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Danielle In The House, October 29: Electric Utilities Amendment Act
Ms Smith: Thank you, Mr. Speaker. Well, I rise with some satisfaction to speak in favour of Bill 8, the Electric Utilities Amendment Act, 2012, a bill which is a direct response to a key recommendation of the Critical Transmission Review Committee and ensures that all future transmission line projects require complete review and approval by the Alberta Utilities Commission, not the provincial cabinet.
When I look through Bill 8, the four simple clauses that repeal section 41.1 of this legislation, I am just struck by how easy it was to fix at least half of the problem with this bill. The reason I’m struck by that is that when I remember the abuse that was hurled at my four MLAs in the Legislature in the spring and earlier when they talked about the problems of this bill – they were ridiculed; they were told they were wrong; they were told they didn’t know what they were talking about – it is actually gratifying to see that the government has finally listened. I suppose part of the reason is because we now have 17 members on this side of the Chamber.
I want to pay a special tribute to the Member for Rimbey-Rocky Mountain House-Sundre, who earlier today tabled proof of probably one of the most scandalous and embarrassing incidents in this government’s history when they hired private investigators to spy on an Alberta landowner group that was opposed to Bill 50 and what it would do to landowner rights. I find it fantastic that the Member for Rimbey-Rocky Mountain House-Sundre is sitting here in this Chamber and will have lots and lots and lots of opportunity to talk about this bill and what’s wrong with it. Let me go to a couple of issues about why we speak in favour of this bill. The first is the recognition by the government of the importance of an independent needs assessment conducted by the Alberta Utilities Commission as opposed to approved through cabinet. Why is an independent needs assessment important?
Well, it’s quite simple. It’s so that the companies who are proposing transmission needs or the Electric System Operator proposing transmission lines can have their data challenged by consumer groups, both industry as well as residential, challenged by landowners so that we actually don’t see mistakes made, so that when government makes a decision to approve a transmission line for construction, we can be certain that it is actually needed. That’s the reason we have a two-step process for approving transmission lines: one step to approve need, the second step to approve the routing of it.
We’re delighted that the government now understands that on a go-forward it makes no sense for members of cabinet, who have no experience in assessing transmission needs, who are not electrical engineers themselves – it made no sense whatsoever for them to take it upon themselves to believe that they could make these decisions in the absence of that independent review. Why we look at this as only half a solution is because it only looks at approving transmission projects on a go-forward. We believe that what we need to make sure of is that we don’t end up making the mistake of building the six lines that cabinet did ascertain were critical infrastructure when we don’t actually really need them. We will be proposing amendments to repeal the schedule so that we can go back and have independent needs assessments for those six projects as well because if it doesn’t make sense on a go-forward for cabinet to be approving these projects, it didn’t make sense when they did it in the first place.
Let me talk about the three mistakes the government made when they first brought through this legislation. The first mistake they made was that they did not realize that in making a decision like this, the paradigm had changed for how we determine our transmission needs. Back in the early 2000s there was a big debate over what our base fuel should be not only Alberta but in North America. The big debate was over these great, vast supplies of coal that we would be able to use to produce cheap electricity versus relatively costly natural gas. You may recall that back in 2006 the price of natural gas spiked up to $16 per mcf. When you were looking at that world, having a discussion about what kind of transmission system you’re going to need looked very different than the kind of transmission we need today. I’ll talk about that more in a minute.
The second thing – and this has been revealed in the WikiLeaks cables that were leaked a number of months ago when a former Energy minister went down to Washington and was talking about how Fort McMurray was going to have oodles and oodles and oodles of electricity, cheap electricity that they didn’t know what to do with, that we would need to export somewhere, and the United States would be the obvious market to export all of that electricity. Once again, the world has changed for what the expectations are of those companies up in Fort McMurray.
Why did they change? A couple of reasons. Well, natural gas became a game changer. An Alberta-based company, Packers Plus, developed the technology for horizontal multistage fracking, unlocking shale gas resources all throughout western Canada and the United States. As a result, we now see the consequence today.
We have natural gas prices that range anywhere from 2 and a half dollars to 3 and a half dollars. It looks like we’re going to have a 120-year supply of natural gas.
It’s in this context that we now have to reassess our transmission needs because in the past when we were looking at coal, building coal plants hundreds of kilometres away from end consumers and then expensive transmission lines to transport that electricity hundred of kilometres may have made sense. In a new world, where natural gas becomes the base fuel, it is possible to build smaller units closer to end consumers so that you don’t need to build all of those transmission lines. That is the analysis the
Alberta Electric System Operator needs to do. That is the analysis that the government has failed to perform, and that is why we’re still stuck on looking at six projects that we don’t actually need.
The second major game changer has been in the area of microgeneration, albeit that this is on the cusp of being transformative technology. In my own constituency of Highwood we have a renowned microgeneration project in Drake Landing. It’s won an international award as well as an Emerald award as well as several other awards, including one from the Federation of Canadian Municipalities, because they have 52 units where the solar heat is taken into the ground, stored in a liquid, and then in the winter it’s used to heat the homes. These are the kinds of really exciting microgeneration technologies that we can use. That’s for heat.
There are additional ones that we have heard about being used for solar film on windows to be able to generate electricity. We know, as well, that there are forestry projects. I’ve travelled the province. There are all kinds of microgeneration forestry projects using biomass.
In addition to that, more and more people are looking to naturalgas generators for their own home electricity generation needs and looking at ways to be able to get off the grid or even generate enough electricity to sell back to the grid. This may be in its infancy, but once again it is new technology that is transformative, that reduces our need and reliance on large generating units built far away from load and large, expensive transmission projects that\ we likely don’t need.
The second mistake that the government made, again back in the early 2000s, was putting 100 per cent of the cost of new transmission onto customers, actually in direct contravention of the advice that they were given by the regulator. The regulator suggested that for big transmission projects the cost of building them be split 50-50 between residential consumers/industrial consumers and the generators who were producing them. By making that decision of a 100 per cent cost borne by the ratepayer, they basically opened up the floodgates of demand to build a bunch of unnecessary transmission that we now see that we don’t need.
The third mistake was agreeing to this notion of zero congestion. When you agree to a notion of zero congestion on our transmission infrastructure, you end up in a situation where you are necessarily going to overbuild. A couple of the statistics that I’ve heard the Member for Rimbey-Rocky Mountain House-
Sundre use – I’ll repeat them here, and I’m sure he’s going to repeat them again later – are that we have a transmission infrastructure right now that’s worth $2.2 billion. The proposal from the Electric System Operator for the entire new transmission plan initially came in at around $13 billion. Recent cost projections – because there’ve been cost escalations – suggest that if this entire system is built, it would be around $16 billion. I’m sure the Member for Rimbey-Rocky Mountain House-Sundre will have updated figures on that. Even if it is $16 billion, what the government is proposing with this plan is that we would see an eightfold increase in our transmission capacity.
I’m not sure what they’re expecting to happen in this province over the next 20 or 30 or 40 years, but I don’t think anybody, not even industry, is expecting an eightfold increase in our need for generation and, thus, transmission. If you were to see, for instance, a highway twinned to the same extent that we are overbuilding our transmission system, you would go from two lanes to, eightfold, 16 lanes. That is the kind of zero-congestion policy that this government is proposing, taking a highway and building 16 lanes just so you can ensure that at no point would there be any congestion. That doesn’t make sense in an environment where you’re talking about roads; it doesn’t make sense when we’re talking about an environment where we’re building transmission lines.
Let me talk about the six projects that were approved in this schedule and their need to be repealed. First of all, there were two transmission line projects going up to Fort McMurray. As I’ve already alluded to, Fort McMurray companies have now changed their business model. They are not talking about exporting all of that electricity. They’re talking about using it themselves. In any case, even if you were going to build those transmission lines, the place where they’re identified to be built is now the wrong place relative to some of the future proposals that are on the table. I’m sure the Member for Rimbey-Rocky Mountain House-Sundre will also elaborate on that.
The third item was a substation that is supposed to be built somewhere southeast of Calgary. We don’t know where. We don’t know what type of project it’s going to be or who’s going to build it, yet the government has identified it as being critical. It seems a little strange to us that a project identified as critical is one where no one knows what it is or where it’s going to be built. The fourth one is a DC line, the western Alberta transmission line – it’s been called WATL – on the west side of the province, that is going to be built by a company called AltaLink. The problem with this line is twofold. Number one, our entire system is built on an AC system, so the question of why we would be looking at DC, especially for such a short distance as is being proposed by this particular line, simply doesn’t make sense. If you’re going to use DC, you’re going to use it to transport electricity much longer distances. As I understand it, distances of\ over 600 kilometres are needed to make DC make sense, especially when you’re switching back and forth between DC and AC. You’re looking at having incredibly expensive costs for the substations that are able to do that.
The reason this is important is because of the heartland line, which is the fifth project. The only reason for the heartland line is to connect the western line, which we don’t need, with the eastern line, which we may need. So heartland is one more as well which I would think, if we were to go back and do an honest assessment of our true transmission needs in the province, would be one that would benefit from a full needs assessment. The last one, the DC line on the east side of the province. There is an argument to be made – and I can put this forward now – that having a DC line on the east side of the province makes some sense, especially if you’re looking to the future and potentially developing hydroelectricity up in the Slave River area, which would bring on many thousands of megawatts of additional electrical power coming down through Fort McMurray, ultimately going down to the southern part of the province. It would satisfy a number of different potential objectives of the government to do this: switching to a cleaner type of power, having the distance that
makes sense for DC. But this isn’t for me to decide. I’m not an electrical engineer. This is a decision for the Alberta Utilities Commission.
The government erred in making this decision prematurely because, once again, if you look at the way the lines are currently proposed to be built, it doesn’t make sense. If you want to do a proposal that would be able to capture all of the electricity coming from Slave River, you would build the system in an entirely different way, which is once again why we have to wipe slate clean, go back to the drawing board, and do a reasonable needs assessment.
Now, let’s remember when all of this scandal started. The scandal started when the Electric System Operator acknowledged that we needed to have a new 500-kV line on the east side of the province to be able to shore up the system. If that was the direction that the government had gone, with a simple AC system, a simple AC line, I don’t think any of us would be in the position where we are today. This, I think, is where the politics entered into the equation. Once again, I’m pretty sure the Member for Rimbey-Rocky Mountain House-Sundre will be able to talk much, much more about this.
The point is: what we have heard from the government almost from the moment they began to try to sell this project to the public was needless fearmongering. We even have the old articles from 2006 threatening that the lights were going to go out in Calgary by 2009 if these transmission lines didn’t get built. Well, I was just in Calgary a couple of days ago. I’m pleased to report that the lights are still on in Calgary even though these transmission lines have not been built. It was ridiculous fearmongering, and I’m glad that we’ve had enough time and distance to see it for exactly what it was.
The danger that we have now if we do not go back and address these six projects that never should have been approved by cabinet in the first place, that need to have an independent needs assessment is the outrageous cost that this is going to impose on our industry. Using the conservative estimate of $16 billion, this has the potential of seeing the transmission portion of everybody’s electricity bill go up eightfold, which would mean we’d be looking at a doubling of our electricity bills. Now, I know that the Member for Rimbey-Rocky Mountain House-Sundre has numbers that suggest it’s going to be much higher than that. Perhaps we might even see a threefold increase in our electricity bills.
Let’s talk about what that means for businesses, businesses that are electricity intensive, and I’ve talked to many of them. If you have businesses who see a doubling or a tripling of their electricity bill, this could be the difference between them staying in business or going out of business. It could be the difference between them deciding to stay in this province or deciding to move to neighbouring
British Columbia or Saskatchewan or going south of the border to the U.S. Or it could be the difference between them deciding to stay on the grid and pay their share of the transmission cost or go off the grid. If they go off the grid, those costs have to be spread around somewhere, and where they get spread around is to those of us who can’t go off the grid.
So then you may end up seeing a greater impact on residential consumers. For our senior citizens, for whom electricity bills represent a significant share of their fixed income and for whom it’s a real hardship during winter to pay the higher cost of electricity and gas, as a matter of fact, as well, you’ll end up seeing those costs go up. And there’s nothing that can be done about it after these projects have already been built.
We’re trying to be the canary in the coal shaft here. We’re trying to say, “Don’t make this mistake,” because we know that if you make this mistake today, we’re going to be paying for it five or 10 or 15 years from now. The people who are going to be paying the most and be hit the hardest are the small business owners and senior citizens and low-income folks who are not able to get off the grid.
I’ll say a word about our landowners as well – of course, that’s once again one of the reasons why there are 17 Wildrose MLAs on this side of the Chamber – because they really were the first line of attack against this terrible approach that the government has taken. It’s not been just on this bill. Bill 19, the Land Assembly Project Area Act, was another bill that they were fighting against, and I would acknowledge that the government basically fixed that one, too. The Alberta Land Stewardship Act, Bill 36, is still a problem, and we will have to address that, hopefully in the course of business in the Chamber. Of course, Bill 24, the carbon capture and storage act, is still a problem as well.
Our landowners came out in droves. The Member for Rimbey- Rocky Mountain House-Sundre conducted probably about a hundred different forums across the province with hundreds of people coming out to hear what he had to say about these four bad bills. This was the reason why rural Alberta got galvanized, why they got behind the Wildrose. They knew that we would be able to press to change this legislation. We at least managed to get the first part of it changed. We’re going to press to get the second part of it changed.
In closing, I would just say one thing to the government on what we actually need to be able to move past the controversy around this entire issue. What we need is to be open, and we need to be honest. Part of what I think the government is trying to do is they’re trying to have it both ways. They’re trying to pretend that they’re creating a system for Albertans – for Alberta residential consumers, for Alberta business consumers – that is a closed system. If you were to look at this as a closed system, there is no possible way that we would need to build $16 billion worth of transmission lines to be able to feed just the Alberta market.
If the government was going to be honest and say that the reason why we’re doing this prebuild is actually a prebuild for export, which is what the Energy minister went down to Washington back in 2003 to talk about, and if this is a system that is going to be built for export, then let’s have that conversation.
But I can tell you what our landowners say here and I can tell you what our ratepayers say here: if this system is being built for the benefit of American consumers, then American consumers are the ones who can pay for the transmission lines, not us. I look forward to having additional debate and discussion on this bill. As I mentioned, I am inclined to vote in favour of it, and I know our members are as well, but we will be seeking a couple of key amendments so that we can have this bill as a full fix rather than just half a fix.
Thank you, Mr. Speaker.