HANSARD

Printed and Published by Nova Scotia Hansard Reporting Services

ECONOMIC DEVELOPMENT COMMITTEE

Mr. Keith Colwell (Chairman)

Hon. Ronald Chisholm

Mr. Keith Bain

Mr. Chuck Porter

Mr. Clarrie MacKinnon

Ms. Vicki Conrad

Mr. Leonard Preyra

Ms. Diana Whalen

Mr. Harold Theriault

[Mr. Chuck Porter was replaced by Hon. Patrick Dunn.]

[Ms. Vicki Conrad was replaced by Mr. Howard Epstein.]

[Mr. Harold Theriault was replaced by Mr. Michel Samson.]

In Attendance:

Ms. Jana Hodgson

Legislative Committee Clerk

Mr. Gordon Hebb

Chief Legislative Counsel

Mr. Neil Ferguson

Legislative Counsel

WITNESSES

Department of Energy

Ms. Alison Scott, Deputy Minister

Mr. Scott McCoombs, Acting Director, Energy Markets Division

Mr. Bruce Cameron, Director, Strategic Policy Planning and Services Division

HALIFAX, TUESDAY, APRIL 7, 2009

STANDING COMMITTEE ON ECONOMIC DEVELOPMENT

9:00 A.M.

CHAIRMAN

Mr. Keith Colwell

MR. CHAIRMAN: We'll start the meeting this morning with the introduction of our members. We'll start with Mr. Epstein.

[The committee members introduced themselves.]

MR. CHAIRMAN: Just before we have our guests introduce themselves, I want to bring the members' attention to a letter from Dalhousie University from Robert Fournier declining an invitation to attend the committee meeting today. You have it right here. If you just want to take a second to review that.

HON. RONALD CHISHOLM: Maybe we should get a subpoena for him.

MR. CHAIRMAN: We can do that if you wish, it's totally up to the committee. Any comments on that? That's fine, we'll just table that letter, then.

Okay, I would ask our guests to introduce themselves and please, after you introduce yourselves, start with your presentation, if you have one, and go from there. Thank you.

MS. ALISON SCOTT: Well, thank you for inviting me here today. I am Alison Scott, Deputy Minister of Energy for the Province of Nova Scotia. With me today is Scott McCoombs, who is the Acting Director of Energy Markets, and Bruce Cameron, Director of Strategic Planning for the Department of Energy.

So you've asked us for an update and we have prepared a PowerPoint which will take you through and I have remarks as well that are available for distribution, if you'd like to take them home and file them away or follow along, in terms of the general presentation.

One document is a copy of the presentation and the discussion that I'm going to have with you but I've also asked that the glossary section of the EMGC report be copied and distributed to you because this is an incredibly technical area of commerce and it has evolved its own language. While I've been with the Department of Energy five years and frankly, I'm not always that comfortable with the acronyms and symbols that represent one thing or another, I thought it would be even more difficult for people who aren't immersed in it every day. So I've asked for that to be prepared for you, so you could follow along some of the discussion, or at least look it up afterwards.

It's my intention today to give committee members an update on where the province is in the implementation of the 89 recommendations that were made by the 2002 Electricity Marketplace Governance Committee. Those of you who were around in 2002 will recall that the Electricity Marketplace Governance Committee was established by Governor in Council as a result of the recommendations in the energy strategy dealing with electricity markets and some cautious urging to market opening.

Then, in 2002, as it is today, our desire for the Province of Nova Scotia is to structure electricity policy in a way that benefits ratepayers and, by extension, all Nova Scotians. Our belief as a department, then as now, is that reliable and low-cost electricity produced in an environmentally and economically sustainable manner is in the best interest of Nova Scotia ratepayers, for industry and residents alike.

To my left you'll see a compilation of the recommendations that were made by the EMGC and an indication of where they are. That's kind of a small chart; it is available in the packages that are being handed out if you want to have a closer look at them. What you will see is that most, indeed entire sections of the committee's 89 recommendations have been implemented.

Now I'd like to take a moment, if I could, and walk you through some of the recommendations which we have implemented and what they mean for Nova Scotians. Our department has made progress on rules around electricity planning, as encouraged by the EMGC. With the Utility and Review Board and Nova Scotia Power and other stakeholders we've undertaken an integrated resource planning exercise, essentially looking at where Nova Scotia Power could most cheaply acquire new generation to avoid the cost of replacing older mega-facilities like Lingan or whatever, as they come on. The conclusion of that study, which fits very nicely with the agenda that we have set here today, was that Nova Scotia Power should concentrate on bringing on as much renewable generation as possible.

Also on the planning front, because we have certain limitations in our province that I'll deal a little more fully with later, we wanted to do a wind integration study. That is something that the Province of Nova Scotia funded, independent of the URB and independent of Nova Scotia Power, because we thought it was important that we get direct

information to us, unfiltered by any other source, as to the challenges around wind integration in our system.

Currently on electricity planning we are engaged in a transmission upgrades and regional regulatory options study. I probably will visit that a little more fully later as well. We've also, as the EMGC recommended, established rules for a competitive process for acquisition of new electrical generation.

On the transmission front, we have established open access transmission tariffs that allow access to wholesale electricity markets, essentially the munies - municipal operators. We also established top-up, backup and spill tariffs which are necessary for anybody who is going to buy or sell electricity to those wholesale markets. We improved the billing structure around new generation so that it was fair and transparent with the Utility and Review Board. We clarified rules for the system operator and how that might work in a world where electricity was being generated by sources other than Nova Scotia Power. We also established metering standards, which I know from my other life in oil and gas is an important element of the basics of what you need to understand what you're entitled to, good metering.

We've been involved in the promotion of generation of electricity from renewables, as EMGC encouraged. We established the renewable energy standard which required our utility, Nova Scotia Power, to have 20 per cent of its generation from renewable sources by 2013. We improved certification in monitoring of renewable energy so that people could reliably know that it was renewable energy from green sources and established a net metering program. If you recall, the EMGC recommended that we establish a net metering program that would allow 100 kilowatt projects to be brought on the system. In the 2009 Energy Strategy just released, we moved that from 100 megawatts to 1 megawatt which is essentially commercial size and something we understood from stakeholders that they wanted to see done.

While there has been significant progress made on the EMGC recommendations, we haven't yet fully implemented them all - those recommendations that dealt with deregulation and retail access to the grid for suppliers of renewable energy.

Just by way of context, I want to take a little time and try to take us back to 2002. As the EMGC committee noted in its description of energy markets back then, around the world, energy supply is undergoing profound change, moving away from its traditional structure of vertically integrated - combining electricity generation, transmission and distribution - monopoly suppliers. Most restructuring includes several elements: greater reliance on market forces to set the price of electricity generation; greater competition to supply end-use customers; and the maintenance of transmission and distribution activities as regulated monopolies.

That said, the EMGC recognized, at Page 12 of the report, that restructuring of electricity markets was a complicated process and one that had to be approached with caution, so as not to unduly cause cost pressures and price volatility. The EMGC then went on to note the declaration in the 2001 Energy Strategy, by the framers of that document - that market opening in Nova Scotia should proceed in a gradual and careful manner.

We have taken the admonition for caution seriously. Electricity markets are too important to all Nova Scotians to take chances with. I would say, however, also that the EMGC Report itself provides some mixed messages on how and when we should move ahead with direct sales of renewable energy to electricity customers.

Some of the recommendations, Nos. 51 to 53, call for direct sales. Other recommendations such as the first recommendations, Nos. 1, 2 and 3, call for proper analysis before this is undertaken. So on one hand they're saying implement retail opening and on the other they're saying, go slowly and do your analysis before you do the opening.

With our opening of wholesale markets to the six municipalities, we have accomplished what the EMGC has called the first step to market opening - and I've given you the page reference if you're interested in seeing the discussion that was taking place in the report about first opening and first steps.

That step was necessary to allow continued access to U.S. markets by the U.S. regulator, but doesn't really represent a significant opening of electricity markets in Nova Scotia from the point of view of megawatts produced. In other words, if producers in Nova Scotia want to sell in the United States, the federal regulator there says you have to have an open market. Opening markets to the six munies qualifies Nova Scotia to have an open market and therefore, if possible, under the appropriate circumstances electrons could flow from Nova Scotia to New England, but it's not a significant change in the way that electricity markets actually operate in our province and we're not pretending it is.

Remembering the caution urged upon us by the EMGC Report and the need for proper analysis, we knew at the outset that we had to further engage stakeholders if we were to undertake direct opening or direct sales, and that's what we did. We believed that the caution that the EMGC Report urged on us was warranted because we have some operational challenges when integrating large amounts of wind power in Nova Scotia and that is because of our limited hydro source. We have challenges backstopping wind and I think we've had that conversation here before - because most of Nova Scotia Power's fleet is coal-fired, it's slow to fire up and wind by contrast is quick to come up and quick to drop off. If it drops off, the coal-fired system is not well suited to ramping up quickly - in fact, it can't ramp up quickly to replace that lost wind power, so it's not a good fit necessarily.

[9:15 a.m.]

However, we and the Minister of Energy of the day, did commit to the industry that we would study the issue of deregulation and he did fulfill his commitment on that. In 2006, the department hired a gentleman by the name of Robert Cary, a consultant and an expert in the field of electricity marketplaces, including the study of financial and physical bilateral electricity contracts, to look at the questions. Here, if you've been given the glossary of phrases that are used in this industry, you'll find financial bilaterals and physical bilaterals in there. I won't take the time to explain them here.

Mr. Cary brought together more than 90 stakeholders, a list that included independent power producers, municipalities, consultants, NGOs, utilities, academics and members of the legal and financial communities to discuss the issues. After those discussions and on the basis of his own research, he presented the department with three options: a full market opening or complete deregulation, a limited market opening and the status quo. We shared these options with the independent power producers and the utilities and to my surprise, there was no consensus on what was the best option, even between the independent power producers. Some independent power producers wanted status quo, others wanted financial bilateral contracts and still others wanted full deregulation.

In the absence of consensus from independent power producers and understanding that there would be technical limitations as to how much renewable generation our transmission system could handle, we opted for a balanced approach. One that allowed independent power producers to sell electricity in Nova Scotia in a fair, competitive process, while maintaining a reliable and low-cost rate for Nova Scotians.

In 2007 the government enacted the Renewable Energy Standard, a progressive and achievable green electricity goal. By 2013, we expect to have about 20 per cent of our electricity in Nova Scotia produced from renewable energy sources - wind, tidal and biomass. This increase of renewable energy - 10 per cent over 2001 levels - doubles what was recommended in the EMGC Report.

As mentioned, we also opened the wholesale market to competition, a move that allows municipal electric utilities to purchase power directly from independent producers. In the meantime, we also undertook an analysis of Nova Scotia Power's electrical transmission system to determine for ourselves what the present system could accommodate in the way of variable intermittent electricity generation. We thought that was an important step because we wanted to have the study consultants reporting direct to us, we wanted to pay the bills, we wanted the focus to be on the issues that were of interest to us and know that we were getting complete disclosure of the information that the consultant was collecting.

By doing the RES, establishing the RES and then going ahead with the Hatch Study, the second study, we felt that we were being responsive to the caution urged by the EMGC.

We were doing a limited opening on the basis of what we thought capacity might be but we needed to understand where there was more opportunity. We hired Hatch Limited and after considerable analysis, the consultant told us that with minor changes, the system we have in Nova Scotia could add about 581 megawatts of wind power. This is roughly what we expect to achieve through our renewable energy standard regulations.

This is a very important point - we are constrained technically by the amount of renewable energy that we can safety integrate into the existing system. Put another way, the system may be maxed out in its ability take more renewable energy by 2013 and unable to handle more without significant enhancements. These technical restraints also represent a challenge to feed-in tariffs. Not only do feed-in tariffs drive up the price of electricity to ratepayers but they also put an enormous strain on the transmission grid, particularly one that cannot backstop wind with rapid response hydro. This is why we're so interested in the independent examination of our transmission system. We would hope that by better understanding the regulatory and infrastructure improvements necessary for a regional grid, we will improve the ability in Nova Scotia to handle even more renewable electrical generation in our system at a cost-effective and prudent manner.

On the issue of renewable markets deregulation, we have been even more cautious and I want to tell you why. Back in the late 1990s, the prevailing wisdom around electricity systems across North America was that deregulation was a good thing. At the time, the general consensus among many was that deregulation would lead to lower prices and that government should get out of the way and that regulations favoured inefficient utilities.

Quite frankly, we were skeptical about deregulation in 2001. By that time, California had blackouts and Alberta had had huge price hikes. This is about the time EMGC was getting set up. That's why we received the advice from the energy strategy that we should be careful.

Years later we've seen the full downside of market deregulation, both in the current banking crisis and the outcome of deregulation in the electricity sector. Nearly 50 per cent of U.S. jurisdictions including Montana, California, Virginia, Texas, Arkansas, Nevada and Oklahoma have opened their markets to retail competition and the majority have experienced increased consumer rates. In 2006, for instance, the Washington Post reported that states which deregulated their industries experienced rates ranging from 36 per cent to 72 per cent. States that remained regulated experienced hikes of 4 per cent to 32 per cent.

Now we're seeing jurisdictions begin to re-regulate their electrical industry so jurisdictions that had deregulated are now returning to regulation. In Maryland, for instance, the Governor introduced legislation last month to regulate energy markets in his state. In the press release that accompanied that announcement, and I quote, "The promise of deregulation - that the free market would drive energy prices down through competition - has failed the people of Maryland", said Malcolm Woolf, the director of Maryland Energy Administration.

That there is a risk of deregulation is also the conclusion of a report from the Carnegie Mellon Electricity Industry Center. Their recent report concludes that electricity market deregulation has resulted in increased consumer rates in the order of 22 per cent to 30 per cent, after you've factored out the pressure of fuel price increase. So that's purely as a result of the function of deregulation, prices were impacted 20 per cent to 30 per cent above and beyond the fuel increases that we've recently experienced.

Certainly our scan of the situation in Alberta and Ontario shows us that deregulation led to price hikes, which resulted in government intervention with subsidies to consumers. We believe that deregulation in Nova Scotia would drive prices higher than they are today.

Moving forward, we need to know what upgrades are needed to our transmission system to achieve even greater integration of renewable energy. That's one of the main reasons of our review of our transmission system that we launched in February of this year.

Another challenge not anticipated by the EMGC in 2002 nor, frankly, by my department in 2007 when we established the RES - the Renewable Energy Standard - was, of course, the current credit crisis and the ability of wind developers to get access to affordable capital. Across North America, wind developers are feeling the squeeze of credit markets. Our belief is that the existing contracts reflect real benefit to Nova Scotians. They represent long-term, renewable energy contracts at competitive prices.

If I could just take a moment there to explain that - Nova Scotia Power went out with a call for proposals for wind projects around Nova Scotia. Those projects were bid by a number of independent power producers with price ranges - and I'm not telling any secrets out of school here, but I believe they're in the range of between 8 and 11 cents a kilowatt hour. They are 20-year contracts and once these contracts were established, it would guarantee that price for those kilowatt hours produced from those plants throughout the life of the contact, which is over 20 years. So while in the initial stages it may be expensive, it's not the most expensive source of renewable energy generation that we can accomplished.

It's good value because unlike coal or oil and gas, it's not subject to world price fluctuation, so it looked like a good deal to us. That's why Minister Barnet raised the issue of government looking at ways to help these projects move ahead. I know a number of you are aware of the problems that these developers have had, they've been in the media talking about their struggles in arranging financing. The government is committed to looking at issues that are ways of helping these producers, including using the existing Industrial Expansion Fund, but that's not a panacea there for wind producers either. It typically costs about $2 million, perhaps $3 million for a megawatt wind power project to get off the ground - so one tower, $2 million to $3 million - and at risk here is 245 megawatts which is more money than the Industrial Expansion Fund has in it. So there are going to be challenges, regardless of what the government chooses to do on that front.

I spent a lot of time here talking today about wind energy but we in Nova Scotia are blessed. We have renewable resources well beyond wind, as potential for electrical generation. I know Rob Bennett was here a couple of months ago, telling you about his hopes and aspirations around biomass . . .

MR. CHAIRMAN: Can I ask the presenters to shorten your presentation a bit because the members were . . .

MS. ALISON SCOTT: I have just a paragraph left.

MR. CHAIRMAN: Okay, great, thank you.

MS. ALISON SCOTT: And we're encouraged to see Nova Scotia Power taking that broad look at renewable energy sources above and beyond wind, for a myriad of reasons. We're also interested in the opportunity the Lower Churchill presents for us.

Our job at the Department of Energy is to recommend and help set electricity policy that ensures Nova Scotians receive a reliable service at the lowest possible price, produced in an environmentally and economically sustainable manner. By doing this, we benefit ratepayers and, by extension, all Nova Scotians.

MR. CHAIRMAN: Thank you.

MS. ALISON SCOTT: Thank you.

MR. CHAIRMAN: Mr. MacKinnon.

MR. CLARRIE MACKINNON: Thank you very much, Mr. Chairman. It's a pleasure to have Deputy Minister Scott with us this morning.

One of the concerns that I would like to raise is the situation where in a lot of jurisdictions there are companies that are fairly good at getting projects through the regulatory system. Then, after they do that in relation to wind energy, for example, they sell the enterprise after it's off the ground and the recapitalizing is a cost to the ratepayers. Is there something we can do in relation to that?

MS. ALISON SCOTT: Well, if it's a non-regulated utility that owns the asset, there isn't anything in existing law that we can do. If it were Nova Scotia Power that was acquiring or selling, it is a regulated utility and there may be things that you could do within the URB's ability to examine the price structure that Nova Scotia Power brings forward to it. But if you're dealing with a private, for-profit organization, we don't have rules that would prevent that now.

[9:30 a.m.]

It's not uncommon to see that kind of practice happen in the mining industry and in the oil and gas industry, for instance, where small venture firms do the startup, flip it to the larger company for development and take their capital and go. It's part of our economic reality, unless we want to regulate that next tranche of generator. So far I haven't heard anyone recommending that we do that.

MR. MACKINNON: I'm not either, I'm just wondering what the current situation actually is, in relation to that.

I have a constituency concern that I would like to raise and that's in relation to Shear Wind. Shear Wind is looking at 30 turbines in my constituency and I'm most supportive of that project.

You mentioned the Industrial Expansion Fund as a way of helping some of these companies out. What kind of interest rate would we be talking there, in relation to the Industrial Expansion Fund, with those companies? That's a key to whether some of these will proceed or not.

MS. ALISON SCOTT: I understand from my discussions with Shear Wind that that is the issue for them, access to cheap, reliable capital. I'm not clear on the rate that Economic and Rural Development might charge in that situation; I don't really have an involvement with their files. My impression from my discussions with Shear Wind and with some of the staff at Economic and Rural Development, the rates would be favourable rates that aren't available from the market. So there would be some interest paid but what exact interest, I'm not sure, and it would be more than competitive with market rates.

MR. MACKINNON: Thank you. Is your department involved with New Brunswick in any way, regarding transmission through that province? It's certainly an issue for excess energy down the road and I think the leadership of your department would be important.

MS. ALISON SCOTT: Well we're involved, whether we want to be or not - we have to be involved. We have a small connection with New Brunswick. Nova Scotia is virtually an energy island. We have a small connection at the New Brunswick border - 300 megawatts - which allows some backup from New Brunswick when we need it, and when we have the ability, we can sell into New Brunswick. But it's not adequate to do the kinds of things that we need to do to take more renewable energy into our province or support the generation of intermittent renewable energy here.

To that end, the Government of Nova Scotia and the Government of New Brunswick have signed a partnership agreement to specifically address the question of integration of our two electrical systems.

MR. MACKINNON: Could you elaborate a little bit on that agreement?

MS. ALISON SCOTT: Well, the statement of purpose is to improve the integration and coordination of transmission-level energy from all sources, especially renewable, between New Brunswick and Nova Scotia. Both provinces are currently conducting major studies to better understand the opportunity for achieving these objectives, including costs and benefits. It is expected that this will lead to more renewable energy, especially wind, contribute to energy security and support large-scale capital investments such as wind, tidal, nuclear and hydro. This has potential to lead to a fully coordinated common market with a single-system operator.

MR. MACKINNON: Sort of in the same vein, looking at the Newfoundland and Labrador situation, it seems that Newfoundland and Labrador has a 40-year vision developing in relation to energy. I'm wondering about the length of our vision in relation to energy and whether we are interacting with the Province of Newfoundland and Labrador in some of the issues that they are involved with?

MS. ALISON SCOTT: We're very engaged with Newfoundland and Labrador. I don't know if you caught the Atlantic Gateway announcement this past Sunday, when Minister Raitt noted that she had a rather unusual but pleasant experience when she consulted with Energy Ministers in Atlantic Canada in January. You will recall in January, the federal government was swinging through provinces, talking to us about our infrastructure needs and what might put shovels in the ground quickly in our respective region.

In Atlantic Canada, those meetings were held here in Halifax and we were all together as Energy Departments, with Minister Raitt and to a number, every minister identified the energy grid as our priority, and transmission capacity. It was quite gratifying to see Minister Raitt then follow through and announce with Minister MacKay that they fully intend to engage this rare opportunity where four Atlantic Provinces are singing from the same song sheet and move the opportunity for transmission along.

MR. MACKINNON: The Hatch Report, we're looking at up to 22 per cent green electricity supply by 2013 and you were talking about 20 per cent. You also said something that was very concerning as well, that we may be maxed out by 2013, in relation to . . .

MS. ALISON SCOTT: The existing grid.

MR. MACKINNON: Yes, the existing grid. What is our vision in relation to that so that we will not be maxed out in 2013?

MS. ALISON SCOTT: To tell the truth we want to max out the existing grid, but we want to get beyond it.

MR. MACKINNON: What I'm talking about is getting beyond it.

MS. ALISON SCOTT: Exactly. We want to take advantage of everything that is available to us with our existing system. We know that upgrades are going to be necessary to allow us to go beyond that and that's why we are undertaking that $300,000 study that we announced in January, to look at physical opportunities where the grid needs to be improved, to allow better backstop from New Brunswick, for instance, and beyond, and also the regulatory considerations that will have to go into that kind of opening to a regional system.

We've always operated under a system in Nova Scotia where we have our Utility and Review Board and New Brunswick has theirs, and P.E.I. has theirs, and Newfoundland and Labrador has theirs. The whole idea of turning to a regional grid, we've got to be pretty serious about this, we've got to get it right. It holds such potential for us, the island amidst these two energy giants, New Brunswick and Newfoundland and Labrador, that we owe it to ourselves to fully understand it, fully understand its costing and when we have those pieces, develop our plan to make sure that we achieve maximum benefit for Nova Scotians.

MR. CHAIRMAN: The time has expired. Mr. Samson.

MR. MICHEL SAMSON: Thank you, Mr. Chairman. Ms. Scott, when did you become Deputy Minister of Energy?

MS. ALISON SCOTT: In 2004, I think.

MR. SAMSON: So you're on your fourth minister now if I'm not mistaken? You had Minister Clarke, Minister Dooks, Minister Hurlburt and Minister Barnet?

MS. ALISON SCOTT: Yes.

MR. SAMSON: You said earlier in the presentation that the EMGC Report, not all the 89 recommendations were implemented. Can you tell us actually how many of the 89 have been implemented?

MS. ALISON SCOTT: But for those three, 51, 52 and 53, we have made progress on all.

MR. SAMSON: You have made progress on all of those, okay. As far as 51, 52 and 53, I'm wondering if you could indicate to us, did those issues ever leave your department to be considered by government as a whole, or did they always just remain a discussion within the Department of Energy?

MS. ALISON SCOTT: They certainly didn't remain within the Department of Energy. The first thing we did, as I indicated in my presentation, was hire a consultant to facilitate discussions with stakeholders. So we went out to about 90 people.

MR. SAMSON: Okay, if I could stop you there. I'm asking within the government, itself, not the stakeholders. Was it simply with the Department of Energy or did this matter go before Cabinet for discussion or before any other departments for discussion?

MS. ALISON SCOTT: If you're asking whether or not it went to Cabinet for consideration, certainly when the RES was introduced, that was introduced by regulation, it was an opportunity for us then to describe the Cary Report and what had gone on and the choices that were made, and the RES was adopted.

MR. SAMSON: So Cabinet would have, in that case, considered Recommendations 51, 52, and 53?

MS. ALISON SCOTT: Yes.

MR. SAMSON: The answer is yes, okay. Could you indicate to us when Mr. Cary was requested to carry out his report?

MS. ALISON SCOTT: I know his first report was sometime in Fall 2006, but I don't recall when we actually retained him.

MR. SCOTT MCCOOMBS: It was leading up to that. He prepared the discussion documents in Fall 2006. The actual stakeholder session was on December 15, 2006.

MS. ALISON SCOTT: But I don't know when we actually retained him.

MR. MCCOOMBS: And then he did some subsequent work after the stakeholder session early in the new year of 2007, to put together his final report.

MR. SAMSON: How was Mr. Cary chosen to do this work?

MS. ALISON SCOTT: It's our practice to do RFPs; I don't have a specific recollection of this one. At this point in time - had he done work for us before?

MR. MCCOOMBS: He had done work for us before. As a matter of fact, you may be aware when the EMGC did its final report, Mr. Cary was hired to do an independent assessment of the EMGC work that was done by Navigant. He sort of did a final scrub if you will, or a final review of that particular document just to make sure in his expert opinion everything held together and that we hadn't missed anything. So we have had some previous experience with Mr. Cary and we're certainly well aware of his capabilities.

MR. SAMSON: So you could provide us with a copy of the RFP?

MS. ALISON SCOTT: I'm not sure it was an RFP or if we sole-sourced it. We would have done it within the alternative procurement rules - if we did it that way - on the basis of his prior knowledge. I can get you either scenario whatever it was.

MR. SAMSON: Very good. Do you know offhand what the cost was for Mr. Cary's report, the most recent one?

MS. ALISON SCOTT: Pardon?

MR. SAMSON: Do you know what the cost was for his most recent report?

MS. ALISON SCOTT: No.

MR. SAMSON: Can you provide this committee with the cost of that report?

MS. ALISON SCOTT: Yes.

MR. SAMSON: You can. Obviously, Mr. Cary suggested that we do go with renewable-to-retail, his arguments were that that would be the best course of action. One of the interesting parts in his report is that: The majority of commenting stakeholders support renewable-to-retail approach. It is understood that a number of parties have made commercial arrangements to develop projects contingent on the adoption of the renewable-to -retail approach. Are you aware of which sort of commercial agreements he's referring to that we're already ready to go had the government adopted the renewable-to-retail approach?

MS. ALISON SCOTT: Let me begin by saying I'm not sure you're accurate about Mr. Cary's preference. He put forward three options for us and what you've read there describes how he was analyzing one option. Am I aware of what projects at this point? I probably was a whole lot more then but at this juncture in time, a little less so but a vague recollection.

MR. SAMSON: Okay. I'm reading here from one of the quotes in the report which says that governments should proceed with the legislation, regulations necessary to permit renewable-to-retail development. I'm not sure what's not clear about that.

MS. ALISON SCOTT: He was acting on the assumption that we had to and frankly, that wasn't the conclusion we had come to.

MR. SAMSON: Okay, so the department reached a different conclusion than what Mr. Carey reached in his report.

MS. ALISON SCOTT: No, he assumed he had a mandate to tell us how to do statutory amendments to bring an outcome, to see market access happening. What we saw was a lack of consensus between independent power producers, different groups of independent power producers not able to come to a consensus as to which of the methods were most advantageous. In fact some of those independent power producers wanted status quo.

[9:45 a.m.]

When we saw that we didn't consider it absolutely necessary to do market opening then. We saw other alternatives to get the renewable energy generation into our mix and I didn't ever consider Mr. Cary's suggestion about how to go about the legislation as a conclusion that it's the best way to do it. If we were going to open, yes.

MR. SAMSON: Okay, so you're saying that Mr. Cary's final recommendation was not to go renewable to retail? Or are you just disagreeing with where he was going? I'm a bit confused here because his report seems to be fairly clear but I understand you're saying you had a different take on what he was looking at but his recommendations seemed to be quite clear in what he is saying.

MS. ALISON SCOTT: It's a question of mandate. He understood his mandate to be how do we see electricity markets open in Nova Scotia? I didn't understand his mandate to be that. In my own mind it was, if we open how do we go, and he laid out the various scenarios. But through the . . .

MR. SAMSON: How was that not made clear to him, because obviously taxpayers paid a significant amount of money for this report, how was it not made clear what his mandate was, off the bat?

MR. MCCOOMBS: Well, if I can speak to that issue, Mr. Cary was hired basically to facilitate a process with stakeholders, to try and build consensus among stakeholders for a certain recommended position. As Deputy Scott has indicated, at the end of the day there was no clear consensus. There were IPPs that were all over the map, in terms of where they wanted government to move with the specific options that were presented to them and in the face of no clear consensus, the minister of the day made a decision and the decision was to double the RES commitment that was advanced previously by the MGC and to commit to bringing in these new set of rates, the top-up, spill and and backup rates to facilitate access to the wholesale market in Nova Scotia.

MR. SAMSON: I'm just curious, did Mr. Cary's report actually provide a breakdown of the independent energy producers and where each one of them stood on the different options? When you say there's no clear consensus, do you have numbers that you can show where each one stood on the specific options that were available?

MS. ALISON SCOTT: I'm not sure we have it. If we have it, I'll look at it and if the FOIPOP rules allow us to disclose the position of third parties, we'll do it.

MR. SAMSON: In this case I don't even think it's necessary that we know the names of the individual ones but I'd be curious to know where, as a collective, they fell. When you say no clear consensus, was it 7 to 3? Was it 10 to 1? What were the numbers?

MR. MCCOOMBS: I can tell you that at least some of the major players that had existing facilities in operation were not in favour of moving to the retail access. They favoured the status quo.

MR. SAMSON: Okay, I'm just curious, deputy, if you could explain to us - you made the comment earlier, which I always have a hard time understanding, when you said the government opened up competition when it came to allowing the independent producers to sell. I wonder if you could explain to us what competition means when you have only one buyer that is allowed to actually purchase independent producers' energy in this province. How does that fall under the definition of competition?

MR. MCCOOMBS: If I might just answer that statement briefly. I think, as the deputy has indicated, there is more than one buyer present, albeit a small buyer. There are the six municipal electric utilities that are open to competition at this time. They comprise about 40 megawatts of available capacity in that competitive market and, to our knowledge, there are some parties who are interested now in bundling an offer together, using top-ups and backup rates to make an offer to those collective municipal electric utilities.

MR. SAMSON: I wonder if you could tell us . . .

MR. CHAIRMAN: Order, please.

MR. SAMSON: I'll be back.

MR. CHAIRMAN: Mr. Dunn.

HON. PATRICK DUNN: Thank you, Mr. Chairman. I just want to follow up a question that Clarrie was talking about earlier and it's the Lower Churchill project. There has been a lot of reports recently in the papers with the agreement with Quebec to use its energy infrastructure. I realize that there has been a lot of dialogue going on between Nova Scotia and Newfoundland and so on, so I guess just sort of looking - and it would be very promising for us to be able to utilize energy from Newfoundland and Labrador, I was just sort of wondering a little, a very brief overview of perhaps what's happening right at the present and what may be happening in the future with regard to the Lower Churchill project?

MS. ALISON SCOTT: Well the announcement on Tuesday, I think it was, of the agreement between Newfoundland and Quebec to sell electricity into the U.S., at the other end of the line is Emera who is brokering and arranging those sales, is a pretty positive sign that the relationship between Emera, at least, and the Newfoundland hydro company is a solid one and something to build on. It's good news for Nova Scotia, it's good news for Quebec and Newfoundland and Labrador to see those sorts of things happening.

The Lower Churchill project is a long way from happening yet but it's our understanding that Premier Williams is desirous of seeing Churchill not only go through Quebec, possibly and into the U.S., but to service the mainland island of Newfoundland. If he does that, the cost structure of that plan is such that he has to find another source for sale of those electrons. It's logical for him, if he pursues his route, to come to either Nova Scotia or New Brunswick as a landfall point.

We think there's an advantage coming to Nova Scotia. The distance is actually shortest between Nova Scotia and Newfoundland and we hope that that gives us an advantage. But both power companies, both the New Brunswick and Nova Scotia Power companies, have signed MOUs and both have done a degree of due diligence about what it would cost to hook into the system and what they think the cost of the electricity might be, and they've moved their respective files along.

At this stage I understand the disclosure stage has happened, so that companies are in a position to formulate bids but we're still a ways from actual construction. Until you get to that stage, it's going to be difficult to assign costs to things. The most you can do is lay out the plans, which is where the Atlantic Energy Gateway fits, I believe. The federal government, hearing all four Atlantic Ministers talking about the importance of transmission grid, paid attention and is willing to help in the analysis of what it's going to take to get those electrons moving through Nova Scotia, New Brunswick and on into Maine.

MR. DUNN: Thank you, Mr. Chairman.

MR. CHAIRMAN: Mr. Epstein.

MR. HOWARD EPSTEIN: Could I start with a question about the Hatch Report? I don't think I've seen it and I don't remember whether it was publicly released at the time. Is it available?

MS. ALISON SCOTT: Yes, it was.

MR. MCCOOMBS: It's on our Web site, actually.

MR. EPSTEIN: Is it? Fine, I'll look it up, my apologies. What I'm curious about though is maybe you can tell me this, I don't understand what it is that the system

enhancements are that Hatch identified or that you think are problematic with the system. Could you just explain briefly what those are?

MR. MCCOOMBS: Basically it gets back to the issue of the available capacity that's currently on the system both for transmission and for balancing the intermittent energy supply that comes from our existing fleet of generation, including the hydro. As you get out beyond the commitments under the existing RES regulation and you get into that sort of 550 to 580 megawatts of variable intermittent generation, Hatch basically realized that there would likely be some requirement to enhance the system, either to bring on more fast-acting generation supply to do the balancing of that intermittent generation, as well as enhancements to particular areas of the grid where there could be transmission constraints emerging because of the location of certain generation . . .

MR. EPSTEIN: I think I understand what you're saying now. Where the wind might be a source of generation, the particular part of the transmission and distribution system there might not have the capacity to take on that new source of generation. So that would be one part of it and another part is, I take it, the . . .

MR. MCCOOMBS: The load following capability, the rapid response because as the deputy has mentioned, we do have some concerns around our existing coal fleet. They don't have the ability to rapidly ramp up, ramp down, turn on, turn off, like a rapid response generation supply that you need to follow this wind. The only real options you have for doing the rapid response load following with wind is either hydro or rapid response gas fired turbines.

MR. EPSTEIN: Gas, absolutely because that problem doesn't exist with natural gas, does it?

MR. MCCOOMBS: So Nova Scotia Power, as you may have seen lately, is in the process of converting two of its own 6,000 units in Tufts Cove to a combined cycle unit with a spare gas capacity on the back end of the heat recovery generator. It gives them an extra 50 megawatts of rapid response.

MR. EPSTEIN: That was my understanding. So is it fair to say this situation is evolving at the moment?

MR. MCCOOMBS: It is and that would bring additional capacity.

MR. EPSTEIN: Okay, let's move on then if I could to focus back on Professor Fournier's report. What I'm concerned about is the extent to which there actually has been movement on the main recommendations that came out of it. It has been common ground so far that when it comes to wheeling that there really has been no movement so far - and I'll get back to that. I understood the suggestion to be that when it came to some other things like

net metering, which is Recommendation 56; and co-generation, Recommendation 63, you were suggesting that there was an advance.

MS. ALISON SCOTT: Considerable.

MR. EPSTEIN: I was wondering if you could tell us - yes, that was my point that it looks like a little. Am I wrong on this? Tell me about co-generation, for example? Where are we with co-generation?

MS. ALISON SCOTT: I'll let Scott take that one.

MR. MCCOOMBS: I think there are a couple of opportunities that exist today for co-generation. One is, again, the access to this contestable wholesale marketplace that has been opened up for competition. So a co-generator today, if they can put together a bundle price offering that competes with Nova Scotia Power's price for the contestable wholesale market, has that opportunity today.

MR. EPSTEIN: So you would classify co-gen as a source of renewable energy and therefore able to bid that way.

MR. MCCOOMBS: As long as it's biomass co-generation, sorry.

MR. EPSTEIN: Okay, but still with a question of feeding into the Nova Scotia Power grid, but not wheeling?

MR. MCCOOMBS: It's wheeling over the open access transmission tariff to the end point customer. That's what the open access transmission tariff does - it allows people to use that transmission system to access contestable customers. The contestable customers in Nova Scotia would be the six municipal . . .

MR. EPSTEIN: Only those, right. As I understand it at the moment, there is a proposal, I think, in Guysborough where they're interested in accessing renewables and perhaps selling them to one of the other municipal entities. Is that correct?

MR. MCCOOMBS: I haven't heard of that.

MR. EPSTEIN: Okay, well it's the only one that I have heard of. I guess what I'm asking is, is there anything going on?

MR. MCCOOMBS: The only one I've heard of so far is that there are a couple of IPPs who are looking to use this top-up, spill and backup rate to put a bundle offering together for the municipal utilities collectively and that's the only one that I was aware of that was . . .

MR. EPSTEIN: Okay, at this point, basically, the only entities that can wheel are the small municipal generators?

MR. MCCOOMBS: They're the only contestable customers in the province at this particular time; obviously it can be used for an export customer as well. There is nothing preventing someone from using the transmission system for an export market as well.

MR. EPSTEIN: While we're on that can I just ask, it was clear in the document that one of the motives behind amending the Electricity Act in 2004 and the Fournier study, was to comply with orders. Has this actually been tested? That is, is it sufficient under the orders that we have just the six municipal utilities as wheeling entities?

MS. ALISON SCOTT: I don't know what you mean by test, but we always understood that when we did it it was necessary for compliance. I'm not sure if they wrote us a letter and said, now you're in compliance or whatever.

MR. EPSTEIN: That's really my question, that is my question.

MS. ALISON SCOTT: But it's not unique to us. It's the same way that Quebec approached it, it's the same way, I believe, that New Brunswick did as well.

MR. EPSTEIN: Well, we may find out to our sorrow at some point whether that meets the test or not.

Let's move over to net metering. I understand that the amount has now been changed, but bring me up to date to the extent to which there is net metering? It seems to me it's just minuscule and I don't understand that it's actually . . .

MS. ALISON SCOTT: At 100 kilowatts it definitely was, but a megawatt is a commercial-sized . . .

MR. EPSTEIN: I understand that, but is it in place, is anyone doing this?

[10:00 a.m.]

MR. MCCOOMBS: I can give you a brief update on what the status is. As you may be aware in the recent energy policy that was just released, the policy commits us to - as the deputy said - ramping up the limit on net metering facilities from the 100 kilowatt threshold to the 1 megawatt threshold, which brings it up to more or less a commercial-scale operation. In addition to that, the policy also advises that it will no longer be required to be installed behind the customer meter and it can be placed within a certain defined distribution zone and also be used to serve more than one meter owned by that customer. If they have multiple

accounts within a certain distribution zone, they would be able to serve those multiple accounts with the facility.

MR. EPSTEIN: For any generator, any customer who sets up a net metering system, or is prepared to set up a net metering system, is Nova Scotia Power required to take the electricity that they generate?

MR. MCCOOMBS: When you say required to take the electricity, the whole idea of net metering is that you size the net metering facility such that it nets out your annual energy consumption.

MR. EPSTEIN: It's limited to zero, is what you're saying?

MR. MCCOOMBS: Pardon me?

MR. EPSTEIN: It's limited to zero? Meaning that you can only offset what you would normally use?

MR. MCCOOMBS: What your normal annual consumption of energy would be. You size the turbine, if you will, to optimally, on average, displace your annual energy requirement based on the expected capacity factor and so on and so forth.

MR. EPSTEIN: I have a problem with that and the problem is that, of course, it doesn't help transform the system into one that is less reliant on central, big generating plants, over to a system where you have smaller sources of independent generation, which is much safer and in many senses reliable and it is also one that offers some kind of economic advantage to those many potential generators around the province, so I understand that limitation. I guess what I'm hoping is that we'll see more advance.

It seems to me that what we hear is there's some small advance on co-gen and some small advance on net metering but so far, nothing on wheeling. I'm not sure why it is that wheeling, which is the technical term for a private generator being able to simply enter into a private contract with some other customer along the system - what's the holdup with wheeling? Why is it that wheeling hasn't gone ahead?

MR. MCCOOMBS: When you talk about wheeling, you're talking about using the open-access transmission tariff and as I say, at the moment the only options in Nova Scotia where wheeling could occur would be to access either a contestable wholesale customer or an export or import customer. There could be an import transaction - if the municipal electric utilities found a source of supply that could be competitive with the Nova Scotia Power supply, there's nothing preventing them from using open-access transmission tariff to import that supply. That's wheeling.

MR. EPSTEIN: What you're telling me is that if some person wants to set up a windmill or more than one windmill on their property and finds a customer somewhere in the vicinity, they can't sell to that customer.

MR. MCCOOMBS: You're talking about retail access then as opposed to wheeling.

MR. EPSTEIN: That's retail wheeling, but anyway, wheeling it along the system. My question is, why hasn't that gone ahead? Why hasn't Recommendation 51 gone ahead?

MS. ALISON SCOTT: It comes down to the time and kind of energy markets that we were in from 2007 and 2009, incredible price pressures on the generation of electricity, incredible price pressure then on consumers of electricity, along with the emerging RES.

We took the perspective that we really want renewable energy generation and we want it as soon as possible and at the cheapest price possible. To do that, the competitive process of the RES, we thought, should give the result that we needed, without putting at risk the backup ability of Nova Scotia Power. You just couldn't . . .

MR. CHAIRMAN: Order, please. The time has expired. Mr. Samson.

MR. SAMSON: Thank you, Mr. Chairman. I just want to go back to the questioning where you said on the competition you are including the municipal electrical utilities. To date, could you advise whether any of those utilities have signed agreements with independent power producers?

MR. MCCOOMBS: I'm not aware of any formal agreements that have been signed. I think prior to the URB approval of the top-up, spill and backup rates, some of these folks had conditional arrangements, if you will, that they were looking at and I suspect now they're back, sharpening their pencils and trying to find an arrangement that can be inked but to date I don't believe there has been any kind of formal arrangement arrived at yet between an IPP and the contestable wholesale market.

MR. SAMSON: So right now, therefore, Nova Scotia Power is the only game in town for independent power producers at this point.

MR. MCCOOMBS: I wouldn't say it's the only game in town, it's just that they haven't been able to obviously negotiate a price that was acceptable to them and their municipal customer. I mean sometimes you give people what they ask for and it still doesn't work, so I think that's the situation that we're in and if the market opportunity is there and the market doesn't materialize, then obviously the people can't offer a competitive price, and I guess that's your point.

MR. SAMSON: What's the total capacity, if municipal electrical utilities were able to purchase all of their power from independent power producers, what would be the total capacity? Do you know what that number is - for their current needs? I'm assuming that municipal electrical utilities can provide to their own area.

MR. BRUCE CAMERON: For the bundle of six municipal electric utilities?

MR. SAMSON: Yes.

MR. CAMERON: Their collective load would be somewhere in the 40-megawatt peak range. I think they represent about 1.6 per cent or 1.8 per cent of Nova Scotia Power's total sales, in terms of gigawatt hours.

My understanding is that there was a wind developer who was looking to build something in the order of a 70-megawatt wind system to serve the entire energy needs of those collective six municipal electric utility customers and that would take into account the capacity factor of the wind system. But as I mentioned before, the only way that they could offer a bundled, firm price offer to those customers was to have the back-up, spill and top-up rates that would be available and that would be provided by Nova Scotia Power to balance the wind, the intermittency of the wind, because there would be lots of times they were over-producing, lots of times they were under-producing and you need to be able to somehow or another balance that under- and over-production capability.

MR. SAMSON: Deputy, I'm curious, other provinces, I believe Quebec is one of them if I'm not mistaken, set a fixed rate for the purchasing of renewable energy. They don't leave it to a utility to offer a certain rate, their fixed rates are provided. Could you advise whether that was reviewed here in Nova Scotia and why we did not adopt that same approach?

MS. ALISON SCOTT: Certainly we were aware of it as a strategy. At the time we had had the experience in Pubnico where we saw 60 megawatts of wind go in relatively nicely, frankly, on the basis of a competitive process without requiring the Utility and Review Board or the government to prescribe a price. So Nova Scotians, as a result of that project, got a 20-year project at a price that was well below anything anybody has ever suggested for a feed-in tariff kind of a project, and I note that that project has subsequently been sold, so somebody is still believing they're making money at that lower kilowatt hour price.

With that experience, and, frankly, concerned about the sensitivity of electrical pricing in Nova Scotia to additional pressure from feed-in tariffs, we opted to go to the more full-blown, open competition process of the RES.

MR. SAMSON: Which provinces are setting a fixed rate? Do you know which ones they are?

MS. ALISON SCOTT: Certainly Ontario is now. British Columbia? (Interruption) No.

MR. MCCOOMBS: I believe New Brunswick has a proposal to look at it for small distribution connected facilities.

MS. ALISON SCOTT: But not major, commercial production.

MR. SAMSON: In Ontario are you aware of how much independent power-producer energy they are getting in that province right now? Do you know what those numbers are?

MS. ALISON SCOTT: Well, it depends on the kind of source. They're willing to pay 80 cents a kilowatt hour for solar voltaic, compared to 12 cents a kilowatt hour is what you pay on your electricity bill each month. They'll pay 13.5 cents a kilowatt hour for wind and, again, that's higher than you're paying on your electricity bill today.

Discussions I had last week, when the CanWEA had their conference here, with some of the Ontario producers was they did not think the 13.5 cents was adequate. So it felt to me, to a certain extent, there was some vindication about our concern on price. I might say that this is at a time when the cost of turbines and the cost of steel to erect those turbines has come down and still the rate has been set at 13.5 cents. Those rates are higher than what I understand Nova Scotia Power received in its last round of competitive bid process.

MR. SAMSON: Has Nova Scotia Power made any representations to your department on the issue of renewable-to-retail?

MS. ALISON SCOTT: Not to me.

MR. SAMSON: Have they made it to your department?

MS. ALISON SCOTT: I don't believe they made it to the minister; conversations go on all the time. I don't know, perhaps Scott overheard them in the Cary Report but I don't think there's been a particular kind of, "we need to talk to you and you alone about this." Our conversations with Nova Scotia Power about retail opening have always taken place in the confines of the stakeholder groups, where we are with other people, so other people hear those representations as well.

MR. SAMSON: So they don't meet with you directly?

MS. ALISON SCOTT: They do, but not necessarily on this issue.

MR. SAMSON: So you have met with Nova Scotia Power alone, without any other stakeholders there?

MS. ALISON SCOTT: Not on this issue.

MR. SAMSON: Not on this issue, okay. The minister recently mused that he was looking at allowing Nova Scotia Power to be able to participate directly in the construction operation of wind energy in the province. Where did that come from? Was that something the minister just dreamt up himself or was that a request made by Nova Scotia Power?

MS. ALISON SCOTT: Well, it was a request for Nova Scotia Power but not just Nova Scotia Power. Some of the developers who now find themselves with stranded assets, so to speak, are looking for additional investors and they have no objection to the participation of Nova Scotia Power in their projects.

Now that said, remember why we did the competitive process; we did the competitive process because we didn't want Nova Scotia Power alone determining what price would be. The competitive process, we felt, would bring the lowest price possible for those electrons going into Nova Scotia Power's grid. Because the RFP has been called, because the winners have been selected, we now have a pretty good idea of where the lowest price is.

If Nova Scotia Power had been in there, bidding in that process, perhaps the lowest price, or the price, wouldn't have been the same, but the open, competitive process has occurred and those contracts are now inked and can take us forward 20 years and are of considerable value to us. We want to see them actualized.

MR. SAMSON: Who from Nova Scotia Power made the request to you that they be allowed to be directly involved in the operation and construction of wind energy in this province?

MS. ALISON SCOTT: I don't think it was ever put that way, Mr. Samson. I think that in the course of describing the situation, it may have been - it was not a "you have to do this for us". It was, "here is the situation that we're dealing with and here are some of the solutions."

MR. SAMSON: Would you have any correspondence or anything you can make available to this committee in that regard?

MS. ALISON SCOTT: Pardon?

MR. SAMSON: Do you have any correspondence that you could make available to this committee? (Interruption) There's nothing on paper from Nova Scotia Power discussing this?

MS. ALISON SCOTT: No, they were basically conversations.

MR. SAMSON: Do you know if they met with your minister to discuss these issues?

MS. ALISON SCOTT: I don't believe they did.

MR. SAMSON: You don't believe they did, but they did meet with you.

MS. ALISON SCOTT: Yes.

MR. SAMSON: You've indicated that some of the existing independent power producers don't have issues with this. Can you tell us who those individuals are or which companies they are?

MS. ALISON SCOTT: There may be potentially commercially sensitive information, I'd want to take that under advisement.

MR. SAMSON: Okay, and you'll provide us with that, if that's available? (Interruption) Sure, we can do that at the end.

MR. CHAIRMAN: We can adjourn and go in camera for the answer to that question.

MR. SAMSON: I guess the question would be, is the deputy prepared to give us an answer, if we go in camera, or does she have the names of the companies involved that have indicated that they have no issues with Nova Scotia Power being directly involved in the financing and construction and operation of wind turbines in this province. Do you have that information in front of you, that you could provide to this committee?

[10:15 a.m.]

MS. ALISON SCOTT: I have it on the basis of hearsay presented to me, not from the original sources, so I'd like to check with the people who told me that and make sure that their information is accurate.

MR. SAMSON: So, is it safe to say it's Nova Scotia Power that told you these companies don't have an issue with us being involved? Is that how you'd get it from hearsay?

MS. ALISON SCOTT: No, no, it was - as I understand it, since I wasn't party to the original conversation, it was someone on staff having conversation with IPPs.

MR. CHAIRMAN: Order, the time has expired. Does the PC caucus have any further questions?

MR. CHISHOLM: Okay, thank you, Mr. Chairman, just a few. The tidal power project down in Minas Basin, do we have any update on that as to what the status of it is or how far along they are?

MR. CAMERON: There's a fair amount of progress being made on the tidal demonstration project. Our understanding is that they will be filing an environmental assessment very soon, which will be an important step in being able to get the permission to put the demonstration devices in the water. That must be done both provincially and federally, in order for that to happen.

Meanwhile, the device-holders are proceeding with their plans and, subject to the environmental approvals and construction season all working out nicely, our understanding is that we could see the first device go in the water this year. It's a tight construction season and you may very well - it could slip into the Spring if they don't line up properly.

We've spent a lot of time in the department working with federal regulators and other provincial departments to make sure that everybody is aware of and knows what the issues are for the environmental side of this. So we're expecting that it will go relatively smoothly but it's not fully within our control. We have to respect the process, so that's why it's difficult to be firm about the timetable.

Meanwhile, there's a very robust R&D agenda that's being developed around tidal, both in terms of what the environment does to the devices, which is sort of a technical analysis of what could be expected. It is very important because ultimately, if the harsh environments particularly in parts of the Bay of Fundy, the Minas Passage - we have to be assured that the investments, the devices are going to survive a harsh environment.

Equally important there's the issue of what the impact is on the environment itself, from the work that is going in the water. At this point it's suspected that the environmental impact of one or two or three devices is going to be relatively low. It probably won't be until we begin to get into arrays of three, four, five, six devices that you'll start beginning to get into it.

The whole policy and the whole plan is done in steps, so that you can measure, monitor and then step up - measure, monitor and then step up. A key part of understanding what those longer-range environmental effects might be is to understand, in a modelling way, in advance. You don't want to just wait until you're up to 300 devices to then understand, oops, we've got to start scaling them back because we're seeing environmental effects.

A lot of this can be done through hydro-dynamic modelling. There are various models out there. There's a workshop that's being held very soon that is using money from the province donated to the Offshore Energy Environmental Research Association, which is

bringing together a whole lot of people who have expertise in modelling, to try and get a consensus on a number of models that could be used in this process.

The hope is that we'll have some very good scientific grounding to be able to make predictions as we move forward and then be able to validate them as we introduce devices, that we'll be able to validate those models, which will give us a lot more assurance if we move to commercial scale, as to what those longer-range environmental effects might be, both in the near field and in the far field. We want to measure far fields quite some distance away.

You also need to be able to understand what New Brunswick is doing, what other devices might be doing, so this modelling part is going to be very, very important.

Another part of the research is developing some very specific regimes and technology to do environmental-effects monitoring as we move through the various stages as well. There are some exciting ideas that are being kicked around at this point, too, to develop a very robust program that way. It's a very exciting possibility but there has to be a realism that until we move up through the steps and trying over the next three or four years, we don't know how easy it will be to realize that potential but we're investing a lot of time and effort to make sure we get it right and to hopefully realize it.

MS. ALISON SCOTT: It's not a quick process. As you would know, minister, the water column above the ocean floor belongs to the feds to regulate. The ocean floor is ours and we have the federal Department of Fisheries and Oceans, we have Transport Canada, we have Defence, we have our own Department of Environment, New Brunswick's Energy.

It's a very complicated process to get people moving in, but because of some positive experience we've had with the Atlantic Energy Roundtable on oil and gas issues, we've got the know-how and the experience to lead on this file with New Brunswick and other jurisdictions. We're getting good co-operation from the federal government, which is not always the case, but we seem to have established a rapport through our oil and gas activity.

MR. CHISHOLM: So it's fair to say then, I guess, that during the environmental process or assessment or whatever, that the fishing community and the stakeholders will all be part of that as it moves forward?

MR. CAMERON: There will be plenty of opportunity for people to be able to see, in a transparent way, what is being proposed, be able to comment on it and be assured.

Again, we've already done a very extensive public consultation through the Strategic Environmental Assessment process and while we think that these groups that would have interest in it will continue to be engaged - First Nations, fishing groups and so on - everybody will continue to be engaged, the real stage where everybody is going to want to get quite a

bit involved is going to be after we move - if we're able to move - from tidal demonstration level, into arrays and pre-commercial and going commercial.

It's at that stage that I would anticipate that there's a lot more stakeholder engagement, a lot more public interest, a lot more process that's involved there, just because what's at stake is so much greater.

MR. CHISHOLM: So it's fair to say, I guess, it'll take considerable time yet before we're ready.

MS. ALISON SCOTT: It's a huge resource. It has been there a long time, I think we've got the time.

MR. CHISHOLM: And it's not going to go anywhere.

MR. CAMERON: It comes and goes.

MR. CHISHOLM: A few months back Nova Scotia Power was in and they talked about burning wood pellets as a source of electricity. Is there any update on that or do you know anything about that?

MS. ALISON SCOTT: Well, there are a number of things happening on that front. The Department of Natural Resources, as you know, is undertaking a forestry strategy or a natural resource strategy, part of which will see them assess the forestry capacity to support biomass from the forests. We're taking preliminary steps ourselves to engage Dalhousie University to assist us with an analysis of available biomass - which may go beyond forests, but would include fallow agricultural lands and potentially, fish byproduct, perhaps municipal waste - trying to understand what's available for energy generation and the various scenarios that might play out if we choose two or three different tools in designing our energy policy and Nova Scotia Power's energy fleet over the number of years; it looks like pretty exciting work.

MR. CHISHOLM: Thank you, Mr. Chairman.

MR. CHAIRMAN: Mr. Preyra, we're going to shorten the times up to five minutes because we have some committee business to handle after this.

MR. LEONARD PREYRA: Thank you, Mr. Chairman. Thank you, Ms. Scott for your presentation, it was very informative and a great education and I think the update was excellent for those of us who have not participated in these discussions before. I have three quick questions, I think. One relates to what I think I heard you say about the Department of Economic Development and looking at projects in the Industrial Expansion Fund, or the federal infrastructure program really didn't receive submissions from the Department of

Energy, particularly as it relates to upgrading the grid and increasing transmission capacity. I guess I'm asking you what the process is internally between the departments when it comes to something that seems to be a high priority for the Department of Energy? How does the Department of Energy influence the process of selection of projects or does it?

MS. ALISON SCOTT: On the federal front I told you of the meeting between Minister Raitt and Minister Hurlburt then and the other Atlantic Energy Ministers, where we did identify the transmission grid as our priority and there has been response to that through the Atlantic Gateway announcement. The federal government has agreed that this is a project worth pursuing, the whole notion of an Atlantic grid. We did make the representation, I can't recall if we did it by writing or not, but we certainly did it in our face-to-face meeting.

It's a bit of an aside, but if you'd just bear with me, Minister Prentice was here recently and he's very interested in our tidal power project. There are opportunities between Canada and United States to co-operate on some of our cross-border energy issues. Minister Prentice signalled that he would like to put our tidal power project on the agenda with his U.S. counterpart as something that should be further supported in terms of study money, so we're encouraged by that.

With respect to the Department of Economic Development and the Industrial Expansion Fund, when developers came to us and said, we need help, we don't have money for that sort of thing in the Department of Energy, so I contacted my colleagues at the Department of Economic Development; actually I went a step further, we brought the issue to the sustainable deputy ministers' table where we have the Departments of Economic Development, Environment, Finance, Intergovernmental Affairs, lots of us. We did a presentation there about where we were in terms of the energy standard portfolio, the choices made and why, and then an analysis of the various projects and what we understood their situation to be. The conclusion of our collective was that we should encourage the companies to make direct application to the Industrial Expansion Fund, which we have done. In addition to that, a small committee was set up between Economic Development, Environment and Scott, actually, to help Economic Development in their analysis understand the importance of these projects to our province above and beyond just bottom lines and accountants' concerns.

MR. PREYRA: It was a short question, but a long answer and I appreciate that. I think I have another minute for a quick question. I wanted to ask something about affordable energy. Energy is one of those essential services and I'm wondering if the department has considered options and what options it has considered in making energy more affordable for people who need it? I know it has come up in the context of Nova Scotia Power, but is there a mechanism in place or mechanisms that you've considered for addressing that challenge of treating energy as an essential service and making it available to people who can't afford it?

MS. ALISON SCOTT: The existence of Conserve Nova Scotia was in some measure driven by that very concern. The ability of people to use energy wisely through energy education, the ability of people to insulate their homes and to engage in responsible energy choices and practices was in response to that concern.

MR. CHAIRMAN: Order.

MR. PREYRA: Thank you, Mr. Chairman.

MR. CHAIRMAN: Mr. Samson.

MR. SAMSON: I just want to confirm, when I spoke earlier about the issue of renewable-to-retail and whether it had been considered by Cabinet, deputy, I think you indicated to me that because of the RES that was decided by government, that you felt it was addressed. Is that correct?

MS. ALISON SCOTT: Yes.

MR. SAMSON: Cabinet has made the decision on renewable-to-retail?

MS. ALISON SCOTT: Yes.

MR. SAMSON: Is it safe to say Cabinet decided not to proceed with renewable-to-retail at this point?

MS. ALISON SCOTT: The choice was again confirmed in the most recent energy strategy, the 2009 document, yes.

MR. SAMSON: And that is to not proceed with renewable-to-retail?

[10:30 a.m.]

MS. ALISON SCOTT: At this time, but these things are always evolving and our policy emphasis will change from time to time. When we have a better understanding of the grid and the opportunity for regional backup, it's a time to revisit it. At this stage, we've done what we can in terms of the available renewable energy band - if I can call it that - to occupy space in the grid system because of its intermittent variable nature. We've got everything that we can take there so the next stage has to be to analyze and improve the grid, set up those cross-border regional structures, look at the question again.

MR. SAMSON: I'm sure you've heard this, but let me say it again. As an elected official, when I see community organizations and communities coming forward and saying, we've got a proposal that we want to build a wind turbine that will provide electricity to our

community in a clean, environmental and sustainable way and they can't do that because the Government of Nova Scotia is preventing them from doing that, it is extremely unfortunate. These are opportunities lost and whereas communities have embraced the whole concept of green energy, it's the Government of Nova Scotia that stands in their way and that's unfortunate.

Let me go to one other question. The RFP that was issued so that Nova Scotia Power would receive proposals from independent power producers to meet their 20 per cent goal of electricity generation from renewable resources by 2013 - are we on target to actually achieve that with what has been offered and accepted right now?

MS. ALISON SCOTT: If I could answer your first assertion about the community situation. One of the reasons we went as large as we did from 100 kilowatts to a megawatt of production in the 2009 Energy Strategy was to address some of the concerns that communities identified to us in terms of the size of the projects and also in terms of the distribution system. Scott is in a much better position to talk to you about the distribution system and the changes that were made, we had to work with Nova Scotia Power to encourage them to do that would allow a group of farmers, for instance, to connect to one turbine. We have taken steps within the constraints that we're operating in to make sure that Nova Scotians have an opportunity to participate in renewable energy that they want to, when they want to.

On 2013, I have no reason to believe that we're not going to hit our 2013 target.

MR. SAMSON: As it stands today, has Nova Scotia Power received the offers and accepted the necessary agreements in order to be able to achieve that 20 per cent, as you sit here today?

MS. ALISON SCOTT: The contracts that they have in place is for 248 megawatts. That would well beyond exceed what they need for 2010.

MR. MCCOOMBS: To your point, they haven't got enough to meet their 2013 target yet. They have signed up more than enough, as the deputy just indicated, to meet their 2010 target because they already had 60 megawatts commissioned up and running since 2001, plus the 245 that they've signed up in terms of these PPAs. So that's well above and beyond the requirement for the 2010 target.

MR. SAMSON: If the government is to make a decision to allow Nova Scotia Power to be directly involved in the financing, construction and operating of this renewable energy, will that be a decision that would come from government itself, or would it require legislative change?

MS. ALISON SCOTT: I'm not practising law here but I'm thinking that it can be done by regulation. I'm not 100 per cent certain on that, though.

MR. SAMSON: Could you provide this committee with a more firm answer on that, once you check with your department?

MS. ALISON SCOTT: I'll get you a real lawyer.

MR. CHAIRMAN: Order, please. Mr. Bain.

MR. KEITH BAIN: Thank you very much for this morning's presentation, very interesting. I'd like to talk about wind energy for a little bit, I guess, mainly because we know that there are many - there's a large wind farm in the Lingan area in Cape Breton, especially with the desire to move away from fossil fuels and into more renewable energy sources.

At the same time, there has been outcry from citizens about the adverse effects of placing wind farms in our communities. What evidence has the department gathered about the environmental benefits versus positive possible negative outcomes on personal health and habitat? Is that an ongoing issue?

MS. ALISON SCOTT: We monitor the literature and so far, there has been no compelling case made that there is a problem. What you're really getting at here is something that we do think needs to be done, which is getting better information available to Nova Scotians. In the coming months, you should see the Department of Energy taking a leadership role in communities, establishing a public education program so that communities can access various sites where they can look at the information and make their own conclusions about whether these things are good, bad or indifferent to them, whether or not they kill birds in an unsustainable way or whatever.

We're going to take aim at that issue. We think people have the right to make informed decisions, on the basis of best available information. We'll be looking at best practices as well.

Early on with wind projects, we did a study with Jacques Whitford which addressed the question of setback requirements. We did an analysis of best practices around the country and abroad and tried to come up with what we thought were good model bylaws for municipalities to adopt on setback and noise considerations and so forth.

That work has been completed and the UNSM has adopted the bylaws and I understand some jurisdictions, some municipalities have actually implemented them, so we're trying to work with communities.

MR. BAIN: But there has been no consultation with local citizens - the department consulting with them.

MS. ALISON SCOTT: That would happen in any EA process, environmental assessment process. It's built into the EA process. What we' re trying to do is give people tools that they can take to those EA processes and use to get facts out.

MR. CAMERON: If I might add, a lot of projects emerge and then people start getting feedback on them and then they disappear on the horizon as well. So there may, in fact, be a view out there that there is a great deal of concern amongst Nova Scotians but when you actually look at the projects that have gone through the environmental assessment and have actually emerged with signed contact, it's far less controversy than you might think.

Part of the selection is probably understanding the public and community acceptance of a project, before it actually comes on and becomes realized.

MR. BAIN: I'm just going to ask one last question. Why have we not been able to increase solar power activity in this province?

MR. MCCOOMBS: When you're talking solar power, are you talking active solar, like active solar water heating, as opposed to photovoltaic solar?

MR. BAIN: Active solar heating, yes. This is not a good day to be asking that question.

MR. MCCOOMBS: I guess to be quite honest, we've tried, through Conserve Nova Scotia again, Conserve Nova Scotia has a program that's also married up with a federal program that was providing rebates for both residential and commercial active solar water heating systems. I think they have made some success, in terms of realizing additional installations in the province.

In addition, the Nova Scotia Community College have recently taken the initiative to provide some technical training for a lot of their apprenticeship programs to give people hands-on practical experience installing and maintaining and operating these systems. So I think over a period of time, that will be sort of a very beneficial course, I guess, for most of the tradespeople who will be coming out because these systems won't be foreign to them. They'll understand these systems and hopefully become champions for these kinds of systems.

I think we have made some limited success in this area. Unfortunately, with the price of energy declining again in recent times, the economics for some of these renewable technologies are not quite as attractive as they were when oil was $150 a barrel. So we are facing a bit of a challenge at this particular time, with the decline in oil prices and, as well,

I'm sure with the financial market situation. These are fairly expensive systems and you have to be prepared to make the long-term investment.

MS. ALISON SCOTT: The payback on a solar water heater is what - more than 10 years, yes. A long time to wait.

MR. CHAIRMAN: Order, please. That concludes our questions. I would ask you to do a wrap-up, if you wish.

MS. ALISON SCOTT: No, I'm pleased to be here and hopefully we've answered the questions that you were interested in and we'll follow up with the undertakings we've made to produce other pieces of paper.

MR. CHAIRMAN: Well thank you very much today. Your comments were very informative and to the point and we appreciate that very much and look forward to when you come back with some really exciting updates for us. Thank you.

MS. ALISON SCOTT: Thank you.

MR. CHAIRMAN: As I said, we have some other committee business we have to handle today. Some of the things are pretty straightforward. The first one I have on the agenda is a letter from the Chair of the Standing Committee on Public Accounts and it's a request that was forwarded to us to consider the Department of Energy - Encana/jobs. What is the wish of the committee on this topic? Shall we entertain this as one of the topics we should look at?

I sit on the Public Accounts Committee. That was referred to the Public Accounts Committee by someone else and they referred it to us, so that's where this comes from.

MR. SAMSON: It certainly seems topical, Mr. Chairman, to add to the committee's business.

MR. MACKINNON: Agreed.

MR. CHAIRMAN: Okay, we'll add that on the agenda when we set the agenda next time. Thank you, that was easy.

We have a letter here - this next one raises two questions. We have a letter here from Emera and it indicates that - we initially asked Mr. Huskilson to come on May 12^th and he is unable to attend at that time because he is going to be out of the province but he did suggest June 2^nd, which is not one of our regular meeting dates.

What is the wish of the committee with this? It's an already approved witness that we have on our list so what's the wish of the committee? Would they like to set a date in June for this? Or try to get a date in June? Or sit on June 2^nd, providing - we also have to decide before we set any meetings around when the Legislature sits, so we have to look at the two issues. So let's address the letter first and see if we can agree on whether or not we should have Mr. Huskilson come in sooner or later, and then we'll discuss whether we meet during the Legislature session or not. Mr. MacKinnon.

MR. MACKINNON: I think it may be premature to set a June 2^nd date at this time.

MR. CHAIRMAN: Okay, we will set that aside for a further agenda setting. Does that sound satisfactory to the committee? Everyone agree to that? That was easy.

Now the next thing - well maybe we should talk about whether we're going to meet during when the Legislature is sitting, before we address the meeting of May 12, 2009 with Nova Scotia Power. What's the wish of the committee? Do you want to sit when the Legislature is sitting? The last time we didn't. What's the wish of the committee? I'd entertain a motion. Mr. Preyra.

MR. PREYRA: I think the last time we addressed this issue in this committee we decided that the committee would not rule out the possibility of sitting, subject to circumstances at the time.

MR. CHAIRMAN: Okay, do you want to make that a motion, or how do you want to address this?

MR. CHISHOLM: As long as the Legislature is sitting, like Mr. MacKinnon says, maybe we won't be sitting very long (Interruption) or he's indicated that, which doesn't really matter to us but anyway, you know we are very busy when the House is sitting, everybody is busy, especially ministers. There are two of us that sit on this committee and it makes it very difficult, with the things that we have to do within our departments and the caucuses and to get to things back home in our constituencies. So it's a very tough time so I would suggest that if there's a special meeting that could be held, if there was some issue that was really important that the committee wanted to deal with, then we'd look at it.

MR. CHAIRMAN: Do you want to make a motion to that? Mr. Samson.

MR. SAMSON: If I could suggest, Mr. Chairman, that the motion should be that the committee not schedule any meetings after April 30^th, while the House of Assembly is in session, but should there be a request from any of the caucuses to meet to deal with a specific issue, that the chairman would consider scheduling a meeting following such a request.

[10:45 a.m.]

MR. CHAIRMAN: Okay is there any discussion on the motion? Would all those in favour of the motion please say Aye. Contrary minded, Nay.

The motion is carried. Thank you very much.

The last thing we have on the agenda here is an opinion by Mr. Hebb about a motion that Ms. Whalen put forward regarding a letter we sent off, at the instruction of the committee, ". . . that the Committee seek legal advice from our counsel, to examine whether or not the witness this morning has been in contempt in her inability to answer some of the questions." and that was in regard to Ms. Vicki Harnish, the Deputy Minister of Finance, in the meeting we held March 24, 2009.

I'd like to know - does everybody want to look at this letter from Mr. Hebb and any questions that anyone has for Mr. Hebb on this. Mr. Hebb.

MR. GORDON HEBB: If I just might say, as a way of introduction to my opinion, although I was asked whether the deputy was in contempt, I didn't feel it was appropriate for me to tell you whether I thought she was in contempt but, rather, what I provided you is a legal framework to give you guidance in making that determination, which I think is the more appropriate course.

MR. CHAIRMAN: Mr. Samson.

MR. SAMSON: Thank you, Mr. Chairman. I know that Mr. Steele had raised some issues with this as well but unfortunately he is unable to comment on it at this time. It's quite clear from the opinion that has been provided by Mr. Hebb, as legal counsel to the committee, that the deputy did not have a choice when she was given a question and, while I was not here, I've had the opportunity to review what took place and it is clear that the deputy did not feel bound to provide answers to the questions that were provided.

I would submit to you that had the deputy been provided the legal opinion that we have in front of us today, that her demeanor and answers should have been quite different than what was at the committee on that specific date.

The question now for us, as a committee, is whether to refer this matter back to the House for consideration of the House. As Mr. Hebb has rightly indicated, it is not to legal counsel to determine whether the deputy minister was in contempt or not but that is a determination to be made by the members of the House of Assembly.

In light of the fact that I only had a chance to review this legal opinion this morning, I would suggest to you the following course of action, and I'm certainly interested in what

my other colleagues would have to say. I believe that as a committee, this opinion should be made available to the Deputy Minister of Finance, Vicki Harnish, for her review and for her comments to the members of this committee, prior to moving forward on this. I would suggest to you that she should be given a week to provide a response on this and to indicate to us whether she wishes to provide any sort of a reaction to the opinion, in light of her behaviour and the way she proceeded to not answer questions put to her during that committee meeting.

At the same time, Mr. Chairman, I can tell you, as a parliamentarian for the past 11 years, I have yet in my time to hear a public servant in this province, and especially a deputy minister, go before the media and refer to the business of a standing committee of this House as "political foolishness". I had hoped - after watching that on the news, knowing that sometimes even ourselves as elected officials, we say things in front of the media that we may regret the next day - I had personally hoped that the deputy minister would have, of her own volition, offered an apology to both the members of the committee and to all elected officials and to the people of Nova Scotia that she, as a senior civil servant and public servant, would have referred to the business of elected officials as "political foolishness".

I would suggest that my comments that I'm making now also be provided to the deputy minister so that she may reflect as to the offence that was taken not only by myself but I know by many other parliamentarians and many Nova Scotians at hearing a deputy minister make such a remark regarding the business that is carried out. So I would suggest that the opinion be provided to her, for her review and for her comments and, as well, my comments regarding the comments made to the media, following this meeting.

I would suggest to you that after giving her a week to respond, that either this committee or the subcommittee of this committee have the opportunity to meet to discuss the matter further and to make a determination as to whether this matter should be referred to the Speaker of the House of Assembly for a determination and a ruling by the entire members of the House of Assembly.

I would also suggest to you, as chairman, that you would seek advice from our legal counsel as to what is the parliamentary procedure as to how this committee could bring forward a motion of contempt to the House of Assembly for its consideration. Thank you, Mr. Chairman.

MR. CHAIRMAN: Thank you. Mr. Preyra.

MR. PREYRA: Thank you, Mr. Chairman. The motion that was passed at the last meeting referred to the perceived inability of the deputy minister to respond to questions and her understanding of the instructions that she received from the Minister of Finance.

I think for the purposes of this committee, it's really a question of who really is in contempt of this committee, whether it's the deputy or the minister himself. I think what we really need to establish is the nature of the instructions given to the deputy by the Minister of Finance.

I think we should send the transcript of our last meeting, on March 24^th, to the minister and ask for clarification as to whether or not those were the instructions that he gave to the deputy or whether the deputy, in fact, misunderstood the instructions that were given to her, just with a view to establishing whether, in fact, the deputy minister had a reasonable understanding of her instructions, however wrong they may have been.

I would suggest, Mr. Chairman, that we write a letter to the Minister of Finance, copy it to the deputy and . . .

MR. CHAIRMAN: Could I interject there for one second. There was a letter sent to me - that I thought the clerk had here today but she doesn't have, and I'll get hold of my office right now to send it over - from the minister, that will shed some light on that, so I'll get that immediately. I didn't want to interrupt you but yes, continue please.

MR. PREYRA: Anyway, I think that answers part of my question, that if this committee does find that the minister did issue those instructions, I would think that we communicate with the Speaker that these were the instructions that were given the minister and that we, in fact, if we have the authority to cite the minister for contempt and raise that issue in the House.

MR. CHAIRMAN: Okay. Mr. Epstein.

MR. EPSTEIN: Thank you. If the committee is going to move in any way on this issue, it's important that there be a fair degree of agreement around the table as to where we go with it. In light of Mr. Samson's remarks, it's clear that no one is ready, I think, at this point to actually entertain a direct motion of citing the deputy minister for contempt or inviting the House to do that. That's fine, he suggested a course of action that I think is also a sensible course of action. My colleague, Mr. Preyra, has also raised a point that needs some follow-up and I gather you might have some correspondence that fits that.

I would only add that my understanding is that the deputy did have legal counsel available to her at the time and I think that's a factor we should bear in mind when we come to further deliberation about this. The other point I would urge on members of the committee is a recognition that unless this committee or any committee asserts its powers to require answers from witnesses, it's a power that can all too easily be flouted. I think that having encountered a direct rebuff on the previous occasion, it's important that we remember that when we come to the point of making a decision. For now, I think the course of action suggested by Mr. Samson makes sense.

MR. CHAIRMAN: Mr. MacKinnon.

MR. MACKINNON: It's a very delicate situation, Mr. Chairman. I'm still not sure whether it's a situation of a deputy in contempt or a government in hiding or whatever, but it is a very, very serious matter. I'm inclined to agree with Mr. Samson's approach in relation to this matter at this time, but also dealing with the minister, as well.

MR. CHAIRMAN: Yes. Any comments from the PC caucus? Mr. Chisholm.

MR. CHISHOLM: Mr. Chairman, if I could, I think a lot of the questions that were asked of the deputy minister that day were issues that were dealing directly with budget and the budget hasn't been presented yet - I think we have to take that into consideration as well. As a Cabinet Minister, I can't go to any committee or go to the press or go to any of my private members and reveal what's in the budget until it's presented and after it's presented, we can discuss it all we want. Probably at that time, if the deputy had been asked to come after the budget was presented, she could have answered a lot more questions. If it is the decision of the committee, as Mr. Samson says, to write her a letter, I could probably agree with that. I just wanted to put that on the record.

MR. CHAIRMAN: Mr. MacKinnon.

MR. MACKINNON: Mr. Chairman, we weren't looking for details in the budget. What we were looking for was the economic climate and situation in the Province of Nova

Scotia and a lot of the questions were geared to that. There was no intent to try to fish out the details of a budget. The situation was very, very clear that we were looking at the economic situation as it exists here in Nova Scotia today and we had not gotten any kind of an update to the situation, despite the graveness of it. December was the last time there was any inkling of any information available to us.

MR. CHISHOLM: Mr. Chairman, if I could . . .

MR. CHAIRMAN: One second, I'll give you a turn. Mr. MacKinnon, are you finished?

MR. MACKINNON: We wanted an update, that's what we were looking for. An update on the climate, the conditions that existed in Nova Scotia and we did not get answers to any of our questions. The fact that the comments were made by a deputy in relation to the political show that was on the go here, that was fundamentally wrong.

MR. CHAIRMAN: Mr. Samson.

MR. SAMSON: Thank you, Mr. Chairman. I don't disagree with the comments made by Mr. Preyra. In fact, my whole intent was to at least give the deputy a chance, after seeing

the opinion, of telling us what she felt were her instructions coming here and why she felt she gave the answers or didn't give the answers here at this committee. I think that will be very revealing as to whether she felt she was under instructions either from her minister or the legal counsel that she had here provided to her not to give answers. That's why I believe that prior to us making a decision here, we should at least hear from her. After seeing, the opinion which I believe - it's quite clear she didn't have a choice but to answer the questions put to her and time will tell as to whether she does indicate exact instructions she received from the minister.

But I must add as well, Mr. Chairman, that I find the comments from my good friend, Mr. Chisholm, quite amusing. The British Parliamentary tradition is that budgets are to be a secret until such time as they are presented, but I'm sure Mr. Chisholm will look back on his government's record and the last few budgets and his federal colleague's record in the last few budgets, that one only has to read the papers for the week and days leading up to the budget to have certainly a good glimpse of what's in the budget and government has routinely disclosed prior to the budget being released as to what was going to be in certain sections of it.

I fully agree with Mr. MacKinnon's comments - there were no questions asked as to what would be in the budget. The whole premise, as our Leader had been calling upon for such a long time, was to provide Nova Scotians with where are we at today. Not where are we going or what is the government's plan - where are we at fiscally today as so many other provinces have provided. They were not questions about the budget.

MR. CHAIRMAN: Just before I recognize Mr. Chisholm on this topic, I want to get permission from the committee to continue past 11:00 a.m., until we get this resolved. Is that a consensus?

SOME HON. MEMBERS: Agreed.

MR. CHAIRMAN: Mr. Chisholm.

[11:00 a.m.]

MR. CHISHOLM: Thank you, Mr. Chairman. I guess I don't have to agree with Mr. Samson. He has a right to his own opinion, but I guess I don't have to agree with him.

MR. SAMSON: You know it's true; you just don't have to agree.

MR. CHISHOLM: Anyway, Mr. Chairman, I'm not even sure that this committee had the jurisdiction to bring the Deputy Minister of Finance in here, that should have gone to Public Accounts. That should have been the committee to deal with that.

As far as Mr. MacKinnon saying that they didn't get an update, they got an update in December. The budget, when it comes in, will be the big update that all Nova Scotians are waiting for and it will be a good budget. That's all I can say on the budget. Anyway, it's my opinion and I think the opinion of some other people, some other Nova Scotians, that this should have been to the Public Accounts Committee. We do not have jurisdiction to bring the Deputy Minister of Finance into this committee.

MR. CHAIRMAN: I disagree with the honourable member. This committee can call anyone they want as long as it's within the purview of the committee and it was clearly within the . . .

MR. CHISHOLM: That's not what the book says.

MR. CHAIRMAN: Order. It was clearly within the privilege of this committee to call that witness.

MR. CHISHOLM: Read the guidelines in . . .

MR. CHAIRMAN: Order. Mr. Preyra.

MR. PREYRA: Thank you, Mr. Chairman. I don't disagree at all with Mr. Samson, I suppose my problem is more from a political science perspective that on balance, I think it is important that we respect the role of the deputy minister in this whole process. The deputy is supposed to be insulated to a certain extent from political pressure and I think on balance, if we are going to get the answer to this question, it should come from the minister - it is the minister.

I haven't had a chance to read this letter that was just distributed, but it seems pretty clear that the minister, you know, gave instructions, and it seemed clear to the deputy minister that she received instructions. I think we should start at the top rather than impugn the reputation of the deputy without, in fact, asking the minister flat out whether or not he gave those instructions. So my preference would be to start with the minister and work our way down to the deputy.

MR. CHAIRMAN: Okay. Let's start with the proposal Mr. Samson put forward. Mr. MacKinnon, on that topic.

MR. MACKINNON: Mr. Chairman, I would like to make a comment in relation to Minister Chisholm on the fact . . .

MR. CHAIRMAN: Could you hold that thought until we . . .

MR. MACKINNON: Well I don't really . . .

MR. CHISHOLM: We have a motion on the table, Mr. Chairman. Point of order.

MR. MACKINNON: Mr. Chairman, everyone has had an opportunity to make a comment.

MR. CHAIRMAN: I will let you make a comment after we talk about the motion, if that's okay.

MR. MACKINNON: Thank you.

MR. CHAIRMAN: Mr. Samson.

MR. SAMSON: Mr. Chairman, time is going by here and that's my concern. If Mr. Preyra wishes to have the correspondence sent to both the deputy and the minister, I don't have a problem with that. I would be curious to hear what the minister has to say in light of the legal opinion that has been provided as well. But at the end of the day, it was the deputy minister that was here, it was the deputy minister that did not answer questions and it is the deputy that needs now to provide us with a reply based on the legal opinion that we have received and the comments that I have made regarding her remarks to the media following the meeting.

As part of due process and the time constraints we're under with the House going in, if it pleases Mr. Preyra, I have no issue with writing to the minister and the deputy at the same time but, as well, giving them a week to respond so that this committee can appropriately decide as to what action it's going to take from there.

MR. CHAIRMAN: A question on the motion. Would all those in favour, by a show of hands. It shows all the NDP and all the Liberal caucus in support. Would all those opposed - nobody opposed.

Now, Mr. MacKinnon, on the points you were making.

MR. MACKINNON: Mr. Chairman, I take issue with the comments of Minister Chisholm in relation to who appears before this committee. I think we should review the history of what actually happened with that appearance because there was unanimous consent from this committee, including the Progressive Conservative members of the committee, and I believe that Minister Chisholm was one of the ones that was actually here who agreed that the deputy minister should appear before this committee and after that deputy minister did appear before the committee, it was the wrong thing to have done.

I believe this is a total farce, it's a joke that we have been dealing with this "she shouldn't have come before the committee" because every one of us agreed that she should be here.

MR. CHISHOLM: A point of order, Mr. Chairman. My only point was that I believe that the deputy minister, if she was requested to do a financial update to the committee, it should have been the Public Accounts Committee, not this committee. That's all I said.

MR. CHAIRMAN: Order. Point of order taken. Mr. Preyra.

MR. PREYRA: Mr. Chairman, I don't want to belabour this point but the context of that debate at the time was that, you know, the government hadn't provided an economic update, that there was infrastructure spending being rolled out, there were Gateway initiatives, the Industrial Expansion Fund monies were being announced. Our question related more to how this affected economic development and jobs and people's pensions and things like that.

We were not looking for budget documents, we were not looking for confidential advice. We were looking for projections and modelling that the department had at the time that talked about what the implications for the province were of all of this spending. They were purely economic development questions and they had nothing to do with Cabinet confidentiality.

MR. MACKINNON: Hear, hear.

MR. CHAIRMAN: Yes, I agree with Mr. Preyra. That's exactly why the deputy minister was called here initially.

The other thing we should address, too, is when we get the reply back from the deputy minister and minister within a week, we should meet again to discuss this topic and see what further action, if any, is going to be taken. So would everyone agree to that? I'll set the meeting date in consultation with the caucuses. Agreed?

SOME HON. MEMBERS: Agreed.

MR. CHAIRMAN: Okay, a motion to adjourn is in order.

MR. MACKINNON: So moved.

MR. CHAIRMAN: We stand adjourned.

[The committee adjourned at 11:07 a.m.]