how to manage wind in the system. Are you talking about physical changes to the transmission and distribution system or are you talking about switching back and forth or both? Could you explain a bit more about what you meant?

MR. COOLICAN: Maybe it was a personal comment that I have to learn more about wind in the system. I think there's a lot of conversation in the industry about the industry is used to sources of energy that are constant; you kind of turn it on and it stays on. If you think about a coal plant, it takes time to get it going and once it gets going, it's better if you keep it going. Nuclear is even more so, in terms of a nuclear plant. It is very expensive to turn it off and get it up and running again. Gas-fired is easier to go up and down. In this province, we have the facility at Wreck Cove that was built primarily to serve Sydney Steel because when the arc furnace went on, it required a significant load right away. You couldn't do that with coal so Wreck Cove was built as a hydro facility to provide that instant load.

Dealing with wind, because wind is so variable, it becomes a question of balancing the system. I don't know a lot about it but I do know that the question of power quality and balancing the system, to make sure that you've got electrons where you need them, is incredibly important to the overall operation of the system and having power on when you need it.

There are questions that are being asked about the capability of the distribution system and the transmission system and whether or not there will be upgrades required as we ramp up the amount of wind but I think, as I mentioned, we're learning so we don't know yet know all the answers to that.

The other area that is being investigated is the so-called smart meter and the impact that will have on people's lives and the way they use energy in their home. Is there a way that you can encourage behaviour that works with the wind, as opposed to against the wind, when

[Page 30]

you are using energy? There are all kinds of questions about in the longer run if the automotive industry moves to electric, do cars become part of the storage system where you are storing energy through your automobile battery while the wind is wind is blowing or while the load is lower on the rest of the system? There are all kinds of those sorts of issues that are being talked about now, that get to the question you are asking.

MR. EPSTEIN: I think this question of the capacity of the overall grid, including the transmission and distribution system, is an important one because looking ahead, if significant alterations are needed, it will be a capital cost and it will have to be sorted out either for Nova Scotian customers alone or for a combination of provinces together, if there are inter-provincial hookups to sort out.

I'm wondering if you can tell us anything about - even if there are general order of magnitude estimates of what number of dollars might be involved or whether that process is at such an early stage that we just don't know.

MR. COOLICAN: In terms of a general improvement, I think it's too early to say. In terms of the New Brunswick-Nova Scotia improvements, that would be in the $300 million range for those improvements. If you talk about the connection to Newfoundland and Labrador, that project, you're looking at $1.2 billion.

It is also important to remember that some of these projects, by improving the transmission system and the ability of the systems to work together, we may be able to create some efficiencies that will reduce costs in other ways. So if you're running a system where you're taking the lowest cost, best environmental performance source of energy and you're just looking at Nova Scotia, your opportunities for savings may be limited. If you're looking at a larger system that includes New Brunswick, the opportunities for savings both on the New Brunswick side and the Nova Scotia side, may be greater because you can call on the lowest cost, best environmental performance.

There are a lot of issues to be worked through before we get there but it may create some savings but you need improvements to the transmission system to be able to do that.

[10:45 a.m.]

MR. EPSTEIN: Yes, and the projected costs are for the New Brunswick connection and potential Newfoundland connection is because there would be increased capacity, is that right?

MR. COOLICAN: I'm sorry?

[Page 31]

MR. EPSTEIN: The reason there are fairly large numbers of dollars potentially associated with the inter-provincial hookups is because they would imply greater capacity, is that correct?

MR. COOLICAN: New Brunswick would double the capacity. I don't speak for the Government of New Brunswick but there are issues in New Brunswick along their line for transmission within New Brunswick, which would argue that they need to improve their transmission in New Brunswick. For Nova Scotia, it will be less cost because the distance that we're covering is not so great to the New Brunswick border but it is important in the New Brunswick-Nova Scotia context because we need greater ability to export or import because we've been close to the limit a number of times in the last little while.

MR. EPSTEIN: Yes, I think the export aspect is going to be quite crucial when we look at that. There's a second point that actually arose from the questioning of one of the earlier members who asked you questions. It had to do with direct sales to consumers and you were asked if the department had a view about this and you gave a fairly definite no.

I've been trying to follow energy policy fairly closely but I hadn't heard that so definitely defined before. I took the question to be one of wheeling along the system, from an independent power producer to a customer. I think this is one of the recommendations, of the Electricity Marketplace Governance Committee some years ago that the system be opened. Do I take it that the department is now saying that they reject that or they just don't incorporate it . . .

MR. COOLICAN: It's not something we're looking at at the moment. I think some of the challenges we face at the moment in meeting the renewable targets that we've set - and we have put considerable onus on Nova Scotia Power to meet those targets. So Nova Scotia Power has an obligation to serve and an obligation to meet certain renewable energy targets.

At this point, we don't see any strong advantage to the system or to the market by allowing independent producers to make deals with individual customers. Now individual customers can certainly, as a part of the policy, generate its own power to serve its own need and we've also put in place a net metering policy, where individuals can do that, where, if you wanted to put a photovoltaic panel on your roof and you could sell back to Nova Scotia Power for the same price that you're paying them, which is an advantage over the way the system worked until now.

MR. EPSTEIN: Yes, I understand the duty-to-serve argument, it's a very important point. But actually, your comments on net metering are where I wanted to go next, so I'm not sure if you've answered my point. Could we hear more about how you anticipate, how the plan anticipates, that net metering will work, what class of customers it will apply to and what rates and whether there are limits on it? Could you just tell us a bit about how that's going to work?

[Page 32]

MR. COOLICAN: The limits are that it's within the distribution zone so that from the point of view of the system, we're not going to have more energy coming from net metering than that area uses, so we don't want it tied into the transmission system, for example, and we put a limit of one megawatt on the amount you can sell to, not sell, but (Interruption) offsets . . .

MR. CHAIRMAN: Mr. Epstein, your time has expired.

That concludes our rounds of questioning. I just wanted to note for the record that Mr. Theriault, the member for Digby, has joined us. I also want to thank you for your presentations and for your presence. Mr. Coolican, if you or any one of you would like to make a closing statement, you have a couple of minutes.

MR. COOLICAN: I think I'd like to say a couple of things. First of all, I appreciate the opportunity to come here and there's obviously a fair amount of interest and expertise in the Chamber around energy issues and it's not all on this side of the table, I can tell you that. We appreciate the interest, I hope it doesn't just end with this session. I think a number of the themes that, while there are some disagreements between the position that we're taking and the views expressed by some members, there does seem to be a general agreement in the importance of balance, in the importance of emphasizing renewable as a way to try to create some stability in electricity prices in the years ahead.

It's not surprising that there is that coming together of views because certainly when you look at when we talked to customers, when we talked to potential suppliers of renewable energy, when we talked to small businesses they come up with a similar strategy. The IRP process that the URB conducted came up with a similar strategy as well, that for long-term price stability it's important to move to renewables; that gives you greater stability, to move to energy sources that are produced from within Nova Scotia, so that we have better security of supply, so the payments are staying more within Nova Scotia, rather than going to another country who is producing the coal. I think there is general agreement on those aspects.

I appreciate the time and I hope we can meet again, but maybe not as soon as the last time.

MR. CHAIRMAN: Thank you, Mr. Coolican. Before you go I just want to confirm that we have two requests for documents. I wouldn't want to characterize Mr. Clarke's question, but he has tabled it and I believe that will be transmitted directly to the department. Also, Mr. Whynott had a request for data relating to the rising costs of fuel prices over the last 10 years and projections into the future, I believe.

MR. COOLICAN: I'll just comment that we won't require the member to go through FOIPOP, but there may be some principles on the ability to protect commercial information that we may apply to the request.

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MR. CHAIRMAN: Thank you, Mr. Coolican, we'll cross that bridge if and when we come to it. We'll adjourn for a couple of minutes to give our witnesses a chance to clear the room. We have a couple of items of committee business that we will get to in two minutes.

[10:53 a.m. The committee recessed.]

[10:54 a.m. The committee reconvened.]

MR. CHAIRMAN: Thank you for staying, everyone is still in the room so we may as well get right down to business. At the end of the last meeting there was a motion on the floor tabled by Mr. Glavine relating to the release of prisoners on weekends, I believe it was.

The matter was referred to the Subcommittee on Agenda and Procedures and the subcommittee met and I believe we agreed to strip the motion of some of its flourishes and we went directly to the questions asked about data. To wit, which offenders benefitted from these temporary absences, what types of crimes were they found guilty of, and did they re-offend while out of custody? The Agenda and Procedures Subcommittee is recommending - and you all have the motion in front of you - perhaps we should just ask Mr. Colwell, if you would like to move the motion?

MR. COLWELL: Which one are we moving? There are two motions.

MR. CHAIRMAN: I think the first one relates to the request for information.

MR. COLWELL: I so move.

MR. CHAIRMAN: For the record the motion reads:

The Subcommittee on Agenda and Procedures unanimously agreed to recommend to the Standing Committee on Public Accounts that a letter be written to the Department of Justice requesting a response to the following questions (as stated in the motion of October 13, 2010): which offenders benefitted from these temporary absences, what types of crimes were they found guilty of and did they re-offend while out of custody.

Would all those in favour of the motion please say Aye. Contrary minded, Nay.

The motion is carried.

Thank you. There was a second motion that relates to the need for a meeting. The Agenda and Procedures Subcommittee amended that motion with unanimous consent. Would you like to move that, Mr. Colwell?

MR. COLWELL: I so move.

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MR. CHAIRMAN: That motion reads:

The Subcommittee on Agenda and Procedures unanimously agreed to recommend to the Standing Committee on Public Accounts

" . . . for approval of a supplementary meeting of the Public Accounts Committee with the purpose of calling witnesses, including Marian Tyson, Deputy Minister, Department of Justice and Sean Kelly, Director of Correctional Services, Department of Justice with regard to temporary absence passes being granted to convicts.

Any further discussion? Mr. Clarke.

MR. CLARKE: Mr. Chairman, to the motion, I'm happy to have this motion amended as well if there's a desire - as a former Attorney General and Minister of Justice - to be a witness to this and I would hope the current Attorney General would want to be part of that and the former Liberal Attorney General, because we're referring to Burnside and it was the former Liberal Government that designed the P3 process that put it in place. You will recall it was only until after a general election that it was moved from Burnside to there. So the institution and the rationale.

Maybe if we're going to ask for staff input because both the current minister and myself have had statements on that, but I would be willing to be a witness to this committee and would hope that the current minister and former Liberal Minister would want to do the same.

MR. CHAIRMAN: Thank you. Are there any other comments on this? I wouldn't say it's a friendly amendment (Laughter), but would the former minister like to comment?

Mr. Colwell.

MR. COLWELL: Just one question on that. If the present minister refuses to come - and based on what has happened in the committee before the NDP Government and also the Progressive Conservative Government was here - my guess is that they will refuse to come, then I would think the amendment should be - while I'm willing to support the amendment - should be null and void.

MR. CHAIRMAN: Mr. Epstein.

MR. EPSTEIN: Thank you, Mr. Chairman. I don't think we can support this amendment. I think the normal place to start would be with the incumbent responsible ministers and department officials, in order to sort out where we are. I think we would only move to any previous governments if for some reason a particular point arose that needed

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clarification or if there was a problem in getting the information that we needed. Calling them together just seems not the right way to do it.

I think if we're starting something that begins to look like a more elaborate inquiry into a department or part of its operations, then probably the way to proceed would be with a variety of witnesses over a number of sessions but I hardly think we're at that stage with this particular item yet. So I think at this point we certainly couldn't support this amendment. Thank you.

MR. CHAIRMAN: Thank you, Mr. Epstein. As much as I would like the spectacle of former Justice Ministers battling it out on this issue, I do think the role of this committee is really to look at current policies and if there is any need at the end of any meeting we might organize, we might move in that direction. Yes, Mr. Clarke.

[11:00 a.m.]

MR. CLARKE: Just for clarification purposes, as you know, offering to be a witness does not get into a battle because you are therefore a witness, as the department officials just were. I was willing to be a witness, as a former Attorney General, and would think that for the purpose of transparency and public confidence about what ministers did or didn't know. What is referenced in the previous preamble is an assumption that it's an issue of just the previous Progressive Conservative and current NDP Government when, in fact, this whole thing started with a Liberal Administration with a P3 process with a design that was flawed.

I'm just saying that if you're going to have a witness, of which I'm more than prepared to sit in a witness chair here - which is not a debate, as you know, you can only respond to the questions answered. But for purposes of transparency and clarity and public confidence, I have offered to be there and I thought that the current minister and former Liberal minister would want to do the same.

MR. CHAIRMAN: Thank you. We will ask the question, do we want to accept this amendment? I see a lot of heads shaking. Okay, the question.

Would all those in favour of the amendment please say Aye. Contrary minded, Nay.

The motion is defeated.

So we are back to the original motion and that is to approve a supplementary meeting of the Public Accounts Committee with the purpose of calling witnesses. Let's put that question first, do we agree?

SOME HON. MEMBERS: Agreed.

[Page 36]

MR. CHAIRMAN: Thank you. The question then becomes as to when this supplementary meeting can be organized. I think in fairness to the chairman of the committee, I should say that there was some discussion at the Agenda and Procedures Subcommittee about the urgency of this meeting and the need for this meeting.

One issue that was raised was whether or not we should wait for the data that was asked for in the earlier motion and that is for data relating to the offenders who may have benefitted from temporary absences, the types of crimes and whether they re-offended, whether we wait for receipt of that data before we move to the next question of a supplementary meeting or if we move to a supplementary meeting now and the question is how we go about setting a date if, indeed, we move to having a supplementary meeting. Yes, Mr. Clarke.

MR. CLARKE: There was a sequence of the requests and I think for the benefit of the committee, if you're going to go to a hearing, having that information would be appropriate before you actually have the witnesses come forward to provide clarity of that, rather than getting the information in a meeting and trying to respond, in fairness to the witnesses. We are asking them a question and when they respond we should look at that and then schedule a meeting based upon the information supplied because the committee may feel that the information supplied is sufficient and on its consensus decide not to proceed, or feel that it's compelling and want to have them here before the committee.

MR. CHAIRMAN: Okay, thank you, Mr. Clarke. As I understand it, you're recommending that the chairman write to the Department of Justice to get this data and then the committee will receive that data and make a decision at that point? Okay.

Mr. Colwell.

MR. COLWELL: I concur with the honourable member's suggestion on this, but I would suggest that possibly we put a deadline on when they are going to respond to us because this is a rather urgent matter and I think we should get the information back. It is information that should be readily available, it's not something that should take months and months to locate.

MR. CHAIRMAN: The committee, as I understand it, is recommending that the chairman write to the Department of Justice and set a date, no more than three weeks, that the chairman request for a response to these questions or at least the place they're at, at three weeks from now and no later. I know I didn't say that very well, but I think we understand that there will be a three-week timeline based on the first motion.

Would all those in favour of the motion please say Aye. Contrary minded, Nay.

The motion is carried.

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I don't believe there is any other business.

MR. WHYNOTT: I move to adjourn.

MR. CHAIRMAN: We are adjourned.

[The committee adjourned at 11:05 a.m.]