[Recorded by Electronic Apparatus]
Wednesday, October 2, 1996
.1630 
[English]
The Chairman: I'd like to call the meeting to order. Thank you very much, gentlemen, for your patience. Unfortunately we had a vote in the House and it has delayed us in starting; I appreciate your patience and understanding.
Today we are continuing with our hearings on Bill C-23, an act to establish the Canadian Nuclear Safety Commission and to make consequential amendments to other acts.
We have today a number of utilities - Ontario Hydro, Hydro-Québec and New Brunswick Power. From Ontario Hydro we have Ron Field, from Hydro-Québec we have Roger Émard, and from New Brunswick Power we have Rex Johnson. Welcome. I understand you're going to make a joint presentation. Did I understand that correctly?
Mr. Ron Field (General Manager, Nuclear, Ontario Hydro): That is correct. I will kick it off. My name is Ron Field. I'm the general manager of Nuclear for Ontario Hydro. I'll just haveMr. Johnson and Mr. Émard introduce themselves.
Mr. Rex Johnson (General Manager, Nuclear, New Brunswick Power): My name isRex Johnson; I'm general manager of nuclear for New Brunswick Power.
[Translation]
Mr. Roger Émard (Director, Nuclear, Hydro-Québec): My name is Roger Émard and I am the Director of Nuclear at Hydro-Québec.
[English]
Mr. Field: Our presentation today will be in three parts. I will do a part and then turn it over to my colleagues. We'll give you a brief profile of the nuclear electricity generation in Canada. I demonstrate our general support for Bill C-23 and provide three recommendations that we believe would further improve the effectiveness of the proposed legislation.
Electricity was first generated from nuclear energy in Canada only 34 years ago. On a national scale, production from our three utilities accounts for about 17% of Canada's generation mix, and in Ontario it accounts for about 63% of electricity generated.
Nuclear generation in Ontario, together with output from the two other Canadian CANDU units - one in New Brunswick and one in Quebec - represents a contribution to the national GDP of over $4.5 billion. The direct employment in the nuclear industry is approximately 30,000 people; with additional indirect employment this is equivalent to nearly 100,000 jobs.
All the nuclear facilities owned and operated by Ontario Hydro, New Brunswick Power, and Hydro-Québec are licensed and regulated by the Atomic Energy Control Board. These operations are monitored on a daily basis by resident, on-site AECB inspectors.
I'll talk a bit about nuclear safety. The safe operation of commercial nuclear facilities has resulted in substantial economic gains to Canada with minimal adverse impacts on the environment. In this regard we emphasize specifically nuclear safety. While it is the hallmark of both the existing and proposed legislation, nuclear safety is also of utmost importance to our three organizations.
The Canadian regulatory philosophy places the responsibility for safe operation of the plant with the utility. The role of the regulator has been to set broad safety standards that must be met in both the design and operation of nuclear power plants. The utility must demonstrate to the regulator, by means of a variety of compliance mechanisms, that these standards are met.
The advantage of the Canadian approach is that the utility (a) assumes primary ownership for safety; (b) requires its staff to have a good understanding of the basis for the safety requirements; and (c) takes the lead role in defining and implementing programs necessary to achieve the safety goals. We endorse the retention of this philosophy in the proposed legislation.
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In addition, we note that constructive and open communication between the regulator and licensees is required in order to maintain the effectiveness of the licensing process. We endorse the recognition of this fact in the proposed legislation and in the retention of licensee accessibility to the commission.
Turning to Bill C-23, we support and endorse the emphasis on health, safety, and environmental aspects relating to nuclear facility operations; the rights of applicants and licensees, now clearly spelled out, to appear before the commission and to appeal decisions and order of the commission and its designated officials; the shift away from ``non-core'' activities of the commission by delegating to the provinces those aspects of regulation that the province is better equipped to administer; and the incorporation of non-AECB standards, where appropriate, to effectively administer AECB regulations. An added improvement would be for any ensuing regulation to expressly recognize the concept of equivalency in subclause 44(4), where the incorporated standard does not contain that flexibility. Finally, we support and endorse the flexibility afforded the commission to operate through the use of panels and up-to-date administrative mechanisms.
I'd now like to turn it over to my colleague, Mr. Émard.
[Translation]
Mr. Émard: Now we turn to recommendations and suggestions that we believe will further improve the proposed legislation. These relate to due diligence, the recovery of regulatory costs and establishing accountability, and consideration of costs and benefits in regulatory decisions.
Due diligence, or taking all reasonable care, is a concept well-embedded in environmental protection and conventional health and safety legislation.
Frequently, this legal defence mechanism is expressly set out in the relevant statutes. The Canadian Environmental Protection Act, after which most of the sanctions under Bill C-23 are modelled, expressly recognizes this defence. As nuclear safety legislation is the same type of public welfare legislation, we recommend that a provision similar to section 125 of CEPA be expressly written into the law.
With respect to cost recovery, in response to a Treasury Board directive, cost recovery fees regulations were instituted in 1990 by the Atomic Energy Control Board. Since then, these fees have risen substantially. The business climate in Canada has changed significantly in the recent past. Industry and public now demand that public utilities be accountable for the efficiency of their operations.
Market forces are such that costs cannot be simply transferred to the consumer through increases in electricity rates without negative impacts.
The existing process for setting electricity rates is open and management remains fully accountable. The public demand for accountability and the customers' needs for low-cost electricity and reliable service continue to challenge the effectiveness of our operations.
We do not believe that it would be appropriate for the new agency to be governed only by internal policies in this regard or that it be only subject to periodic external review by the Auditor General of Canada.
Given the demands of our customers, we recommend that the legislation incorporate similar forms of public accountability for the new agency, such that its internal management, operations and business practices be subject to review by the industries and organizations that are regulated to ensure that the agency's mandate is discharged in the most efficient and effective manner.
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We recommend that section 44 be amended to allow licensees to have some input prior to the establishment of the fee for the forthcoming period as well as to review costs as incurred.
[English]
Mr. Johnson: Ladies and gentlemen, mesdames et messieurs, I'll deal with consideration of costs and benefits in regulatory decisions.
The evaluation of costs and benefits to guide the decision-maker is a crucial aspect of improving future practices. Worldwide, the concept of risk-based cost-benefit evaluations is gaining acceptance, and such evaluations are being used to an increasing extent in the application of health and safety legislation that includes nuclear activities.
In addressing risks to health, safety and the environment, it is government policy to serve the public interest by ensuring the public's money is spent wisely. The 1995 Treasury Board policy, reference 1, applies to all federal regulatory authorities and states, ``the objective...is to ensure that use of the government's regulatory power results in the greatest net benefit to Canadians''. The Treasury Board policy requires regulatory agencies to demonstrate that ``the benefits of the regulatory activity outweigh the costs, and...in particular...ensure that the limited resources available to government are used where they do the most good''.
This issue is a matter of substantive concern to us. The cost impacts and the growing burden of compliance are large. Without certain changes to the existing regulatory regime, the commercial viability of the industry may be in jeopardy. In the long term, we are concerned that the competitiveness of the industry could erode to a point whereby it may no longer be feasible to realize future benefits of nuclear technology either nationally or internationally.
In 1993, in a joint submission to the advisory panel on regulatory review, we recommended that cost-benefit considerations should be incorporated into AECB decision-making. That panel recommended to the Minister of Natural Resources that mechanisms be developed to examine cost-benefit issues in decision-making.
The AECB staff do not currently appear to consider costs and benefits in their assessments and board staff recommendations show little evidence of being guided by such evaluations. This we believe is contrary to Canadian government policy and the intent and broad desire on the part of all the stakeholders to ensure that maximum benefits accrue to Canada.
An AECB policy on application of cost-benefit considerations in regulatory decisions is one mechanism for addressing our concerns and is presently being developed. It is our expectation that such a policy will focus on specific decision-making under the authority of the act and not be simply confined to the regulatory development stage. We have reviewed an early draft of a policy that we find encouraging, as its scope of application recognizes that, save for areas wherein the AECB has no discretion, cost-benefit analysis is capable of being applied to each and every decision of the AECB staff and the board. Such a policy, once implemented, will assist both the AECB staff and our own personnel to ensure that costs incurred are commensurate with the benefits of risk reduction.
While it may be premature to have any specific reference in Bill C-23 to this emerging and significant concept, nonetheless we do note that development and implementation of such a policy is consistent with the commission's object under Bill C-23, namely to regulate such that there is no unreasonable risk to health, safety, and the environment.
We maintain that this policy is an essential supporting document to the act, and therefore we enlist the support of this committee to endorse utilization of cost-benefit evaluations in regulatory decision-making.
Specifically, we recommend that the committee, in its report back to the House of Commons on Bill C-23, recommend implementation of a cost-benefit policy consistent with the Treasury Board policy to guide the decisions of the commission prior to promulgation of the new act.
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Thank you members of the committee. We're available to answer questions.
The Chairman: Thank you very much, gentlemen.
We'll begin the questions with the Bloc Québécois. Mr. Canuel.
[Translation]
Mr. Canuel (Matapédia - Matane): On page 4 of your brief, you state the following:
- In response to a Treasury Board directive, cost recovery fees regulations were instituted in 1990
by the Atomic Energy Control Board. Since first instituted, these cost recovery fees have risen
substantially.
Mr. Émard: Because of the cost recovery provisions, between 1992 and 1996, licensing costs have increased by 89% in Hydro-Québec's case for Gentilly-2. The increases are not necessarily the same for each generating station because the rates differ based on the number of reactors. In the case of Gentilly-2, there is a single reactor.
Mr. Canuel: An 89% increase is enormous!
Mr. Émard: Yes, the cost of the license increased from about $1.2 million to $2.3 million.
Mr. Canuel: I see here that you have made a joint submission. I trust this is not an indication of collusion between the three corporations. As I understand it, this means that New Brunswick, Ontario and Quebec have all agreed on the recommendations submitted here.
M. Émard: The submission represents a joint effort by the three corporations. We all agree on its contents and recommendations.
Mr. Canuel: In light of the recent drastic cutbacks at Hydro- Québec, has the safety of the nuclear industry been affected? We all know that the cuts have been deep. Could safety be compromised to some degree as a result of these cuts?
Those who know something about it are afraid of nuclear energy. Regardless of the cost, I think that we have to protect our citizens. Will safety be compromised as a result of these cuts?
Mr. Émard: To answer your question, the safety of our facilities not be compromised in any way. Certain activities have been affected by the budget cuts you spoke of, but nuclear safety will not be compromised under any circumstances.
[English]
The Chairman: Mr. Ringma.
Mr. Ringma (Nanaimo - Cowichan): Thank you for your presentation, Mr. Émard.
As a British Columbian, I was a little surprised to find that B.C. Hydro, being a non-nuclear-generating corporation, had set up a company to do business overseas with India and Pakistan.
Maybe I shouldn't be surprised. It perhaps is a reflection of my ignorance of B.C. Hydro, or hydro companies generally.
I would have expected it, or not been surprised, if Hydro-Québec, Ontario Hydro or New Brunswick Power, which are in the nuclear business, were doing something with overseas companies.
So I'll ask you this directly, because it may impact on Bill C-23 or the regulatory authorities: do you do business overseas with other companies, as with Ontario Hydro, Hydro-Québec and New Brunswick Power, either nuclear or otherwise, or is it all funnelled through - what is it - AECB?
.1650
Mr. Field: No, we have a separate subsidiary, Ontario Hydro International, which does business with a lot of utilities throughout the world, both nuclear and non-nuclear.
Mr. Ringma: Is it the same for Quebec?
[Translation]
Is it the same for Quebec?
Mr. Émard: It's the same at Hydro-Québec. We have a corporation call Hydro Quebec International and we do business abroad with various electrical and nuclear utilities.
[English]
Mr. Ringma: Thank you.
Mr. Johnson: Yes, New Brunswick Power is a smaller organization than either Hydro-Québec or Ontario Hydro, but we also do overseas business both in the nuclear and non-nuclear fields.
Mr. Ringma: Thank you. I have a second question, Mr. Chairman, which is totally unrelated to that. It concerns public education in the domain of protection of the environment, safety, and such. To me, there's a very large factor of public education involved in it. I don't see the topic covered in Bill C-23.
I would just like to get your opinion on the degree to which, if any, the new commission should be involved in that domain. Or should it be left to you as provincial hydro authorities?
Mr. Johnson: Maybe I can start by responding to that. I must admit I haven't thought about whether the regulator has a role in the education of Canadians, although I think they do carry out that role to a degree. Certainly we, the utilities, as the users of nuclear power, see that we have an obligation to educate the citizens of our province. I think that would probably apply to the other two as to the facts about nuclear technology and the safety that goes behind it.
We have a number of programs that range from being involved in the teaching community in New Brunswick to offering plant tours and that type of initiative. We have our visitor centre. I think this is fairly common in the nuclear industry.
I think the nuclear industry has tended to recognize the importance of education in convincing its ratepayers that it's making the right decisions. That becomes the driving force behind that aspect.
Mr. Ringma: I guess one of the premises to my question is that I kind of feel that maybe someone other than just the producers, such as the government, has some obligation there, but I don't know to what extent the government controls it.
Mr. Field: I hadn't really thought about it in terms of the act, but clearly the role of regulation in the nuclear business is very important. It's very important that people have a clear understanding of the government's role in that.
To the extent that the new commission would be involved in that, I think it would be useful, but I think their major focus should be in regulation.
[Translation]
It's the same thing for Quebec.
[English]
The Chairman: Mrs. Cowling and then Mr. Reed.
Mrs. Cowling (Dauphin - Swan River): Thank you, Mr. Chairman.
My question is with respect to regulatory fees. Could you provide the committee with the figures on regulatory fees as to whether they have registered any exorbitant increases in recent years?
Mr. Émard: As I mentioned previously, in our case, a single-reactor utility, our cost increased about 89% over a four-year period.
Mr. Johnson: I think it may be worth mentioning - this should be evident from our brief - that we don't oppose cost recovery in principle. We recognize that a component of the fee increases is the progressive recovery - the full recovery - of regulatory fees.
.1655
The point we wish to make is that the establishment of those fees is based on the cost of operating the regulatory body, and we would like to have some opportunity to view the way in which the AECB spends its money and the way in which it operates from an efficiency perspective. We feel that without that, all that remains is the Auditor General's occasional visits to the regulator. Prior to fee increases we would like, as users and fee payers, to have some input into the establishment of those fees or the rationale for establishing them.
The Chairman: Mr. Reed.
Mr. Reed (Halton - Peel): Being a member from southern Ontario, I guess I should direct my questions to Mr. Field.
Some information, whether it's accurate or not, has come our way that when the older nuclear units come up for relicensing, they may not be relicensed but rather mothballed because of costs. I was wondering if the cost of the licence itself would be a factor in that decision?
Mr. Field: No. The cost of the licence itself would be a factor, but a very small factor.
We are currently in the process of trying to achieve a licence renewal for the Pickering station. Four of those units are our oldest units, and our expectation is that we will be successful in getting that relicensing done later this year. We don't see the age as being an impediment as long as we meet all the licensing conditions, which we believe we do.
Mr. Reed: What about the Bruce?
Mr. Field: The Bruce Unit is in a different situation. Bruce Unit 2 is shut down and de-fuelled right now. To restore Bruce Unit 2 we would have to put in a new steam generator and new pressure tubes, a fairly major investment decision. With the electricity situation in Ontario, where we have more generation capacity than we need, a fairly flat load growth, and are heading down to a competitive market, the decision to leave Bruce Unit 2 in its current state for the time being is basically about economics. It's not really about licensing. We would have to make significant investments in the physical side of the plant.
Mr. Reed: What about the subsequent units at Bruce? Will they be subject to the same scrutiny when their time comes?
Mr. Field: Each of those decisions will be made on economics, based on how we see the market conditions at that time. For Bruce Unit 1 we'll have to attract about $300 million of investment if we want to re-tube those units. When that time comes, in a couple of years, we'll be making that decision.
Mr. Reed: What was your peak winter demand?
Mr. Field: Don't hold me to this, but I think it was around 22,000 megawatts.
Mr. Reed: So it's been higher in the past.
Mr. Field: Yes, it's been higher. It's been very flat throughout most of the 1990s.
Mr. Reed: This may not be a fair question, but what do you consider to be the total capacity of the utility at the moment?
Mr. Field: I believe it's a little over 30,000 megawatts.
Mr. Reed: So you have a margin of approximately 8,000, or 25%.
Mr. Field: Yes.
Mr. Reed: That's interesting. In the 1970s, 25% was considered minimum as a margin.
Mr. Field: There's a new world dawning on utilities now.
Mr. Reed: What do you consider to be a proper margin?
Mr. Field: I couldn't give you an answer to that. It's an area I'm not very familiar with recently.
You're right that those numbers used to be in that range, but I think some of the interconnections with other utilities are better, and we have a growing number of non-utility generators in the province. A number of different factors come into play. But certainly the margins are getting tighter than they used to be.
.1700
Mr. Reed: Once again, maybe this is an unfair question, and if it is, tell me. Is your pricing policy for the sale of electric power now different from the one you had, for instance, ten or fifteen years ago?
Mr. Field: I can't comment on that.
Mr. Reed: No. I'm sorry, it's probably not a fair question to ask you.
Does the nuclear component of Ontario Hydro have any future expansion plans, if we assume the peak does increase significantly?
Mr. Field: No, nothing. Again, it would depend. If, for example, the peak went up to 30,000 megawatts, the company would have to look at how it would best and most economically meet that increased demand. But we don't have any plans. Our forecasts are not showing any need for new generation at this time.
Mr. Reed: On the licensing costs, a comment was made by Hydro-Québec about the increase in the cost of licences. What is your experience?
Mr. Field: Very similar. Our absolute numbers are a bit higher because of the number of reactors we have, but the rate of increase has been similar.
Mr. Reed: Is the cost based on a plate rating or is it based on the yield of the unit?
Mr. Field: It's based on a formula.
Mr. Johnson: I don't know whether it's the number of reactors or.... I think there's a more complex formula for multi-unit reactors. But I think our fee and Hydro-Québec's are essentially the same for single-unit plants.
The Chairman: Mr. Thalheimer.
Mr. Thalheimer (Timmins - Chapleau): Are all nuclear power plants in Canada CANDUs?
Mr. Johnson: Yes.
Mr. Thalheimer: How do our safety regulations stand up against, say, the American regulations? Do you compare them? They obviously don't all have CANDU reactors.
Mr. Field: They don't have any CANDUs.
It's a different regulatory environment, as we talked about. The U.S. environment from their regulator is much more prescriptive. Overall they're all driving towards the same end, which is safe operation of the reactors. They just go about it differently in the States. I think in the standards, as much as you can say, we're in the same ballpark.
Mr. Thalheimer: I would expect the safety features of nuclear reactors around the world would be pretty well standard, unless there are other ways to control the safety and the environment from these reactors.
The one at Long Island wasn't a CANDU reactor, was it?
Mr. Field: No.
Mr. Thalheimer: Were those regulations basically what we had here at that time in Canada? How are they regulated?
Mr. Johnson: Again, the regulatory regime in different countries varies based on what that country deems to be appropriate. Again, I'm no expert on the regulatory scene...other than the fact that they have a federal regulator, just as we do. As Mr. Field mentioned, it's our understanding the regulator in the States is far more prescriptive. In other words, they provide far more detailed regulations and far more detailed prescription of what can and can't be done.
In Canada the regulator has historically taken the role of establishing some fairly high objectives; not particularly high-level objectives, but they have set objectives for safety and left it to the utilities to satisfy those objectives. This perhaps leads to a level of initiative and commitment from the utility to meet those criteria that ultimately I think our regulator and we would judge are safer than having the regulator tell you in detail how to do your job.
I think the U.K. industry, for example, is similar to Canada's in the role of the regulator. I'm not familiar with Europe, Japan, or the other nuclear countries - France - but they all have slightly different variations in the way in which they do business. I judge that in essence the nature of the regulator's role and the quality of the regulation are about the same in most countries.
.1705
Mr. Thalheimer: I think it would almost have to be identical, because you're dealing with the same properties.
If the regulators in different countries have standards different from those we apply to the CANDU reactors.... Are they specifically for the CANDU reactors or for the nuclear industry as a whole? There are different types of reactors and different types of regulations, but in the end, as far as safety goes, it's all going to be the same.
In other words, a catastrophe here or the one that we've seen in Russia comes to the same damned thing. How are they regulated, though? How was the one at Chernobyl regulated? Would those regulations stand up beside ours and would ours stand up beside theirs?
Mr. Field: In the case of Chernobyl, at that time our regulations were much more stringent. If you look at the design, our containment systems are much better than that particular Russian-designed reactor. I do know that when CANDUs are licensed in other parts of the world, our regulator is involved in making sure the standards are comparable.
I don't profess to be an expert on the regulations throughout the world. Through work done with some of the international bodies, the idea is to try to get comparable standards throughout the world. You're quite right: something that's happened in Russia has had an impact on the industry worldwide.
Mr. Thalheimer: But you mentioned just a minute ago that there are international bodies trying to monitor the whole thing for the nuclear industry or that are trying to make sure they're all regulated to a sufficient standard.
[Translation]
Mr. Émard: Regulations are one thing, but as Mr. Johnson said, we often take different approaches to the regulatory process.
On the other hand, I think it is important to mention that the nuclear industry and reactor owners in particular have gotten involved in the process of exchanging information with all operators, at least with the international agencies operating nuclear power plants.
Nuclear operators frequently share their experiences and exchange ideas about their operations and practices so that a very high level of safety can be maintained.
For example, we exchange information with the American groups INPO and WANO and in Canada, with COG. This is all part of the process of making the nuclear operators accountable and of ensuring that positive experiences are shared and that the highest level of safety is maintained in all our facilities, even when different regulatory regimes are in place.
[English]
Mr. Thalheimer: So there is a mechanism for comparing notes and experiences.
The Chairman: Thank you, Mr. Thalheimer.
Gentlemen, I have a couple of questions. I want to explore a couple of issues, starting with the cost-recovery issue. Leaving aside the issue of whether the regulations there now are necessary, once you agree on what an appropriate regulatory regime is, do you think the cost of it should be borne by the industry?
[Translation]
Mr. Émard: We accept the cost recovery principle as set out by Treasury Board.
More specifically, in our recommendations, we state that we would like to see a forum through which we can review increases and examine procedures so that the Commission can operate as effectively as possible.
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As we mentioned in our brief, the only mechanisms available to us right now are the Auditor General's reports.
Basically, what we want is a process whereby we can call into question increases in licensing fees or the cost recovery process. We agree fully with the principle involved.
[English]
The Chairman: I want to explore that just a bit. I'm going to try to get my mind around your point III(b), your first paragraph, with your example of an 89% increase.
If I understand it correctly, we're not necessarily dealing with an increase here. You made a decision in 1990 to start cost recovery. Let's say a unit is $1,000 of cost recovery. Rather than assessing you $1,000 in 1990, the agreement was - and I believe it's going to be over an eight-year period - that you would start to pick up full recovery.
So statistically you can say that if you paid $100 or $125 in year one of an eight-year process to get to $1,000, in year six, if you're paying $800, it's a 500% increase or whatever it works out to...my math is not too good on that. But in reality you're not experiencing an increase in fees. All you're experiencing is a gradual implementation of something that you've just said you accept as legitimate. Am I off base? Am I missing something?
[Translation]
Mr. Émard: You are quite right to say that cost recovery has been spread over several years.
However, we should also mention that during the same period, staff levels at the Control Board increased substantially. Looking to the future, we would like to see established a forum in which we can discuss cost increases, just as we have a duty, as an electrical utility, to respond to our customers concerns about costs.
[English]
The Chairman: There's no argument about the need to move to be efficient...and how it's done. Would the tribunal you're suggesting have a power to overrule it or are you looking at something that's advisory?
[Translation]
Mr. Émard: We think it would be a good idea for this tribunal to have some decision-making powers.
[English]
The Chairman: Right now you mention that it's only the Auditor General, but in essence I suspect that all of these fees are gazetted. There's a waiting period between the time they're gazetted and the time they come into force. I suspect, although I don't know for sure, that organizations such as Hydro-Québec or Ontario Hydro would take - and have taken - advantage of that period to object. Am I wrong?
[Translation]
Mr. Émard: It's true that in recent years, we have been informed about increases. We were notified about them several months in advance. I forget exactly what the waiting period was.
However, we would like to see a different mechanism in place which would allow us to review these costs increases.
[English]
The Chairman: I'm going to quote from page 5 of your brief in English:
- Without certain changes to the existing regulatory regime, the commercial viability of the
industry may be in jeopardy. In the long term, we are concerned that the competitiveness of the
industry could erode -
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Mr. Johnson: Yes, maybe I can address that. That's not what we're trying to say. We recognize, I should add, that there is an ongoing initiative to recognize cost-benefit in regulation. There has been a Treasury Board policy for a number of years that requires that. So we're really not introducing a new concept here. In fact, we're simply reinforcing the position that already exists through Treasury Board policy that regulation should be cost effective.
In that regard, it isn't a matter that if in fact the necessary regulation makes nuclear power non-competitive, then nuclear power will be non-competitive. We don't believe that. We believe the regulatory process has the potential to affect the competitiveness of nuclear power without it improving the safety in a commensurate way.
The Chairman: So you're not saying that's happening right now.
Mr. Johnson: We're saying that isn't happening right now.
The Chairman: Okay, good.
I have one last question, and then I know a couple of colleagues have some follow-ups.
Again, I'm going to quote from your brief. It says:
- The AECB staff do not currently appear to consider costs and benefits in their assessments and
Board staff recommendations show little evidence of being guided by such evaluations.
Mr. Johnson: Yes, I can give one example, and I think Mr. Field can give another.
Some years back we were asked by the regulator to move steam lines at our plant. We judged that the benefit in terms of safety from this particular activity was minimal, and yet the costs were substantial. In fact, they were in the order of $60 million, and that was not taking into account the cost of energy when the plant was shut down.
In that particular case, we made our case to the AECB itself, and ultimately they agreed with our position. But the board staff who do make the recommendations did not appear to recognize or consider the cost-benefit issues, certainly not to a degree that we thought was acceptable. That is one substantial example of a cost benefit over a regulatory decision that we felt didn't take cost and benefit into account.
The Chairman: Mr. Field.
Mr. Field: There are a few like this around. The one I'd like to talk about is some of the de-ratings we've taken at our Bruce units, which we imposed on ourselves in the beginning, and the very slow and laborious process to get those units back up to full power, which they still are not. Bruce A is still restricted to 75% and Bruce B is at 90%. In our view, we've had a very long and arduous process to move these back up. We believe in this particular case, from a safety point of view, the cost that has been imposed far outweighs any benefit in terms of safe operation of the reactor.
The Chairman: Thank you.
Mr. Canuel, did you have a follow-up question?
[Translation]
Mr. Canuel: I would like to come back to the subject of regulations. As we know, there are nuclear generating stations located just about everywhere and a number of countries have CANDU reactors. Would it be at all possible to put in place international regulations that would apply to all of these facilities? Of course, Canada cannot impose its will, but it can act within international forums.
You stated earlier that the United States had more detailed regulations, not more finicky ones, mind you, but more detailed.
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Here in Canada, we have another problem, much like other countries. If one does not already exist, would it be possible for Canada to recommend the creation of an international body to develop a uniform regulatory regime?
It's all well and good to build a new generating station in a given country, but if that country has not adopted regulatory provisions or if these provisions are extremely lax, we are contributing in some way to the destruction of that country's environment.
Even if here in our country we have remarkable or adequate regulations, if this other particular country does not have any, we all have a major responsibility in this. Isn't there some way that we can create an international body?
[English]
Mr. Johnson: There are certainly a number of international initiatives that are aimed not necessarily at a universal international approach to regulation, although - and I'm no expert on this; the regulator is perhaps the best organization to speak authoritatively on this - the International Atomic Energy Agency in Vienna has a number of initiatives to try to create a uniform, consistent regulation, I believe, in all countries that are members of the IAEA.
In addition to the infrastructure of regulatory consistency that they try to and do promote, they take an active part in assessing the safety of other plants. They have a process or program, or a number of programs, where they send experts from all over the world to visit nuclear plants all over the world and to access the safety of those plants independently. So the IAEA does carry out an audit function of the safety of nuclear plants. These are plants, however, that are members of the International Atomic Energy Agency - or countries that are, which is a large proportion of them.
In addition to that, following the Chernobyl accident, there was an organization set up called the World Association of Nuclear Operators, which is not a regulatory organization but an organization whose membership includes, I believe, every organization that owns a nuclear reactor in the world. This organization's role is: to promote safety by exchange of information; by peer evaluations - by audits, in other words; by circulating good practices; and by reviewing events at each other's stations. So there is a very extensive process taking place worldwide where all owners of nuclear reactors really open their doors to other owners of nuclear reactors.
I think all three utilities at this table, for example, have invited WANO audit teams to our plants, where we can take advantage of their experience in operating plants safely, and they, by visiting us, can pick up information about how we operate plants safely.
I think worldwide there's really quite an effective set of international organizations that is attempting to set standards.
Another one that is very important is the International Commission on Radiological Protection, which is an international organization that sets radiation protection standards and which I think is also affiliated with the IAEA.
The Chairman: Mr. Reed.
Mr. Reed: Thank you, Mr. Chairman.
Obviously what's very evident is that the nuclear component in any utility is subject to some costs that are unique to it, whether it's the licensing of the unit or the inspection, or the change in regulations that says you should spend $60 million to move pipes from one place to another to comply with the new concept of safety, and so forth. When those costs are imposed, what happens to them? Do they go into operating costs or capital costs?
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Mr. Field: It depends on the nature of the costs. In the example Mr. Johnson gave, they would likely go under the capital cost and then be amortized over the remaining life of the plants. Some of the additional regulatory costs end up in new procedures or similar things that would impact on the day-to-day operation of the plant. It would really depend on the nature of the regulation.
In the old days I guess they would end up in our cost base and might be a reason for a cost increase. With the new competitive environment we seem to be heading into, we will have to learn how to deal with those costs, either learn to run more efficiently or take them out of net income or something else, as any other business would have to do.
Mr. Reed: With the way you do your assessments, are you able to tell us what those additional costs might represent per kilowatt?
Mr. Field: No, we are not.
Mr. Johnson: Are you asking us to try to assess the financial cost of regulation?
Mr. Reed: Yes.
Mr. Johnson: I think that's quite difficult. The one clear and obvious cost directly associated with regulation is, of course, the licence fees. If you start with $2.3 million or something along those lines, which is the cost of supporting the regulatory infrastructure, that is one clear cost that is there because we have a regulator. To try to assess the other costs that stem from regulatory decisions, regulated positions or regulation itself would be difficult.
Again, it's important to recognize that the safe operation of the stations is our responsibility. Whether the regulator was there or not, we would still have that responsibility. When we make decisions related to safety, we would be making those decisions anyway. The regulatory presence provides an independent oversight of whether we're taking the appropriate steps to operate our plants safely, and I have no doubt that this is a legitimate role for a regulator to play. We do not dispute that there needs to be a regulator in the nuclear industry.
So it's really a matter of assessing whether the regulator is cost-effective in these activities, and that is the gist of our brief. It isn't that we disagree with regulation or disagree with being burdened by the cost of regulation. It's simply that we would like to have a more open and involved approach to the regulatory process.
Mr. Reed: In the end I guess there is a way of determining the cost per installed kilowatt for doing these add-ons. If you blow them into capital, they're there in capital. For instance, as Mr. Field said, Ontario Hydro will be making decisions on Bruce units in two years. I take it that this kind of cost will be factored into your assessment of the future of those units.
Mr. Field: We can price out the specific additions or regulatory items, but as Mr. Johnson said, because the responsibility for safe operation is on us, we believe that in the type of business we run, the regulator has a very useful purpose. It's very difficult to distinguish between the things that we may do and the actual additional cost of regulation. For us it's part of doing business and we recognize that. What we're asking is that it be done in a cost-responsible manner. We don't want to get into saying that we're regulated to this amount or some other amount, because it's very difficult to segregate what we would do on our own and what we might not do.
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Mr. Reed: Thanks, Mr. Chairman.
The Chairman: Mr. Ringma, you had a question.
Mr. Ringma: How much time do I have? Are we running pretty short here?
The Chairman: We are going to have a bell go off -
Mr. Ringma: Momentarily?
The Chairman: It was delayed because of the minister's statement, so there's a little bit of time, but not a great deal.
Mr. Ringma: Okay. I have a real quickie for Mr. Johnson.
I was really pleased to hear you describe these international organizations that have come into being since Chernobyl and such. Given what we hear about India, have you any feel for their cooperation in this? Or is the atomic weapon quite a side issue from everything else they're doing?
Mr. Johnson: I can't speak authoritatively on that. I do know the Canadian government does approve our support of India and Pakistan in areas that relate to nuclear safety. We have some very tight restrictions on business we do with India and Pakistan, but in that one area, when there are requests from those utilities or those countries for help where it relates to the safety of those plants, we do give and have given them support.
Mr. Ringma: Moving back to Bill C-23, I'd just like to get a feel for the extent to which you were consulted prior to Bill C-23 being formulated.
I'd take the specific example of your recommendation that clause 44 be amended to allow licensees input prior to the establishment of fees, which we've just been discussing. Had you been consulted on that? Had you tried to make that point in advance? Were you rebuffed? Or is this something that's come up after normal consultation prior to this time?
Mr. Ian Motherwell (Assistant General Counsel, Law Division, Ontario Hydro): PerhapsI could address that.
My name is Ian Motherwell. I'm with Ontario Hydro.
The issue was raised in discussions with the AECB staff, amongst other things. I might add the consultation has been very good. They've talked to us on numerous occasions about the progress of the bill, and we've discussed what's in the bill. We did provide some input to them.
This issue has been raised with them before. There has been a suggestion that an AECB policy might be developed to achieve this goal. We believe we would like to see something more statutorily enshrined, but obviously a policy would be a step in that direction.
Mr. Ringma: I have a final quickie. If the recommendations in your presentation were to be implemented in the bill, you'd go away happy?
Mr. Field: Yes, we would.
The Chairman: Just before I adjourn, I have one quick last question on that last point that was brought up on the fees.
As I'm sure you're well aware, paragraph 43(1)(b) provides you with an appeal process should you not be satisfied with the fees being suggested. Obviously that's not addressing your concern, because you're making another recommendation. Maybe you can tell me why paragraph 43(1)(b) would not satisfy your concern about having input to the fees. If I understand it correctly, you can appeal any Order in Council, which would include a fee increase.
[Translation]
Mr. Gilles Marchand (Chief Counsel, Legal Affairs, Hydro Quebec): Off the top of my head, I can't recall all of the details of paragraph 43(1)(b), but it has to do with appeals to the Commission.
Mr. Émard spoke earlier about setting up an independent body to review the Commission's costs and effectiveness. This particular paragraph pertains to appeals to the Commission. I think that answers your question.
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[English]
The Chairman: Thank you very much.
Thank you, gentlemen. I appreciate the fact that you were patient and waited for us to complete our vote in the House and that you've taken the time to provide the testimony. It was very meaningful to our analysis of Bill C-23. Thanks on my behalf and that of the committee.
We stand adjourned.