1995 Legislative Session: 4th Session, 35th Parliament
HANSARD
The following electronic version is for informational purposes only.
The printed version remains the official version.
(Hansard)
TUESDAY, JUNE 13, 1995
Morning Sitting
Volume 21, Number 1
[ Page 15377 ]
The House met at 10:03 a.m.
Prayers.
Hon. A. Edwards: I just observed since I came in.... I believe there's a school class up there that hasn't been introduced. I'd certainly like to make them welcome, because we're all always glad to have school children here to see how the Legislature works. Welcome to the class that I see up there.
Hon. G. Clark: First of all, I'd like to call Committee of Supply in Section A for the purpose of completing the estimates of the Ministry of Energy, Mines and Petroleum Resources. In the House today I call continued debate in committee stage on Bill 16.
CLASS PROCEEDINGS ACT
(continued)
The House in committee on Bill 16; D. Lovick in the chair.
Section 18 approved.
On section 19.
J. Dalton: I have a question for the Attorney General. Is it conceivable that under this section, a plaintiff could start an action, have a class proceeding certified under this act, and then have to incur the expense of giving notice to all the other people he or she may not have contemplated being dragged into this? The concern I have is that there may be undue expenses imposed upon a plaintiff who had no intention originally of proceeding under this statute.
The Chair: I'm going to recognize the member for Shuswap for a moment. S. O'Neill: I request permission to make an introduction.
Leave granted.
S. O'Neill: It's a pleasure for me today to welcome to Victoria and the Legislature 21 students from grades 4 to 7 from Westwold Elementary in Westwold in my riding. They're visiting here with their teacher Mr. Yamaoka. Please make them welcome.
Hon. C. Gabelmann: It's a rare honour for the students to be introduced twice this morning.
The short answer to the member's question is yes. I am assuming the question is that a plaintiff applies who knows about, let's say, 100 others in the same situation, gets certified, and then following that certification discovers there are another 900 people he's required to notify. The answer is yes, he has to make that notification. But later in the costs sections -- when we get to them -- there is an opportunity to mitigate any untoward expense that would otherwise occur on the plaintiff's behalf. That's how that situation was designed to be addressed.
Sections 19 and 20 approved.
On section 21.
M. de Jong: I'm returning to a theme we explored earlier in the debate on this legislation -- that is, my concern that we may, with this legislation, be stepping beyond the bounds of where the courts should be in terms of participating in the actual conduct of the litigation. I think the Attorney General can make a strong argument that at the initial stages or at the stages surrounding the commencement of the action, the notice provisions have to be very wide, so that the broadest range of people that might be affected are involved. But at this point -- section 21.... As I understand it, we are now at a stage where the litigation has been commenced, for all intents and purposes the parties have been identified, the various groups, subgroups and subclasses are now in existence, and the court is being empowered above and beyond any application that any of the parties might make to decide, of its own volition, that certain information should be passed to one or all of the parties.
I think the intent may be honourable, as it says here: "...to ensure the fair conduct of the proceeding." But it is still an adversarial proceeding. One wonders and becomes a bit concerned about the prejudice that might befall one of the parties -- either the plaintiff or the defendant -- where the court is now stepping in and making rulings that information otherwise available to the opposing side that they haven't requested, or for any number of reasons haven't availed themselves of.... There is now going to be an obligation placed on litigants by the court to provide information that might be detrimental to their own case. It's fair, but it's certainly a radical departure from how litigation in this province has heretofore been conducted.
Hon. C. Gabelmann: The member makes relevant and important points. However, one of the things that we have to do in designing the legislation around class action is to ensure that there's some protection for absent members of the class. Situations may arise where someone who is not present in the courtroom, and who may not know about what's happening but could be impacted by the proceedings, needs to be advised or protected, and this gives the court that protection. There is no question at all that the member's thesis in respect of this and other sections is correct. The court is given wider authority than it normally has when there is a single plaintiff and a single defendant. There are complications around that too, but in general terms, the court has wider authority. There is no other practical way of.... Perhaps there are other ways of doing it, but this is our way of providing that protection in particular to absent but potentially affected people, as this section does.
Again, we've taken the experience of other jurisdictions and the work of the Ontario Law Reform Commission, and this is the conclusion that seems most appropriate.
M. de Jong: I'll just comment, then, on the record, and the Attorney General can respond if he wishes. My hope would be that this section would be interpreted in a way that would reflect a recognition on the part of the court that if an individual has submitted to be a party to an action, then there would be some onus on that party to remain informed -- or to exercise some diligence about remaining informed -- about
[ Page 15378 ]
the conduct of the litigation, and that this not be interpreted too paternalistically. I think that if an individual has submitted to the process by registering and becoming a member of a class, there is some obligation on that person to remain informed.
Hon. C. Gabelmann: Not to prolong this, but in an opt-out model you need -- and the member understands this.... The people who have automatically been included need greater protection.
Section 21 approved.
On section 22.
J. Dalton: It's probably just a minor point, but I don't think this section is really needed. In division 3 -- the division dealing with notices -- every section preceding this one refers to the court, the direction the court will give and the orders the court will make. I don't quite understand why it was necessary to put this provision in there. I can understand that we want to make sure that notices are properly complied with, but given that the court must approve every notice, I don't understand why the section was included.
[10:15]
Hon. C. Gabelmann: This section is just an additional safeguard. Again, it also has the effect of protecting absent or uninvolved class members. It was just felt that this added protection was required, so that notices aren't given without court approval.
Sections 22 to 25 inclusive approved.
On section 26.
M. de Jong: My question to the Attorney General is: is it the Attorney General's understanding that a judgment on a common issue would bind a litigant who was a member at the time that judgment was rendered but subsequently opted out of the proceeding?
Hon. C. Gabelmann: If I understood the member's question correctly, the individual could not opt out after the judgment was rendered. There is an opting-out period -- we talked about this the other day -- which ends, and following that there is no ability to opt out. Therefore that wouldn't happen.
M. de Jong: Although I think there is provision for applying to opt out at any time, and presumably, then, a condition of opting out would be to preclude that individual from re-litigating a matter that had been determined prior to the opting out.
Hon. C. Gabelmann: If that application were made, then the court would have to consider a variety of issues, including the one the member raises. That would be for the court to determine.
Section 26 approved.
On section 27.
J. Dalton: Section 27(1)(b) is an interesting provision. The court is empowered to "appoint one or more persons including, without limitation, one or more independent experts, to conduct an inquiry into...issues...." I don't need to go on and read the rest of it. It would seem to me that this could be a costly exercise. My question is: who would pay for these experts? Given that we will be coming later to the cost issue under section 37, it would seem to me that we might be getting into a rather interesting but costly exercise, potentially.
Hon. C. Gabelmann: The provision is actually designed to try to minimize costs, because the court proceeding may -- without having this kind of side exercise occur -- take longer and be a more involved process. This is an opportunity for the court to resolve particular issues that are identified under the section, in a sense, in a sidebar way. As I say, the intent is actually to try and reduce the complexity, the length and the procedure, and thereby the costs.
J. Dalton: That may be so, but let's consider a possibility. Let's say that the court decides to appoint a whole fleet of engineers to deal with a bridge collapse. The court, in its wisdom, has decided that they need some experts to have a look at it. As we know, engineers and other professionals don't come cheap. These costs would be imposed upon whom? How are we going to take care of that possible scenario?
Hon. C. Gabelmann: Section 27(1)(b) needs to be read in conjunction with 27(3), where it says: "...the court must choose the least expensive and most expeditious method of determining the individual issues...." That should capture the member's concern.
J. Dalton: I thank the Attorney for drawing my attention to that subsection, but I don't know that that is necessarily going to be terribly helpful to the court. In the latter part of the phrase that the Attorney General just read out, it provides: "...that is consistent with justice...." I think the court has to be more concerned with the implications of finding justice than perhaps with trying to find the cheapest price at which to produce these experts. I don't necessarily need a response; I'm just flagging this. This may be a costly exercise. People who, I admit, are trying to save court time and reduce costs or distribute costs over a wider field may not achieve that exercise; it may do quite the opposite.
Hon. C. Gabelmann: I'm not sure it warrants a long debate, but what we're saying here essentially is that the court can go outside and set up a separate process to inquire into the facts. It has to do so making sure that justice is done by that exercise and that the appropriate people are retained to make sure that justice is done. While doing all of that, they have to do it in the cheapest and most expeditious way. It's actually common sense. It would be something that I would expect would happen in any event. It's here to provide additional clarity and direction to the court, and I think it's appropriate for the Legislature to do that.
J. Dalton: Just one concluding comment -- and this is not for our audience but for the O.J. people: I wish they would listen to this advice and do something about it.
M. de Jong: Hon. Chair, I just want to clarify.... There are provisions now whereby courts make references to regis-
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trars or masters for determinations of collateral issues, if you will. Those hearings, though, are conducted in a setting where counsel are present and the rules of evidence -- although slightly amended -- exist and occur. My sense is that we're talking about a different procedure here, where the court could appoint a body of experts and say: "You come back to this court with findings of fact or theories or determinations on particular points." As the Attorney General said, that work will be undertaken separately, and apart from the scrutiny of counsel and the various litigants. That is a very different sort of procedure. Am I reading the section correctly when I indicate the difference?
Hon. C. Gabelmann: As I understand it, what we're trying to accomplish here is this. The inquiry would be conducted under the rules of court, which is in section 27(1)(b). Further to that, when the evidence from the inquiry comes to court, there's an opportunity for examination and cross-examination of that evidence in the normal way as well. If I understand the member's question correctly, I think the issue he raises is protected in two ways in a sense.
M. de Jong: I think the Attorney General has answered the question. Just to be clear, then, the finding of fact that the expert body would make would not be received as evidence of that fact, but it would be available and subject to cross-examination and argument by the various parties involved.
Hon. C. Gabelmann: Yes.
Sections 27 to 29 inclusive approved.
On section 30.
G. Wilson: First of all, I find the placement of this section in this particular statute a bit puzzling. One of the difficulties that seems to be coming up from those who are reviewing and looking at this material is the notice with respect to the statistical evidence that can be used and how that might be admissible in a court. It suggests under section 30(1) that: "For the purposes of determining issues relating to the amount or distribution of aggregate monetary award under this Act, the court may admit as evidence statistical information that would not otherwise be admissible...."
The difficulty we have with this is that if indeed both parties are presumably able to prepare, because of the 60-day notice period required and because there has to be an expert provided for cross-examination, what is envisaged here is that there may be a possibility where both sides will provide conflicting statistical information with their supporting documentation and so-called experts, and put the judge in a virtually impossible situation with respect to determination on which of the two sets of information may be correct. In the provision of an aggregate monetary award, it may be to the detriment of the plaintiff if one could almost stalemate this material coming in by virtue of the fact that there may be two academic arguments advanced that the judge is simply not in the position to rule on.
Hon. C. Gabelmann: The first part of the answer is that the court is often faced with conflicting expert advice, and the court has to make a determination about that. More importantly in this case and in terms of this answer, the subsection that the member refers to -- 30(1) -- is governed, of course, by subsection 30(3), which includes in it sub-subsection (c), which makes sure that the evidence and the experts are in front of the court and that the experts are subject to cross-examination. I hope this would alleviate the member's concern.
G. Wilson: What we're really saying is that because there's a 60-day notice period and because you have to put in place some expert who is presumably open to and subject to some kind of cross-examination, it is then up to the judge to make a finding of fact on the basis of the information. The concern that was expressed to us as we have consulted with people who are litigants in this business -- and I'm not -- is that the difficulty may be that this may work to the disadvantage of the plaintiff, by virtue of the fact that all statistical information that can be provided can be countered with other statistics. You can basically have statistics read to say what you want. It may put the judge in a position of having to make a finding of fact on statistical information that cannot be corroborated beyond the vagaries of reporting. For example, they'll say it's accurate within two.... If you're dealing with certain kinds of statistical reference material, there's a window within which accuracy may be determined. There is also a projection upon which those statistics may be valid or not. There are primary assumptions which could be challenged, and so on. So it may, in fact, work to the detriment of the plaintiff in this case.
They're thinking specifically of the breast implant case. I wonder if that's been reviewed and considered, and if the minister might comment on it.
Hon. C. Gabelmann: I understand the issue and the source of the.... We won't talk about it across the floor, but we've had discussions too with the same person the member has been talking to. In this issue, the reality is that, as with everything in court, the judge is going to make a decision based on the evidence available in the final analysis. There will often be cases where there's a conflict and it's not clear. The judge simply has to listen to both parties, the experts and the cross-examination, and make a determination.
The member says it could weigh against the plaintiffs. Well, it could weigh against the defendants equally. In the final analysis it's going to be the judge who makes the decision. The full procedural tradition of the court is available on this question, as on others.
[10:30]
J. Dalton: Is this section patterned after any other act in any other jurisdiction, or are we truly breaking new ground? The other point I want to make, and I'll ask this question at the same time, is: are we not rewriting the rules of evidence through this provision?
Hon. C. Gabelmann: On the second question, no, we're not. There are the standard rules of evidence. The first question has two answers: the Ontario Law Reform Commission and the Ontario act are the sources of this.
J. Dalton: We, of course, will be able to do some research to see what the Ontario experience has been, so we don't need to get into that.
The other thing I spotted in subsection 30(1) is of interest. I know that we have another act before the House that heaven
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forbid we would trespass upon. But I'm looking at the phrase "including information derived from sampling." It comes to mind that there may be a contentious point in the Election Act that later we'll have a chance to debate. I know that has nothing to do with this provision, but it would just seem to me of interest that.... I do feel that we are breaking new ground. I think we're getting into a very intriguing area of evidence and testimony that might arise in civil process. I will put that comment on the record, and the Attorney General, I'm sure, will be responding when we get to the Election Act.
Section 30 approved.
On section 31.
M. de Jong: I want to ask the Attorney General... My sense of this section is that it approaches the subject of aggregate awards and dividing aggregate awards from the point of view not necessarily of what the entitlement is but what pot of money is available -- what the pot is and how we divvy that up. That's the only way I can reconcile subsections like (3)(b) and (3)(c), where you're considering the number of individuals who aren't going to be part and parcel of the award. I wonder how wise it is to approach it from that perspective. A defendant may be in a position to satisfy a court that his or her means of satisfying a judgment is quite limited. How is that going to impact upon the division of the aggregate award?
Hon. C. Gabelmann: Again, as we often have in this legislation, this section is based on the recommendations of the Ontario Law Reform Commission. Their report is strong about the need for an aggregate awards section. It's governed by whether it would be impractical or inefficient to identify each of the class or subclass members. I don't know what alternative scheme the member might propose to this, but the work, the research and the experience points to the need to do this for practical reasons.
M. de Jong: I don't quarrel with the need to include some manner of section along these lines, though I might, on the face of it, argue that there exists some possibility of an override, to the extent that.... The entitlement of the individual plaintiff should be paramount. There may be other factors that mitigate against that and things that the court has to take account of, but the entitlement of the individual plaintiff should remain paramount.
Hon. C. Gabelmann: The member will ask me again, if I have missed the point of his question. Subsection (3) enables a member of the class or subclass to seek a variation, and the court can do that. I must say that I'm not sure that I.... If I haven't answered the question, I'm not sure what it was.
Sections 31 to 33 inclusive approved.
On section 34.
G. Wilson: I think this is probably one of the more contentious parts of this piece of legislation. I can see, in an award.... In other jurisdictions, where an award has been made, if that award is greater than the total distribution, any balance remaining in that award is, I understand, generally returned to the defendant. What this jurisdiction is saying, as I understand this particular section, is that the court may have a right to take moneys unclaimed and apply them to persons -- even persons who aren't part of the proceeding -- if the judge.... In section 34(4), for example, it says: "The court may make an order under subsection (1) even if the order would benefit (a) persons who are not class or subclass members...." Clearly, I think that this is something the Attorney General needs to give some explanation for. If there's been an award, if that award has been paid into court, if that money has then been distributed to those parties that were affected -- either the class or subclass -- and if there are moneys unclaimed, my research tells me that in most jurisdictions those moneys would then be returned to the defendant. In this case, you're saying that the court can then take those moneys and give them to somebody who wasn't even a part of the proceeding, if that's deemed by the court not to be unreasonable. That's the word that lawyers and judges love and never define. Maybe the minister could tell us the explanation for that and the philosophical rationale for doing that.
Hon. C. Gabelmann: If you look at subsection (4)(a), the court could make an order that would benefit persons who are not a class or subclass. An example under the breast implant issue could be -- and I say could -- that the judge may make a decision, with undistributed moneys, to order that some of those moneys be spent on a screening mammography program, or some other kind of health program that may have to do with breast disease or some other issue related to a broader class but not directly affecting the specific class. Rather than have undistributed moneys go back to the defendant, the money would be used, at the court's discretion, for a broader related health purpose which could benefit people beyond the class. That's what this is designed to do.
G. Wilson: I have to say that I've been unfairly maligned, I think, in this House for taking too strong a line with lawyers. I should go on the record.... You know, the best man at my wedding was a lawyer; some of my best friends are even lawyers. I say that only by way of some defence here.
Not being a lawyer, but certainly having been involved in some research on this particular bill, one of the concerns I have is that, surely, when judgment is made, that judgment has to be specific with respect to the application of those awards. In the event that the defendant is charged with whatever the award may be, and therefore pays into court, how is it that the judge is then going to be given freedom to apply moneys unclaimed if, in fact, they are not applied in the manner specific to the order from the court? That's question number one.
Question number two. The other point that I think needs to be made is that, surely, if a judge believed that there was reason to give -- say in the breast implant case -- dollars to those organizations that may be putting out information, which I think is useful, or to mammography -- which is essential, all of those kinds of things -- I wouldn't particularly have problems with that. But surely that should be a stated part of the award. My concern is that you have dollars unclaimed sitting there that then seem to be able to be applied solely at the discretion of the court. Those dollars may have been paid into court under specific court order. I don't know why, without some proceeding, the defendant wouldn't have claim to that money.
Hon. C. Gabelmann: As one non-lawyer to another -- although this is new ground for everybody, including lawyers,
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and, I think it's fair to say, including lawyers in the House.... The court will determine what the damages should be; then the court will determine the distribution of those damages. There may be people who, because it's an opted-out model, may not have been identified as being potentially legitimate recipients of the award. So there is an opportunity for the court to include in the damages a distribution of the moneys that goes beyond simply providing direct financial remedy to the identified plaintiffs in the class action.
The other example that may make sense to members is that, if we are dealing with the breast implant issue, there may be in the judge's mind -- if you go back to subsection (2) -- a reasonable benefit to persons who are not members of the class, to provide further research into issues relating to the need for breast implants or the way in which they are done, or into the more fundamental issue that breast implants address. But the judge has to be sure that it's not an unreasonable benefit to these other persons, and again, that's a question for the judge.
This comes, again, out of the work that the Ontario Law Reform Commission has done and of the experience in Ontario and elsewhere. It simply enables a bit of discretion here. The other option is to return, in effect, unclaimed money to the defendant, and that doesn't serve anybody's purpose -- except the defendant's.
G. Wilson: On a point of principle -- and I guess that is where I'm getting a bit hung up on this -- if I'm the defendant in a class action suit, and, for the sake of argument, there are 20 within the class and perhaps ten within a subclass of that 20, and an award is made on behalf of the class that I need to pay the court whatever the total amounts are, then once I've paid that into court, according to this, the judge can set a reasonable amount of time by which that money can be claimed. If that money rests unclaimed, either because there was inadequate notice of reward, which is not covered off here, or for whatever reason, then the dollars I have paid into that come to be at the discretion of the court.
It would seem to me that if the award is made in favour of a fixed number of people who are taking action against me, as the defendant, and if that money is not claimed -- notwithstanding the fact that I paid that award -- there has to be a procedure by which I, as the defendant, could then come back and say: "Look, that money sits unclaimed; this is money paid into court." In some jurisdictions you can do that. In the Ontario case, I understand that you can. That was controversial there, and I think it is going to be somewhat controversial here.
I'm sympathetic to the fact that once a ruling is down, you pay your money into court and that's it; as a defendant, you're done and you're gone. Where I run into difficulty is that if there are unclaimed dollars in court, the court has that level of discretion -- particularly if it can be forfeited by government. That causes me some concern, because I think we have to spell out in what cases government may, in fact, forfeit.
Also, with respect to the time set by the court for notice provisions to those people who may be part of a subclass and may not even be aware that they are eligible, I have some concerns with the way this is. It seems to me that it is too loose, and it strikes me that the defendant should have -- just under simple rules of court -- some opportunity, if the award is deemed.... Because it may well be part of and subject to appeal, they should have some opportunity to be able to defend their right to reclaim unclaimed moneys.
[10:45]
Hon. C. Gabelmann: I'm going to come at this as I think of it: backwards. If the issue in question is an individual issue rather than a common issue, then the defendant can have access under the Ontario bill, under this bill, under the Ontario Law Reform Commission proposal and in the States. The defendant can come back to the court and make an application. But on the question of common issues, the judgment was that the defendant was guilty and the penalty is X number of dollars, presumably. That's the penalty; that's the fine; that's the judgment. Because it's not all claimed doesn't mean that the judgment should be somehow mitigated or the fine reduced. That's the principle. If money is left over, a variety of things can happen. One of them is the section we're talking about: giving the judge the right to provide the money for a related benefit that may go outside the class, if it's reasonable. It deals with the issue at hand.
G. Wilson: I think I could accept that. So what we're saying, in a sense, is that on the common issues where judgment is rendered, the defendant is out of the picture at that point. What is now left to determine is how the court is going to make application of that award. If the minister could speak specifically to subsection (5), where it says: "...undistributed after a time set by the court...." It goes on to say that if it remains unclaimed after that time set by the court, that presumably is at the discretion of the court. Or is that a functional part of the judgment? Does it have to say in the ruling that those moneys must be claimed by a certain date, and failing that, the following is going to occur? Or is it something that is set, and when a period of time has elapsed there is an opportunity for somebody to apply to the court for unclaimed moneys? In other words, is there a requirement within the act that the judge would specify that this is the award, this is the distribution of the award, and it must be distributed by this time; failing that, the following moneys will be applied in this way? Or is it possible for somebody who is not part of the proceedings to make application to the court to claim unpaid moneys?
Hon. C. Gabelmann: Argument can be made to the court about how the unclaimed moneys would be distributed by people who were party to the proceedings, but not others. Somebody who wasn't a party can't come along and say: "Here's a good source of funding for my particular project. I'm going to make application to the court to see if I can get some of that." That can't happen. Parties to the proceeding can make argument. The court will decide, and the court has a number of options, which are spelled out in subsection (5).
J. Dalton: As the member for Powell River-Sunshine Coast commented when he led with his questions, this section is controversial. There wasn't unanimous agreement in the Ontario Law Reform Commission report, and I'll get to that in a moment.
The first point that I want to make, as a clarification for the Attorney General.... In one of his answers he mentioned that the defendant or defendants will be ordered to pay a penalty. In civil proceedings we don't penalize people; we
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compensate the plaintiffs. Indirectly it may be perceived that someone may be penalized, but that's a criminal process; it's not a civil process. I don't know how many times I've had to tell my students at Langara that very item, and I hope that some of them got the message. So I just make that point of clarification.
It's important that we recognize that distinction, because it may very well be.... I think the member who preceded me made a very good point, and it's also addressed in the B.C. section of the Canadian Bar Association's response in anticipation of what might come down the pipeline. But the member did make a good point, and in fact I agree with him on this very point. I don't think we should be handing out money to people who had not been declared and had no interest in the case. Unless there is some very unusual circumstance, that money should be returned to the party against whom the award was made. That's the last provision, as the committee will see, in this very section. It also catches my eye, in subsection (5), that -- heaven forbid -- the money could be forfeited to the government. Well, I hope not to this government.
Let me come back to the controversy over what is described as a cy-pres distribution, because that's what this section is. Of course, that's dealing with potentially giving money to people who have already been compensated -- not penalized -- through the court proceeding. The chair of the Ontario commission and one of his colleagues expressed their forceful opposition -- not just in passing; they were definitely opposed -- to this distribution. The B.C. section of the Canadian Bar Association is opposed to this provision.
Let me just read into the record some of the concerns that both the Ontario chair and one of his colleagues and the B.C. people have about this: "Not only can non-class members receive windfalls as a result of such distributions, but at least one form of cy-pres distribution, an order requiring price reductions, can result in undue interference by the courts in the operation of economic markets." That's rather an intriguing thought: that we may be intruding on the marketplace indirectly through this provision. The criticism goes on: "The Ontario LRC argued that courts should have discretion to determine the appropriateness of any particular form of cy-pres distribution."
In anticipation of the Attorney General's response, I recognize, in the first part of section 34, that "the court may order" -- that's the discretion. But there is potentially a downside to the way this section is structured, and that's the point.
Another thing -- again, in support of what the member for Powell River-Sunshine Coast stated -- the last comment on this point in the B.C. section's criticism is: "In any event, it seems logical and fair to distribute damage awards to those who apply for compensation" -- note that term again -- "and to return undistributed funds to the defendant." I would support that proposition.
Hon. C. Gabelmann: First of all, on this point the Ontario Law Reform Commission did have a minority report or position -- or a minority of the commission had an opinion -- that differed from the majority's. I sided with the majority of the Ontario Law Reform Commission, and the member has sided with the minority. That is appropriate, I suppose, given our respective roles in this place.
Secondly, the member comments on commentary by the CBA. I should point out -- I'm sure the member knows -- that this is commentary from members of the defence bar, who, I think, obviously would argue that the money should go back to the defendants, who are their clients. That has a certain logicality to it. I'm not here as the Attorney General to reflect the interests of the defendants; I'm here trying to design a bill that balances the needs of the defendants with the needs of the plaintiffs. It gives them a process that is fair and just and equal. I'm not going to take my advice from one side of this question. The member may choose to do that in this debate, but if our positions were reversed, I suspect he would choose not to do what he's doing today.
G. Wilson: I just want to come back to one point that the Attorney General made, because it is an important one. It has to do with the.... Assuming that we will accept -- and I'm hearing that the Attorney General is not going to take an amendment on this issue anyway, so we are going to accept what is here, like it or not.... But assuming that that's so, that the award has been made, and if there are moneys that are unclaimed.... I heard the Attorney General say that only members who were listed as plaintiffs in the action can actually make claim for that money -- I think that's what I heard the Attorney General say -- so that if there are unclaimed amounts, only those who were parties to the proceedings can actually make claim. If that's not the case, could the Attorney General spell it out for me? My concern is that you will have a situation where the court will order that claimants be compensated with payments within two years, then the two-year period elapses and there is a huge sum of money that sits unclaimed. In some of these cases, we may be talking in millions of dollars. That money sits in court unclaimed. My question is: how then is that money going to be accessed or distributed, and to what extent is there going to be discretion within the court to distribute that money without some form of hearing? That's my concern. Is it possible for somebody who was not part of the proceedings, and who simply watchdogged the sum of dollars to make application to the court to gain that money, to say: "Hey, here's a great chunk of change -- let's go get it."
Hon. C. Gabelmann: The court can, at the end of the trial, with the decision on not the penalty but the award for damages.... If I used the word "penalty".... I don't remember using it; I didn't intend to. Perhaps I should take the member's course, but I do know the point he makes and accept that he's right.
At the end of the proceeding the court can make determinations, listen to argument about how unclaimed moneys might be distributed -- that's one point -- or the court could presumably decide to have that hearing later, at the end of the claim period. I would assume that there is no reason why the court couldn't choose to do that, if they chose. They could in effect announce that if there is unclaimed money, they would hold a hearing at the appropriate time to make those decisions.
The member said something as part of his question that had to do with plaintiffs who are known at the time, and I want to make sure we don't have a misunderstanding about it. It is not required that they be known; it's required that they be within the class as defined by the certification, in the first instance. It could be that, let's say, there's a two-year period for distribution of the award. It could happen that 18 or 20 months into that period, someone could come along and say: "Wait a minute. I'm in this group. I didn't realize it, but I'm in
[ Page 15383 ]
this group. I'm going to make a claim." They would be able to make a claim and share in the distribution. I just want to clarify that point, although I don't think it was the member's main issue on this.
G. Wilson: That was part of what I was getting at. The concern I have here is that the way this act is written and this section worded -- and I think I've gone through this very carefully -- I don't know where it spells out a procedure whereby a hearing subsequent to that period is going to take place, who has access to that hearing or who is able then to argue on behalf of unclaimed amounts. That's my question.
Hon. C. Gabelmann: It is not spelled out in the legislation, but the court has the inherent right and obligation to allow the parties to the case -- the defendant and the plaintiffs -- to make argument about the distribution. That is almost axiomatic, and is the way in which the court conducts itself in the normal course of events. It is not spelled out in this legislation dealing with class actions, nor is it spelled out in other legislation -- again, unless I've missed the point.
G. Wilson: No. So far, we're on track together. Where we differ is in the case of these class actions, as I understand it, where there may be people who are unknowingly part of the class. At some time after the award, they will determine that they have in fact been affected by whatever affected others within the class, and subsequent to that action, they may seek to be part of it and to make their claim. I understand that this act will allow them to do so. That's the first point -- they may be part of the class, although they were unaware of it at the time.
[11:00]
The court then puts in place a time frame that says we're going to have the aggregate amount of this award paid into court and distributed to those people we know of, and there will be amounts that will remain unclaimed but presumably will be claimed as people become aware or people who are notified get to access those dollars. Once that time period is over, once the payment has been paid out, the amounts that remain.... Let me be very specific in my question: is it possible, under this act, for people who were not party to the action to commence a court action to get those moneys paid to a third party who may be tangentially interested in what has been going on -- maybe a society that's set up to work with people affected; maybe...all kinds of legitimate things in society perhaps? May they commence court action to claim unpaid amounts? That's my question.
Hon. C. Gabelmann: The answer is no, they cannot. If they were not -- as I understand the description the member outlines -- a party in the first instance, they can't make an application later. The parties have the right to argue in front of the court as to the distribution; uninvolved persons or parties do not have the right to make such an argument.
G. Wilson: Can I just further clarify what we both mean when we talk about "a party to the action"? It is somebody who is within the class at the time of trial. It's not somebody who subsequently finds that they're able to fit the criteria and therefore sets up a society, gets their claim and then goes to claim additional moneys in order to finance their society.
Hon. C. Gabelmann: No, the parties in the first instance are the defendant, which is clear, and the representative claimant. Therefore other persons who may fit into the class do not have standing to go and make a separate application for a different kind of division. The representative claimant makes the argument, and the court hears from the two sides through, on the one hand, the defendant and, on the other hand, the representative claimant.
G. Wilson: Okay. So what the Attorney General is telling us -- although I don't see it spelled out in the act, but that's the intent, I understand -- is that only the representative claimant is in a position to go into a hearing for undistributed amounts; none of the other members of the subclass are able to make application to the court for payment of those unpaid amounts -- and that's if the court has a hearing.
Hon. C. Gabelmann: Yes. The representative claimant has a duty to represent the interests of the person who the representative claimant represents. So those are the reins on that issue. It could mean that if there are 1,000 people out there and 990 of them are completely happy and ten of them aren't, the ten won't get the kind of argument in front of the court that they wish to get. But I would think that, given the duty of representation -- and I don't know the answer to this off the top of my head -- there would be some kind of obligation on the part of the representative claimant to make clear to the judge that these ten people exist and what their perspective is. I don't know whether that's the answer or not; I don't know that I can get that specific. I suspect that a lot of these issues are going to get determined by the courts as the common law around this legislation emerges.
G. Wilson: This gets a little bit more complex, because the act makes it very specific that whatever the award is to that representative claimant, it's binding on all parties, and anybody who signs on is subject to that section. They're not going to be able to have a minority position in court. It is not provided for in the act. The representative claimant is going to represent all the people, and they all have to either buy in or opt out, and they've got a section of choice to do that.
Interjection.
G. Wilson: Earlier, they do, yes. At that point they can't opt out.
I guess the concern I have is that this may open the door.... I can think of two instances where this may occur: where you've got a successful class litigation against a manufacturer who is producing some product sold into the market -- and I'm not necessarily thinking of the breast implant, which could be a case, but something that's a little less definitive in terms of its direct impact -- a court may make a ruling on behalf of a class, and somebody finds that they qualify under the terms and conditions of the proceeding and sees that there is $2 million left unpaid, makes application in court to become a functional part of that class, has a society set up -- of which they are president, treasurer and secretary -- and makes application for the moneys left unpaid to finance their society so that they can do benevolent things for all people.
That's a problem for me, because I don't think that's the intention of this act. I would prefer that there be something far more specific with respect to the rule of law as it directs the court on what has to be done with those unpaid amounts, so that you can't have those kinds of windfall profits picked up
[ Page 15384 ]
by people who may be only tangentially involved -- or, in some instances, as this act provides, not involved at all in the proceeding -- and yet are able to benefit from moneys that some defendants paid into court in response to a court order.
Hon. C. Gabelmann: It may not satisfy the member's concerns completely, but I think the nub of the issue is dealt with in subsections (2), (3) and (4), which outline the parameters the court has to follow in respect of the cy-pres distribution. In all of that, the court, as I said before, has to make sure that there are not unreasonable benefits to persons who are not members of the class. We have dealt with that and any other matters the court considers relevant.
I guess we could write legislation that was so long and thick and convoluted that we could make all the decisions for the court, but what we've tried to accomplish here is a balance. What we've essentially tried to do is replicate the procedures that an individual has available to them in a civil action, taking into account the differences that come from having a group of people, but without writing legislation that so directs the court that they're unable to make appropriate decisions, given the appropriate circumstances.
I think the fact that we've taken the advice of the majority of the Ontario Law Reform Commission and the Ontario act -- a couple of years' experience on that without any problems in respect to this.... I think we're on the right track. Time will tell how the courts respond. The Legislature is always here to redress inappropriate directions that the court may choose to go in, but there's no indication here that the court would get out of line on this one.
G. Wilson: I think time will tell. Neither of us is clairvoyant enough to predict that -- some things perhaps, but not that.
I seek leave to make an introduction.
Leave granted.
G. Wilson: I'm delighted that participating in this debate today are 95 or 96 -- it says on my note here.... I'm not sure. Maybe they lost count; I hope not. They're students from Oceanview Junior Secondary School in Powell River. These students have fundraised all of the money themselves to make this trip to the Legislature, which shows you how important they see the halls of government as. Their teachers accompanying them are Mr. Scholtz, Mr. Anderson, Mr. Rodonets -- I hope I've pronounced that correctly -- Mr. Hanson and Ms. Lundell. The House may have to indulge in making two sets of introductions, because there are so many of them that they can only bring them in one half at a time. Would the House please make these young people from Powell River welcome.
Sections 34 to 36 inclusive approved.
On section 37.
G. Wilson: I move the amendment to section 37 standing in my name in Orders of the Day.
[SECTION 37,
Strike section 37 and substitute the following:
37. (1) The Supreme Court or the Court of Appeal may award cost to each representative plaintiff or class member in any class proceeding or appeal arising for any class proceeding.
(2) The Court referred to in subsection (1) may only award costs to a defendant in respect of a class proceeding or appeal from a class proceeding:
(a) at any time that the Court considers that there has been vexatious frivolous or abusive conduct on the part of any party,
(b) at any time that the Court considers that an improper or unnecessary application or other step has been made or taken for the purpose of delay or increasing costs or for any other improper purpose, or
(c) at any time that the Court considers that there are exceptional circumstances that make it unjust to deprive the successful party of costs.
(3) A Court that orders costs under subsection (2) may order that those costs be assessed in any manner that the Court considers appropriate.
(4) Class members, other than the person appointed as representative for the class, are not eligible or liable for costs except with respect to the determination of their own individual claims.
(5) In addition to the Courts' discretion to award costs, the Courts may order the defendant parties to pay an amount into a fund or funds created to pay the class disbursements and/or to pay such class legal fees as may be fixed by the Court.
(6) In exercising its discretion with respect to costs, the Court may consider whether the class proceeding was a test case, raised a novel point of law or involved a matter of public interest.]
The Chair: Does the member wish to speak to the amendment before we entertain a response from the Attorney? I see that it is a printed amendment, so I'm sure the Attorney will be familiar with it. But if the member wishes....
On the amendment.
G. Wilson: Thank you. The authorship of this amendment I can only partly take credit for. In fact, it has come from lawyers who are involved in class litigation and have addressed with me their concerns about the question of costs, because quite clearly one of the main reasons for this bill is to try to eliminate or reduce, where possible, costs to individuals who wish to take suit against a much larger, much more well-financed adversary.
What we've attempted to do here is introduce an amendment that essentially replaces section 37. Principally, we're suggesting that the "Supreme Court or the Court of Appeal may award cost to each representative plaintiff or class member in any class proceeding or appeal arising for any class proceeding."
It provides the court much greater freedom to be able to apply directly an award of costs to those who are involved in a class action, and mitigates costs that will be incurred by bringing in experts. In fact, I think the member for West Vancouver-Capilano raised this point in a section earlier. If you have to bring in experts to talk to subjects, if you're having to bring in matters that are going to require statistical information and interpretation, if you're going to need people to come in to give technical evidence or expertise on those subjects, those are the kinds of things that are expensive. Those costs need to be covered. So the amendment effectively provides a far greater degree of flexibility to the court in terms of the awarding of costs to the plaintiff, on behalf of the plaintiff.
[11:15]
[ Page 15385 ]
Hon. C. Gabelmann: Again, without getting into names of people who aren't here to talk for themselves, we have written a substantial letter to the lawyer who has drafted the amendment for the member. I'm not being disparaging here; that's fair enough and a legitimate process here. In dealing with the principle of the bill, which is.... I gather the terminology is a "no-way cost" principle as opposed to, in her case, logically, a "one-way cost" rule. In other words, what the lawyer that the member has been working with on this issue would like to have happen is that plaintiffs would not bear their own costs if they lose. That's the effect of the amendment. I'll say it again. If the plaintiffs lose under the member's amendment, they would not have to bear the costs. Under this bill, if the plaintiffs lose, they don't bear anyone else's costs, but they do bear their own. We've done that simply.... The basic argument is one of trying to provide equity between the parties. This is not a bill that is designed to assist plaintiffs more than it assists defendants.
I want to just read one paragraph in response to this issue. This is addressed to the lawyer involved:
"In your letter, you suggest what is typically called a one-way costs rule. This rule would permit costs to be awarded against a defendant but not against the plaintiff. The difficulty that the government and the Law Reform Commission found with the one-way cost rule is that its asymmetrical approach is unfair to defendants. While a one-way cost rule could facilitate class proceedings, it would violate this government's commitment to equitable treatment of plaintiff and defendant."
In this case, the lawyer involved is clearly and properly acting on behalf of the plaintiff and is advocating that particular perspective. We're trying to walk down the middle on this question and make sure that there's no unfair advantage to either plaintiff or defendant.
G. Wilson: The legislation, as I read it now, is unfair, and what this amendment tries to do is make it more fair. Let me give two examples. One of the questions that I think is important is.... We have to recognize that the inability to recover money where that is not the remedy sought -- and that's an important point -- will greatly limit if not preclude action on that level.
The second problem is that where you have a class action being fought -- and let's take the breast implant one as an example -- you're going to find that the litigants individually are going to have to have a whole variety of medical experts come in. Those costs borne by the individuals may be far greater than the medical expertise provided by a defendant. For example, you might find that the cost of bringing medical experts in so as to adequately argue this case may run anywhere from $500 to $2,000 per litigant. If 1,000 people are involved in the class action, you might be looking at costs in excess of $5 million. If you can't recover those costs, then it clearly is not going to be a workable piece of legislation; people aren't going to move forward. The amendment seeks to find a way to provide an opportunity for the court, through legislation, to be able to award those costs so that we don't have a prohibition for class action as a result of their inability to recover the costs that are incurred. That is what we are doing here.
I would say that there is another case that affects a number of people in my own riding -- in Gibsons, Sechelt and Powell River -- and, I know, a whole lot of people on the Island and, I would guess, people in other members' ridings as well. It's the whole Flexwatt Radiant Heat issue. If class action suits are going to be taken on that, there are going to be costs incurred because the installations are all different: the places where they have installed them, whether they have put them against particular kinds of gyproc, or whether they install them absolutely specifically. All of those issue are going to have be dealt with because it's a class action, but they are going to have to have some expertise to tell us whether or not each of them, in fact, qualifies under whatever award the judge may make. Those are going to be borne individually by the litigants; even though they are in a class action, they still have to come with those individual costs. If you can't reclaim them, then it's going to be prohibitive.
In the amendment, we are attempting to provide the opportunity for those costs to be awarded so that it is not prohibitive when expensive medical experts have to be brought in, in one case, or when electricians, electrical experts, building construction engineers or whatever they may be have to be brought in and used to provide evidence in the court.
Hon. C. Gabelmann: First of all, section 37(2)(c) says that if the court considers that there are exceptional circumstances, then the court can award costs that deal with these.
I want to get to the core of the question. I'm asking the member a question in order to clarify the debate. If the plaintiff is unsuccessful, is the member suggesting that the defendant should, if the court orders, pay to the plaintiff some of these exceptional costs; for example, the extraordinary medical evidence costs that the member describes? Our answer is that the defendant is judged by the court to be "not guilty." Why should the defendant then have to pay the plaintiff anything? If the member can make a convincing argument that the defendant should pay when the defendant isn't guilty of anything, I'd like to hear what the argument is.
G. Wilson: What subsections five and six of the amendment do, because I think that's what we need to look at here.... Section 37(5) says: "In addition to the Courts' discretion to award costs...." We're not talking about the court being bound on that question. We are giving the court an opportunity to "...order the defendant parties to pay an amount into a fund or funds created to pay the class disbursements and/or to pay such...legal fees as may be fixed by the Court."
We're not saying that the court is bound in terms of the costs to the defendant. We're not saying that no matter what the outcome, the defendant is going to pay; that's not what this is all about. We are saying that where there are specific costs incurred that are extraordinary, perhaps, or that may be particular to a case and therefore deemed ordinary, there has to be discretion within this legislation that empowers the court to order the defendant to pay those costs into a fund to be redistributed. I think that's inherently fair.
In the case of an appeal, for example, the cost of moving through the first action and then into an appeal -- and it can be an appeal driven by either the defendant or the plaintiff -- can become so onerous that members of the class aren't going to be able to continue the action unless there is an opportunity for them to be able to recover costs through this kind of amendment. That's what we're saying. This doesn't tie the hands of a court with respect to the award. It gives the court a greater degree of flexibility to be able to assign costs
[ Page 15386 ]
against the defendant who, in most cases -- and I think the Attorney General would agree -- are far better funded than the individual litigants that are trying to go against them.
In a class action suit against Ford Motor Co. in the U.S. -- it's an American case -- Ford Motor Co. has a bank of lawyers that are going to make any individual pale in comparison. If you get a class action suit against them, the costs of that action -- and I'm thinking of one specific case in the United States -- are enormous; they're astronomical. They couldn't be borne individually by members of the class unless they had a pretty reasonable opportunity to recover those costs once that action was done.
You can't prohibit somebody from going to court to seek justice because they don't have the money to do so or they don't have an opportunity to recover the money to do so. You can't preclude their ability to go forward by not having some opportunity for the judge to say that because of the exceptional circumstances with respect to taking this to court, they're going to be able to have their court actions precluded. That's what this is all about: it's giving people at the start of a case some equal footing with respect to an expectation of dollars coming in to pay for their costs.
Hon. C. Gabelmann: If the member is saying that a class action, for example, launched against B.C. Telephone Co. fails.... The court says that the class action is wrong; B.C. Telephone Co. is right. There are no damages to be awarded. The member then wants B.C. Tel to have to pay for some part of the costs of the action taken by the plaintiffs. I just reject that. Why should the innocent party have to bear any costs? The plaintiffs in that kind of situation take advantage of public interest advocacy groups and of other opportunities that people working together provide for them. But in no way should the defendant be required to pay the plaintiff's costs if the court determines that it doesn't have a case.
If the member agrees with me that that shouldn't happen, then the next question comes up if the defendant is guilty or partially guilty and has to pay some damages. In the bill that we've drafted, under subsections 37(2) and (3) the court can award costs to the defendant, to assist with the plaintiff's costs, if there are exceptional circumstances. Ordinarily, the costs will be borne by each party on their own without any transfer of money; but if there are exceptional circumstances, the court can order, in the case I cite, that B.C. Tel should assist the plaintiffs in their case, because there were exceptional circumstances. So the member's attempt, in the amendment that's under discussion -- subsections (5) and (6) of the amendment -- is accomplished in exceptional circumstances by section 37(3).
The Chair: Before I recognize the member for Powell River-Sunshine Coast, it seems to me that we simply have a philosophical disagreement at this point. I'm wondering, then, if much more is to be served by protracting the debate. However, I recognize the member for Powell River-Sunshine Coast.
G. Wilson: Far be it from me to protract a philosophical debate in this Legislative Assembly. We have a technical difference of opinion on the wording. The Attorney General has unwittingly, I think, misrepresented what this amendment says. This amendment does not say that the court is bound to make that decision. Furthermore, it is not unfair to the defendant, because it is discretionary to the court. What this does is increase the court's discretion with respect to the award of costs; that's what it does. It doesn't bind them to say that if you're found innocent, you have to pay costs. That's completely wrong, and that is an unfair characterization of what this amendment says. What the amendment is suggesting is that there are greater discretionary powers in the hands of the court to find an award to the plaintiff, which is beneficial to the process of law. With that having been said, I think we should just pass this amendment and move on.
J. Dalton: I anticipated that the Attorney General wouldn't have a response; I just want to jump in here. We're not going to protract the discussion on this amendment. I think the Attorney General made a good argument in his last response as to why both the section and the amendment are wrong. We're certainly going to be speaking on the section itself once we get through with this.
I can't ask the member for Powell River-Sunshine Coast a question, but maybe I'll just feed this to the Attorney General, if he cares to pick up on this point. As the Attorney General was saying, this is not a one-way provision -- that's true -- but I think it is one-sided. It has missed the boat. The section is wrong and the amendment is wrong. Why are we saying to plaintiffs that they might get some costs? What about the defendant? Sure, it may be a big bad corporation, but it might not be. And I don't care whether it is or it isn't.
[11:30]
The fact is that the normal rules of court in the normal course of events are that costs follow the event. This section doesn't do that; the member's amendment doesn't do that. This is just as one-sided as anything else that's happening in this section. I don't see any rationale -- and I'll get to this point when we come back to the section itself -- as to why we are favouring one party over the other. People have to recognize that you take your chances in a civil proceeding. Now, admittedly there are examples where we may have to bring some corporations who act improperly to justice, so to speak. The breast implant issue is a good case, as are the Ford Motor Co. case in the U.S. and others of that nature. We can do that through the normal civil process, and there are also criminal penalties in the criminal courts that we might consider. I can think of a Michigan case, for example, where Ford Motor Co. was charged with vehicular homicide because they put out a defective product; they knew it was defective, and they made no effort to recall it. I don't recall the outcome of the case, but it was very intriguing to have a corporation charged with vehicular homicide.
I think of another amusing example in the B.C. courts. I don't know whether this would apply to class actions, but a woman in Alberni, I believe it was, brought an action before the court a few years ago. She was cut off on a talk show program, and she was arguing before the court that she had the right -- and, I guess, all other listeners to Rafe Mair's talk show and others would argue the same -- to not be cut off and to not have her right of access to the radio waves denied. That might be an interesting class proceeding. What the court did, by the way -- which is covered in this section and in the rules of court anyway -- was rule that it was a vexatious action, and they tossed it out. That's just an aside.
Obviously, I and members of the opposition here will not support the amendment.
G. Wilson: I do this more for the Hansard record than for anything else. Just very briefly, the member for West
[ Page 15387 ]
Vancouver-Capilano hasn't read the section very carefully, or he wouldn't have asked the question. This is not unfair to either party, because section 37(4) says: "Class members, other than the person appointed as representative for the class, are not... liable for costs except with respect to the determination of their own individual claims." So that's there. We're not saying the plaintiff gets off the hook, and they don't have to pay anything. But the class action, because there's a representative plaintiff, may incur costs which have to be borne by all the members of the class action, which may be enormously large. Therefore we're saying that if the court deems it fair -- and that's why in the amendment we are adding subsection (5), and therefore it has the discretion to award costs, which it already has in section 37 -- then "the Courts may order" -- it doesn't say has to or must -- "the defendant parties to pay an amount into a fund or funds created to pay the class disbursements and/or to pay such class legal fees as may be fixed by the Court." So the member for West Vancouver-Capilano has clearly not read my amendment or the section. We're not binding an unfair decision against the defendant. It is fair. In fact, it's more fair, because nine out of ten times a class action suit is entered into because individuals can't afford individual litigation against the company. It's the whole purpose of this legislation. I want the record to be clear on that, because the amendment has been badly misrepresented in debate by those who clearly haven't read it.
L. Fox: It's a very interesting debate, but I speak against the amendment for a couple of reasons. It's important to recognize that a class action may be taken against not only a large corporation but against a very small business or an individual. One of the balances we have is the economic hardships on both: one in terms of the defendant to defend himself in court; the other for the group of plaintiffs to proceed with their class action in court.
But if we tip the scale -- and we see enough of it today.... We see it in the legal aid program, where one family member has all the opportunities to access funding through legal aid to take on another family member who earns just over the maximum income for getting legal aid. So they're not able to access legal aid, and because of that particular circumstance we've tipped the scales of justice. It's my belief that if we accept the amendment, we would once again -- perhaps not in the case of a class action against a large corporation which may have the ability to pay, but in terms of a class action against a small business which doesn't have the ability to pay and in fact may have every bit as much difficulty meeting the costs of defending their rights -- tip the scales and perhaps take away that individual's privilege of defending their rights in court.
I think it's well-intentioned. I understand the member for Powell River-Sunshine Coast's argument, but I believe that if it was accepted it would tip the scales of justice, and I'm concerned about that.
M. de Jong: I'll keep my comments brief. The amendment that's been proposed does set two separate standards for the awarding of costs. The test to be applied in the case of awarding costs in favour of a defendant is different from the test to be applied in determining whether costs will be awarded in favour of a plaintiff. At a minimum, it does that. The member for Powell River-Sunshine Coast was clear about this -- it does so on the basis that there is a presumption that the defendant is better equipped to finance the action -- and I think he was forthright.
I can't support the amendment, because I don't think you can make that presumption. It might be true in 95 percent of the cases, but as the previous speaker mentioned, it may not be true in a whole number of cases where the defendant is an individual or is not as well equipped or is equally as well equipped as the plaintiffs to finance the action.
Now, the member for Powell River-Sunshine Coast says the judge has discretion. But it's different discretion. The discretion he can exercise in favour of one of the parties is different from the discretion he can operate in favour of the other party. That inequity can't be permitted to exist at law, because we can't anticipate the actions that are coming. We all have in our minds the concept of the plaintiffs taking on a multinational corporation; those are the easy actions to contemplate. But they are going to be quite different. Therefore we can't, in my view, enshrine legislatively differing court discretions, which the amendment does. Therefore I won't be supporting it.
G. Wilson: I seek leave to make the second half of my introduction.
Leave granted.
G. Wilson: Their introduction is timely, because this is the second half of the 95 or 96, and I hope by now they've counted -- members from the Oceanview Junior Secondary School in Powell River, who are here with the teachers whom I introduced earlier in the House. Their timing is perfect, because I think all members recognize how unfortunate it would be for them to see their member lose a vote on an amendment. So while they're here, call the question, and perhaps we can get this passed. Would the House please make them all welcome.
The Chair: With that, I pose the question: shall the amendment pass?
Amendment negatived on division.
J. Dalton: Again -- not to protract the discussion, because I think we have certainly covered most of it in the amendment discussion -- as the Attorney General, I'm sure, is well aware, there was an interesting point of controversy in Ontario when they looked at this no-cost provision. The Ontario Law Reform Commission recommended a no-cost rule. That recommendation was rejected by the drafters of the Ontario act, and I agree. Maybe the first question I will ask the Attorney General is: why did the drafters of the Ontario act shoot down the no-cost recommendation from the Ontario Law Reform Commission?
Hon. C. Gabelmann: I have no way of knowing why the Ontario Legislature did not follow the recommendations of the Ontario Law Reform Commission. We felt that the Ontario Law Reform Commission recommendation that there be a no-way cost rule -- in other words, that each party pay their own expenses, except under exceptional circumstances -- was the appropriate way to go. Why the Ontario House did something else, I don't know.
J. Dalton: That leads into the point that I will make, and this is the point advanced by the B.C. section of the Canadian
[ Page 15388 ]
Bar Association. They endorse the recommendation of the Ontario Law Reform Commission. I will quote from their reaction to the consultation paper that the Attorney General distributed last May: "There has been no suggestion that the operation of the normal cost rules has somehow impeded class actions in Ontario." That's the first point. It goes on: "Costs may well deter the bringing of actions lacking in intrinsic merit, and that policy goal is one that supports the traditional rule of costs following the event."
That's the point I made in second reading, and I'm making it again. That's why I said earlier, in the discussion on the amendment that failed, that I don't think either the Attorney General or the member for Powell River-Sunshine Coast -- with all respect to him and his friends from Powell River -- hit the point, either, as we've already voted on that.
I do not understand why the Attorney General has made the decision, in the face of contrary evidence and certainly in the case of traditional costs following the event, to wander down this path. I can understand the sympathy for the beleaguered plaintiff or plaintiffs, who, I admit, individually and perhaps even collectively won't have the financial resources to take on the big bad multinational corporations. As my colleague from Matsqui aptly described earlier, those aren't the only defendants that we should contemplate. I think we're tipping the scales too far one way or the other. As we know, justice is blind, and justice should be balanced. I don't think this section is balanced, and perhaps someone was blind when they drafted this. So I would be interested in the Attorney General's observations about why we are casting aside the traditional costs following the event and getting into this provision.
Hon. C. Gabelmann: We think as the Ontario Law Reform Commission thinks: that this cost rule is the best way to ensure fairest access to the justice system. Plaintiffs banding together know that with the exception of the exceptional-circumstance provision they are not going to have to bear the costs of the defendant if they are unsuccessful. They are each going to bear their own costs. That's an access-to-justice question that I think is straightforward. I don't know whether they want to protract this, hon. Chair, because I'm not quite sure why the member would want -- again, except for the exceptional-circumstance provision -- to have the potential plaintiffs fear the additional burden of costs should they be unsuccessful.
J. Dalton: I'll just make one other point. I can well understand that this section is going to be passed, and that's why we haven't even dared to suggest another amendment. The point I will make is that I think that indirectly, at least, through this provision the Attorney General is denying defendants their right to a day in court. I say that because it may very well be that they're going to have to be well aware -- and will be well aware -- of the implications that they will not recover their costs if they successfully defend an action. I don't know why we want to go so far to one side and favour plaintiffs when we're basically ignoring the rights of defendants -- whether they be multinationals with buckets of money, small corporations or just a collection of individuals who may not have any financial resources. So I don't think that section 37 has addressed the question of costs appropriately, even though I do acknowledge that class actions are new and we should all anticipate that there is some excitement concerning how they're going to be handled. But I think awarding costs.... I'll make the point again, and then we can get on with our lives and maybe our lunch soon. The point I will again reiterate is that costs should follow the event. I haven't seen any argument from this side or that side or anywhere else to dissuade me from that position.
M. de Jong: My point, which I made earlier to the Attorney General on this question, relates to the uncertainty that results, particularly when one considers subsection (1) and how it relates to subsection (2)(c), and this inability that litigants are going to have to get advice from their counsel as to how the rules of costs are going to apply. My fearless prediction in this House today is that if nothing else, there will be much litigation to the appeal court level regarding this particular statute simply on the question of costs.
Section 37 approved on division.
On section 38.
[11:45]
G. Wilson: I would move an amendment to section 38(1)(b), in which you would strike "whether or not" in (b) and put in its place: "...which may be stated as a percentage of the eventual recovery when...." That subsection will then read: "give an estimate of the expected fee, which may be stated as a percentage of the eventual recovery when that fee is contingent on success in the class proceeding...."
The Chair: We will review this. Perhaps the member would like to proceed with substantive arguments surrounding this.
On the amendment.
G. Wilson: I apologize for not having copies of that. I thought I had handed both amendments in for the order paper at the same time.
Effectively what it does is clean up the language with respect to the provision of section 38(1)(b). Essentially, section 38(1) says:
"An agreement representing fees and disbursements between a solicitor and a representative plaintiff must be in writing, and must
"(a) state the terms under which fees and disbursements are to be paid,
"(b) give an estimate of the expected fee whether or not that fee...."
What we're attempting to do in the implementation of the language is essentially to provide that it will be established as contingent on the success of the class proceeding. It really is just a clarification of language. I don't think it substantively alters the intent of the section.
Hon. C. Gabelmann: This section relates to the contingency -- the provisions in the Legal Profession Act. We're trying to make sure that it's consistent with the provisions of the Legal Profession Act, so that's why the wording is as it is. It's because it flows from the other statute, which we want this to be consistent with.
I frankly haven't had an opportunity, because I haven't seen the amendment until just a minute or two ago, to actually
[ Page 15389 ]
sit down, think it through, check the Legal Profession Act and see what the implications would be. So at this point -- not because it may be wrong in principle, but because I haven't had an opportunity to deal with it, and substantially because the member himself agrees that it doesn't alter the intent -- we'll vote against the amendment.
G. Wilson: There's no question that it's right in principle. There's no doubt about that, or we wouldn't have introduced it. So we can let the Attorney General rest comfortably on that question. Immediately, it's correct in principle. In respect to the Legal Profession Act, I must confess that I haven't done a cross-reference with that.
Once again, I should just put on the record that I can't take credit for authorship, other than the fact that we got it typed up. This is coming from legal litigants who are concerned about the language in the act. It is brought forward in an attempt to clarify the issue with respect to fees and disbursements as a requirement of the act; that's what that language attempts to do. I defer to their greater expertise when they say this is a potential problem -- the way it's worded now -- so I introduce it on their behalf.
Hon. C. Gabelmann: Section 78 of the Legal Profession Act is a long section -- two full pages long -- which sets out all of the rules around.... It's entitled "Contracts for remuneration," which deals with contingency. We want those rules to be the ones that apply in this case. The member's amendment would vary that, and that's not supportable.
M. de Jong: It's unfortunate that I don't have a copy of the amendment.... I have one now, but that doesn't afford sufficient time to properly cross-reference it, and it may well be an amendment that's worthy of support. I can't resist, however, drawing on this as an example and pointing out to the Attorney General that his desire to err on the side of caution and stick with the text -- and perhaps be voting against an otherwise appropriate amendment -- is the same feeling that members on this side of the House are having, on disturbingly frequent occasions, when significant and weighty legislation is tabled without appropriate time given to study it.
The comments of the Attorney General are correct: he is erring on the side of caution. Government does itself a disservice when it tables legislation in an untimely manner, because that's what oppositions have to do. When the government doesn't get the support that it might otherwise deserve, it is because oppositions are erring on the side of caution.
And that is the sermon for today. Thank you, hon. Chair.
The Chair: Exuent omnes, one would hope.
G. Wilson: On this hallmark day I agree with the member for Matsqui -- maybe something's happening here, I don't know. I do think that we have to err on the side of caution. However, I just want to say that the Attorney General and perhaps.... I guess, facetiously, I could say that if we drag this out for another ten minutes the member for Matsqui will have lunchtime to study the amendment, but I'm not going to do that. Let me just say that I do have some support material with respect to that amendment that I think the Attorney General and his staff should read. I'm not a lawyer and am not as well-versed in this as others are, and I do think that the argument they put forward with respect to that language is quite legitimate.
With that, I would call the question on the amendment.
Amendment negatived.
Sections 38 to 45 inclusive approved.
Title approved.
Hon. C. Gabelmann: I move the committee rise and report the bill complete without amendment.
Motion approved.
The House resumed; the Speaker in the chair.
Bill 16, Class Proceedings Act, reported complete without amendment, read a third time and passed.
Committee of Supply A, having reported progress, was granted leave to sit again.
Hon. C. Gabelmann moved adjournment of the House.
Motion approved.
The House adjourned at 11:55 a.m.
The House in Committee of Supply A; G. Brewin in the chair.
The committee met at 10:09 a.m.
ESTIMATES: MINISTRY OF ENERGY, MINES AND PETROLEUM RESOURCES
(continued)
On vote 26: minister's office, $343,000 (continued).
The Chair: We've already done the major introductions, so we're into the straight debate at this point. I recognize the hon. member for North Vancouver-Seymour.
D. Jarvis: We've had a break, as you can probably appreciate, for a little while with regard to Energy and Mines estimates, and I hadn't finished all my questions last time, although I was down to just a few. But certain events have brought up other subjects, and I guess we have to address them or ask about them.
I want to go back to the budget for the Ministry of Energy, Mines and Petroleum Resources and ask the minister if there have been any large amounts of moneys allotted in her budget for large or small acquisitions -- for example, the Vancouver Island pipeline. Could she comment on that?
Hon. A. Edwards: There is money in our budget to deal with the VI gas agreement as it currently exists. You are
[ Page 15390 ]
probably aware -- I am sure you are aware -- that we announced we were negotiating a different agreement. That has not been finally signed off yet, so we have the RSF payment involved for the rate stabilization fund -- the money that we will put out to Clean Choice. Those amounts are in the budget.
D. Jarvis: Could the minister tell me what part of the budget refers to a possible purchase of the Vancouver Island pipeline and how much is allocated?
Hon. A. Edwards: I have to repeat that we have money allocated for the rate stabilization fund; we have no money allocated in this ministry for any purchase of the pipeline.
D. Jarvis: I would like to get into some energy questions now. B.C. Hydro put out another energy plan in 1994 -- the existing supply plus committed new resources. Could her Energy ministry tell us if what we have now is sufficient? I believe the amount of energy supply required by B.C. Hydro in their 1994 electricity plan was in the vicinity of 9,800 megawatts for British Columbia. Could the minister tell me if that has changed in the last while? Are we sure that we're going to get firm amounts from the various sources?
Hon. A. Edwards: I can assure the member that there will be no energy shortages in British Columbia. As you know, during the last year B.C. Hydro put out a request for proposals. Whether or not we receive the downstream benefits, we have the choice to do that. That is always a potential supply.
B.C. Hydro's Resource Smart projects will make a huge difference to the demand, as will the shifting of demand through rate design. All of those things should make a huge difference to our demand.
We have no fears that we will be short of supply. Certainly we have looked at supply possibilities with and without the downstream benefit return, the Kemano completion project and so on. We have no problems that we can see in meeting our demand.
D. Jarvis: In the 1994 electricity plan, they contended that they required at least 9,000 megawatts for 1995-96 and 1996-97. Then it progressively gets higher, up to 10,300 megawatts. Can you tell me, in view of the fact that KCP was involved in that...? There were 300 megawatts involved in that; I think it progressively increased to 550 megawatts. The fact that we've had some changes in the downstream benefits aspect of moneys or power.... Are those items that were listed in the 1994 energy plan consistent now? Are they the same as they were before? Taking into consideration the request for independent power programs -- I believe you've agreed to purchase only 300 megawatts -- is the change up or down?
[10:15]
Hon. A. Edwards: I can probably give you a few more details that might be helpful in this. There were 220 megawatts of self-generation included in their plan, but that has since been replaced by 300 megawatts of power, which was solicited under the December 1994 request for proposals. That power could be delivered by October 1998. There were 270 gigawatt-hours -- or 250 megawatts of energy capacity -- from the Alcan coordination agreement, and although the contract is there, the supply is considered not likely, and it will be subtracted from the forecast.
Again, we have -- I'll just give it in capacity -- 300 megawatts of capacity from the Alcan sale to B.C. Hydro, which may be honoured by Alcan. However, if it affects the aluminum operation of Alcan, B.C. Hydro will not insist that it be delivered. Now this amount equals two years of load growth, and we could easily advance Mica and Revelstoke additions to meet that demand.
D. Jarvis: There is going to be a basic shortage where there's no firm commitment. In other words, the electricity required should be considered firm, and those figures are basically, I believe, a little bit short. So where are they going to draw from to make up that shortfall? I understand 300 megawatts are coming from the IPP proposals. Is there anything coming from other sources, such as the Williston Lake area drawdown? I understand also that we cannot count on Alcan's 225 megawatts. They have said that they are going to reopen some potlines. That will look after the supposed surplus there.
Hon. A. Edwards: I'm really at a loss to understand why the member thinks there is a shortage expected, because we have lots of energy in British Columbia. We have lots of opportunities to generate energy in British Columbia. There has been no change in the downstream benefit entitlement. As a matter of fact, if we were to change anything in our agreement it would be that we have an increase in the capacity that we would expect from the downstream benefits.
First of all, I reject your premise. The B.C. Hydro energy and capacity balances under the 1994 electricity plan are without KCP. It's already been excluded from those figures. If there are changes and the balance has become very, very close, it's certainly nothing that couldn't be dealt with by looking at our planning reserve. There is a significant planning reserve of between 700 and 800 megawatts.
There is the possibility for coordination with Alberta on an emergency or long-term basis for 400 megawatts if we wanted. There is no shortage that we can see that has been indicated by anybody who has done estimates of what the power supply will be in balance with the demand.
D. Jarvis: I'll be turning it over to the Leader of the Third Party, who wants to ask a few questions, but first of all I would like to ask a question. In view of the deregulation in the United States, has the value of our downstream benefits been downgraded to any degree?
Hon. A. Edwards: Deregulation in the United States will mean that we have better access to transmission through the United States. Therefore we will have better access to the market. Overall, we believe it has improved the opportunities for energy sales to the U.S.
D. Jarvis: We're working on the premise, then, that all agreements with the United States will hold, too. We cannot guarantee that aspect of it, because we know what the United States has done with regard to, for example, its agreement with Japan. If it finds us starting any type of trade war, which your government has threatened to do with regard to the
[ Page 15391 ]
Bonneville situation, then it will simply turn around and change its mind on it. Whether or not we have world trade rules, they changed them and did whatever the hell they wanted to with regard to Japan. They just ignored them. We won't have clear and unobstructed access to the United States over the transmission lines unless we are good neighbours. The premise that this government has been working on over the last little while clearly shows that the Minister of Employment and Investment does not plan to be a good neighbour.
D. Schreck: Is the Liberal position to cave in and give away our resources in order to be a good neighbour?
D. Jarvis: No. The member for North Vancouver-Lonsdale contends that the Liberal position is probably that we're not going to be good neighbours or there's a possible problem. I'm trying to tell the minister that there is a possible problem if we continue with the approach that this government is presently taking.
I would ask if the minister could explain to us what different agreements we have with regard to the downstream benefits. We keep hearing of different agreements being brought up. How many separate agreements are there, and could she tell us what they are?
Hon. A. Edwards: I find it surprising that a member of the Liberal Party, which originally said it opposed NAFTA and then immediately signed it, is now here to tell us that we should worry about our NAFTA partner. It's a rather interesting position for you to take. If you're worried about the Americans as partners in a trading agreement, then your party probably should have been a little more careful about what agreements it signed.
As far as agreements under the Columbia River Treaty downstream benefits entitlement, the only agreement we arranged to deal with the return of the entitlement is the memorandum of agreement that we signed last September. We have a number of agreements under the treaty in a broad sense, and that comes from operating the system jointly for the benefit of both partners under the Columbia River Treaty, which oversees the whole business. But as far as the actual entitlement and its return, we negotiated one agreement, the one we announced last September when the Premier and the Bonneville Power Administration signed it with great fanfare. It represented the best efforts at the levels we are at to get to the full entities and to get the agreement signed.
D. Jarvis: First of all, I would have to answer the minister by saying that the B.C. Liberal Party is separate and distinct from the federal Liberal Party. That is an absolute fact. It's on the same basis that the provincial NDP takes lengths when their federal counterpart approaches an issue differently than they do here -- for example, on gun legislation. They certainly ignore that aspect of it very quickly.
In any event, I was trying to make the minister aware, if she is not, that from what I've been advised, the Bonneville power authority did not actually sign that agreement. They're under special legislation in the United States. They are a Crown corporation in a sense; they are owned by the government. If the United States government decides that the provincial government of British Columbia is starting some type of war and they don't agree with what Bonneville happened to say, if we turn off the tap, it's going to turn off the switch. It's entitled to do so.
If you had been aware of this, we probably wouldn't have been in this problem with regard to the agreement on downstream benefits. It was clearly and unmistakably evident in that agreement that there were subject-to clauses that they could enact. The $1.5 million you spent on lawyers and all the rest didn't do us any good. Bonneville decided that they weren't going to enact the agreement, and their subject-to clauses enabled them to get out of it. That's all I was trying to say.
We'll go back to my original question. We understand there are now other commercial subagreements in the Columbia River Treaty. Could the minister tell us what these agreements consist of?
Hon. A. Edwards: I would like to clarify again for the member that our negotiations were with Bonneville Power Administration, which acts as the entity for the U.S. government in negotiating further agreements under the treaty. As the entity, the Bonneville Power Administration came to an agreement with us that they said publicly was a good agreement. During the negotiations we had scanned a huge number of options. The Bonneville Power Administration said that was the preferable one under the terms of the treaty. That was the one that gave the benefit to them and to us.
When it came time, they decided that they would not encourage their government to make the exchange of notes and finalize the agreement. Bonneville responded as a commercial enterprise. The basis for their refusal to encourage the U.S. government to sign was the impact it would have on Bonneville alone. That is the essence of the problem that we have with Bonneville.
You know, there are other things going on in the energy area. There are other things that are happening under the treaty, but this is the essence of the downstream benefit entitlement. That is why we believe that we have significant weight with the memorandum of understanding; that is why we believe that Bonneville has acted inappropriately. We recognize it has many hats and many reasons to do things, but we are putting the case very clearly that its function, its task as a negotiator under the treaty, was to represent the U.S. government. When it broke that agreement, it acted differently; it acted as a commercial entity. That is our concern.
[10:30]
There are 12 to 20 agreements under the Columbia River Treaty, depending on how you count them. It includes the annual operating agreements, the five-year operating agreements, the reviews and so on and so forth. There are operating plans that go into place, and we agree to those plans under the Permanent Engineering Board's supervision. First we agree to long-term plans, and then we work to one-year plans. We are in continuing consultation about the other operations.
I'm sorry I can't name all the agreements. Of the three agreements that we said we would not renew, two are storage agreements. One that we said we would send back -- having signed it on April 6, when Bonneville probably knew that they were going to do this, so we're not sure of the good faith of this treaty -- is the enhanced marketing opportunities for electricity. We will either not be renewing or not be proceeding with those agreements, but there are more agreements under the treaty.
D. Jarvis: Let me put it this way. The U.S. government, if it's treated badly, doesn't always comply with world trade
[ Page 15392 ]
agreements. We know that for a fact. There are continual disputes; the one with Japan is ongoing. There are protocol and legal realities that could happen and that we should be aware of. Knowing the track record of BPA as a commercial entity, I'm surprised that their track record in Washington State and Oregon is not very good. The minister has admitted to that as well. Therefore we should have been aware that there may have been a looming problem in view of the fact that we did not have a signed, sealed tight contract. We didn't have one, and you know we didn't have one.
In any event, I want to jump to another quick question with regard to all these commercial agreements you were talking about. Is it possible that your officers could send me a list of these agreements and what they entail briefly? I don't want to go into the whole details of the contract.
I understand Ken Peterson was acting on behalf of this government in negotiating the downstream benefits or the new repatriation agreement, if that is what it is, or the resale of electricity. I was also wondering if he was in the employ of the Energy and Mines ministry then, and if the minister was aware that he was being paid on a commission basis for short-term power sales to the United States.
Hon. A. Edwards: Hon. Chair, I am constantly surprised at the stance that the critic and his party have taken about this agreement. He observes that if the U.S. government is treated badly, it doesn't observe agreements. Is that some reason to lick their boots? Is that some reason to simply say: "We give up, we'll have to do what they want to do?" We have an international agreement. This international agreement has held for nearly 30 years. We expect it to continue to hold under the direction of the two governments who signed it. The entities who work with it represent those governments, and those governments have to expect that there is good faith there. If there isn't good faith there, then there is something else to be done, and that's not to get down on our knees and lick boots. I assure you that is not what this government is going to do. I don't know where you get the idea that the U.S. government was treated badly; they have not been treated badly whatsoever.
I can get you a synopsis of the various agreements that are in place under the Columbia River Treaty, and I would be happy to do so. Ken Peterson worked partly as a consultant for the Ministry of Employment and Investment, and then, as CEO of Powerex, he has been part of the negotiating team.
D. Jarvis: Prior to Mr. Peterson being the CEO of Powerex -- that's the period I was asking about -- was he being paid for short-term power sale contracts into the United States?
Hon. A. Edwards: This ministry has not at any time hired Mr. Peterson as a consultant.
D. Jarvis: I'll just sum up, Madam Chair, before I turn it over to the Leader of the Third Party.
I'd like to ask the minister a question. In the event that we have to repatriate the power and Bonneville Power has to put transmission lines back to all their.... Is there any estimate of the physical cost to the British Columbia government for hooking up to the American transmission lines heading into Oliver?
Hon. A. Edwards: We do not see that there's going to be any requirement that we take the power back to B.C. We have the option of having the power returned to B.C., as the treaty says, or selling that power in the U.S. That opportunity is there. Whether this agreement goes ahead -- we expect it will -- we retain the option to sell the power in the U.S. or return the power to our own system. So it remains an option.
We do not expect the transmission line across the Cascade Mountains to be the optimum choice; we do not expect that will happen whatsoever. There are several reasons for that. If it did happen, the cost to us would be approximately $20 million. We haven't calculated an exact figure, because we don't expect this to happen. It would be in the range of about $20 million, as I understand it, for us to put the transmission line from Oliver into our system.
J. Weisgerber: I'd like to cover much of the same ground. I would like to examine the supply side first of all. My experience over the last nine years has been that Hydro has consistently forecast the Kemano project, Kemano 2 and the return of the Columbia downstream benefits on the supply side. And my calculations suggest that the province is going to have a considerable shortfall of power without Kemano 2 and without the Columbia downstream benefits, even factoring in the independent power projects.
The minister said early on in the debate today that there would be no energy shortage, that Hydro's energy smart project and rate design would indeed deal with any demands on power. The minister seemed quite confident that there was going to be a surplus. Before we get too much further down the road, can the minister tell us how much Hydro expects to reduce demands through the energy smart project, what the cost per kilowatt-hour of those savings will be and how much the government and Hydro intend to discourage consumption with higher rates? Obviously the rate design approach is to say to people: "We are going to make it less attractive for you to use electricity, we are going to increase rates and we're going to discourage consumption."
To start this debate, could the minister tell us how much it's going to cost on the energy-smart side per kilowatt-hour, how much reduction in demand is anticipated there and what the cost to consumers and the effect on the rate design might be?
Hon. A. Edwards: I certainly could respond. First of all, I believe you are talking about Power Smart; you call it energy smart. There is a Power Smart and a Resource Smart. I assume you mean Power Smart, which involves demand-side management measures with the public. What B.C. Hydro expects -- and this is also in the 1994 electricity plan -- is that there will be energy savings by the year 2000 of nearly 5,000 gigawatt-hours annually. That's the total. If you want to put that in capacity, that would be about 900 megawatts. That will reduce slightly up to the year 2014, but just very, very slightly. So basically, that's the kind of savings you're looking at because of Power Smart. I think I'll let you....
J. Weisgerber: I was curious to know the costs to B.C. Hydro, and ultimately to consumers and government, of that Power Smart project and the timing of when those reductions in consumption come into effect. What I'm trying to do is get a sense of the cost of it and of how quickly it will come into play. I was curious to know how much rates are going to have to go
[ Page 15393 ]
up for the rate design which the minister referred to in order to start discouraging consumption. I can't imagine that anything else would be the case. What the minister seems to be saying is that we're going to make electricity sufficiently more expensive to cause people to seek other alternatives, other options.
Hon. A. Edwards: In the broad sense, obviously different parts of Power Smart demand-side management cost different amounts, but overall we're finding that the supply from demand-side management is coming in at about the same price as new supply will come in, which is somewhere between 3 and 4 cents a kilowatt-hour. It has real benefits in some ways over other sources of power, but it will cost about the same as what we're being offered right now. So that is a relatively modest amount.
As far as the rate design is concerned, the rate design is a change to flatten the design, as you know, so that those who use a great deal more energy don't get a reduction in cost as they use more. But we at least charge them exactly the same amount, and if they use more, they pay more. The rate is the same right across; it's a flat rate. I believe it is appropriate to describe it as a flat rate. It extends out for anybody who uses power so that the more they use, they'll pay at the same rate, even if they use a whole lot more.
Other things are being looked at right now that will encourage conservation. What will happen, I believe, is that as conservation is encouraged, people will begin to conserve, and they won't be paying more for their power. We're looking at day and night rates, high-use times and those kinds of things. Those things are being considered right now by the Utilities Commission, and they will make a difference that I don't think.... People who use power inefficiently are the ones who are going to pay, so it will be very much a rate that's designed to encourage efficient use.
J. Weisgerber: I suppose that's a demonstration of the seasonally adjusted rates, for example, that say to people in the Peace River country: "When it's 40 below, don't use power, because that's not a very efficient time for you to use it. Use lots during the summer when it's light out 18 or 19 hours a day. We'll give you your power at quite an attractive rate when you don't need it, but when you've got to heat your home, we're going to whack up the rate by 50 percent to encourage you to use less."
[10:45]
I don't know how far that principle is applied, but that is the most dramatic demonstration I've seen so far of rate design. I can tell the minister that it's certainly not appropriate to the people in the community I represent. It's not a flat rate; it's not extending the cost of power out on a flat line. It says when you need it most, you're going to pay the most. When you need it least, we're going to reduce the cost to you.
Is the seasonally adjusted consumption rate, the seasonally adjusted program which has been implemented by or imposed by the B.C. Utilities Commission on all customers of B.C. Gas, a demonstration of the rate design or an anomaly in rate design?
Hon. A. Edwards: One of the things it does is allow people to get the return on energy conservation measures and see their results. It costs more for the suppliers to supply gas, and this is only a gas rate that you're talking about. This has happened with gas; it hasn't happened with electricity.
With gas, people will be paying more in the winter and less in the summer, and it encourages conservation. There are many people who perhaps could close the opening around their windows and that kind of thing. It will make a difference to them. It encourages conservation and therefore conservation year-round. I think it's a little counterproductive to think of it as encouraging people to use more energy in the summer when they don't need it, because that's not the goal of the rate design. The goal of the rate design is to encourage people to conserve energy unless they truly need it. If you balance the two, people should have an extremely modest rate increase. The increase was expected to average 2 percent over a year. Although the rates did go up for the winter, they went down significantly over the summer, with options for people to better conserve and take advantage of that. The implications are that they will begin conserving energy and their rates will not be excessive.
J. Weisgerber: I think this is an example of natural gas versus hydro, but I think if Hydro intends to follow the same principle in rate.... Let's understand that if you live in the Peace or other parts of northern British Columbia, your options are limited. It gets down to 25 or 30 below for extended periods of time in the winter. The price under this rate design is 50 percent higher in the winter, when the consumption is the greatest, than it is in the summer. How can you save enough during the summer months, when the average consumer doesn't use any gas, by keeping the price lower? The mathematics of it don't work. I don't think the reduction in the consumption of natural gas will be noticeable. People have already taken reasonable measures to improve the insulation in their homes. For years now homes in the north have been built with very high insulation factors; so much so that condensation has become a major concern that must be dealt with.
Anyway, we're getting a little distracted from my original question. I still haven't heard from the minister what savings in consumption under rate design have been forecast, or if the program will simply extend a flat rate for consumers rather than provide a volume bonus or incentive, as perhaps is the case now. How many megawatts per year does B.C. Hydro expect these higher rates to achieve in savings?
Hon. A. Edwards: I still want to deal a bit with this gas program, because the decision was made by the Utilities Commission based on evidence that was presented at hearings in 1993. What it specifically showed was that gas costs for residential and commercial consumers are 25 percent higher in winter than in summer. Now if you assume 120 gigajoules of consumption, which I assume is reasonable, B.C. Gas residential customers will pay an average of 8 to 9 percent more in the winter with the new rates. This is offset by a 13 to 14 percent reduction in the summer. As I said, the overall increase in gas bills, which you can average out in payments over the full year if you choose, would be about 2 percent.
Along with that, inland customers still pay 41 cents less per gigajoule of natural gas than those living in the southern part of the province. This is due to deferred tax benefits, a
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lower incidence of unaccounted-for gas and the fact that they're closer to gas supplies, which lowers transportation costs. This was all taken into account when those decisions were made.
You can't translate that into electricity directly. What you look at in electricity are time-of-day decisions. As you will understand, if you can reduce the load in the morning, when everybody gets up and turns on toasters, electric shavers, etc., and their water heaters click in if they happen to have an electric one, and also the evening load at dinner time, you don't need so much capacity. Even if you used as much energy, you wouldn't need as much capacity, and that makes a huge difference to the system -- I know you understand that. That's the kind of thing that will be attempted. What it does is encourage people without raising rates necessarily -- certainly not significantly. It will change how the system is used and the overall cost to people of the whole system.
J. Weisgerber: Well, we could argue with respect to natural gas delivery, particularly in the producing regions. The argument around a 25 percent increase in cost during high demand simply does not hold water. In fact, if you're not dependent on the major transmission system, you can't argue the 25 percent higher delivery cost in peak seasons. But I'll be happy to come back and pursue that at some other point in time.
What I haven't heard yet is how much in terms of demand this rate design, which the minister has held out as one of her two major arguments favouring a maintenance of the demand side.... In other words, the minister said early on that because of Power Smart and rate design there was going to be no shortage of electricity, no shortage of capacity and no shortage of power in British Columbia. So far, we've heard that the minister believes that sometime over the next ten years Power Smart is going to save about 900 megawatts at a cost of somewhere between 3 and 4 cents a kilowatt-hour. But I haven't heard anything further in terms of concrete numbers on the rate design side and what the effect of that might be.
Hon. A. Edwards: We don't have figures on that. That is partly because the savings from the elimination of the trailing block have not come in yet, and we certainly don't have any change in the rate design. So we haven't got the figures or anything to hand you.
J. Weisgerber: Given adjustments for Power Smart, my figures still suggest that without Kemano and without the return from downstream benefits, British Columbia has to be at least 1,600 or 1,700 megawatts short. The minister said in her remarks earlier that she expects about 300 megawatts from IPPs. But she recognizes that outside of Kemano 2, there are still unlikely to be about 570 anticipated megawatts coming from Kemano on top of the Kemano 2 shortage.
The point I'm making is that it seems to me pretty clear that without going to the Kootenay projects, the province has a domestic shortfall. The province needs to build new capacity in the Kootenays, given the fact that Kemano 2 is gone, according to the Premier and others. But we haven't seen the government take any action other than rhetoric; we haven't seen any movement beyond that. Given the fact that Hydro has taken Kemano 2 out of their projections, it seems to me that there needs to be a significant amount of power from the new Kootenay projects -- whether it be Mica, Revelstoke or Keenleyside -- in order to meet our domestic demand over the next couple of decades. Will the minister confirm that Hydro will have to have a significant block of power returned from the Columbia system or else it is going to have to go to new projects in the Kootenays to meet demand?
Hon. A. Edwards: I go by the figures that we have put together. B.C. Hydro projects that with their revised balance without KCP -- the Kemano completion project or Kemano 2, whichever you want to call it -- we will not have a shortfall in energy or capacity balance. If we did, we would add, as I say, the up to 300 annual megawatts that we have asked for under the RFP. Seven Mile unit No. 4, Stave Falls and Revelstoke unit No. 5 will be advanced, and we will not have an energy shortage for domestic needs.
Beyond those things, we also have all the potential that is there with the downstream benefits, and we have B.C. Hydro's curtailable load rates, which can be changed. We have Resource Smart projects that can be moved forward. There is, by all calculations we can see, no reason to suppose that there would be an energy deficiency.
J. Weisgerber: Just to make sure that I understood what the minister was saying: is the minister saying that the province and Hydro, however you make that distinction, can follow through and complete the agreement reached on the Columbia downstream benefits, without bringing any significant block of power back to British Columbia, and still not have to depend on the projects announced in the Kootenays? That without Columbia downstream benefits, without the Keenleyside, Mica, Brilliant and Waneta projects announced.... Is the minister saying that this government doesn't need either the Columbia projects or the recently announced Kootenay projects? Is that what the government really wants us to believe?
Hon. A. Edwards: I think that if the hon. member is trying to say we don't need those projects, they are projects that could be in the mix. Obviously they are projects which are sitting there and could be available for domestic use; they could be available for export use; they could be available. That's definitely part of what we see.
[11:00]
Just to deal with the downstream benefits issue, we do not see, under any circumstances, that we would be precluded from selling some of those downstream benefits into the U.S. if we don't need the energy at home.
J. Weisgerber: Perhaps I've got to go back a step further, then. Was the minister not involved in an announcement in conjunction with the establishment of the Columbia Basin Trust? Was the minister not involved in the announcement of projects that were going ahead in the Kootenays -- the new generating facilities that were going to be brought under construction as part of the $1 billion announcement made under the Columbia Basin Trust Act?
Hon. A. Edwards: Certainly I was there. There is the option for the Columbia Basin Trust to develop some projects with the province, and, of course, they would need to have a market for them. They have anticipated -- certainly it was booted around -- that a probable market for those kilowatts
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might well be West Kootenay Power, and if not that, then export. The discussion of that remains in the mix. There are many possible projects for energy in the province and many possible options to market those projects as well. In the changed environment, where it is now possible to use energy for marketing elsewhere, we have a different pattern. We also have many projects; we have lots of supply for electricity in British Columbia.
J. Weisgerber: I take it from the minister's comments that the announcements made in the Kootenays with respect to the various new generating facilities were simply an indication that the Trust, along with the province, had at some future date an option to move ahead with those projects that they were depending on. The projects, in turn, were dependent on markets still to be identified and contracts still to be considered. In essence, there has been no announcement other than a willingness to participate along with the Trust in some possible endeavors in the future. Is that what the minister is saying?
Hon. A. Edwards: The group that was talking to government, representing the people in the Kootenays, wanted the opportunity to develop power projects. Of course, they have the option of whether to do so or not. This is not a gift that has been imposed, as some people have chosen to characterize it. It is very much a response to the group that was negotiating for the people in the Kootenays. They want to develop power, and they certainly would have to do the same as any other independent power producer: find a market and a place to do it. They definitely have the opportunity to go ahead if they choose, and they have indicated their great interest in that direction.
J. Weisgerber: I expect that the people I know who are involved in the Columbia Basin Trust and in the considerable amount of work that was done in the community leading up to it will read those words with a great deal of interest. It seems to me that they came to government with a proposal to share in the Columbia downstream benefits. They were in turn told: "We're going to give you some money for some specific projects" -- I think totalling about $47 million. They were told by the Premier, the minister and the government that they were on top of that. Those people were going to have an opportunity to participate in these projects. I don't recall, in my talks with the Columbia Basin Trust lobbying group, that being the thrust of the initiative that led up to this announcement.
But having said that, I'm sure those groups will be able to read your words and analyze them far better than I. What the minister is saying is: "There's nothing firm on the projects in the Kootenays. There are no agreements in place, and there is no domestic demand with B.C. Hydro for any electricity that might be generated there." I don't want to put words in your mouth, but I want to understand specifically what you're saying.
Hon. A. Edwards: I think the group in the Kootenays knows very well what they are choosing to do if they choose to go with the power project options. The government has said that if you choose to participate jointly with the government in developing energy projects, we will do that. That is what they expect to do. I have been extremely clear with them as Minister of Energy that they would have to go through the process that anyone else would in order to get a project going. I have no doubt in my mind that they understand that very clearly and that they have had very close talks with B.C. Hydro, Powerex and so on as to the opportunities they would have to sell that power if they develop it. We're not trying to impose something on the trust. The trust would take that option and has the opportunity to do with it what it would choose to do.
J. Weisgerber: Could we then look at the economics, the opportunities that exist with those particular projects? Could the minister tell us across the board, or on an individual basis, what the costs of power generated at those Kootenay projects would be? You can give it to me either by each of the three individual projects or on a blended basis. I'm trying to get a sense of what it is going to cost to generate electricity at those projects in the Kootenays. For clarification, the cost of it without transmission costs -- simply the cost of generating it at the facility -- would be an interesting starting point.
Hon. A. Edwards: The cost of developing Keenleyside in particular -- and the very same thing applies to any of those projects -- will depend on the debt-equity ratio. Although we have the application sort of begun for Keenleyside, we have not yet been able to determine the figure for that. If there is a heavy up front investment from both partners, that will reduce the debt-equity ratio for the project, and it may be a fifty-fifty ratio. If that's the case, it would reduce the cost of power for the project. It could be around 5 cents per kilowatt-hour.
J. Weisgerber: For the sake of argument, let's assume that there is no equity and that the cost for the electricity generated has to bear all of the cost, whether it be a return on equity for those who contribute equity or a servicing of debt. It's important to know what the capitalized cost of the project will be. Based on that capitalization, debt equity aside, the question is: how much do you have to get for the power in order to service the capital cost and the operating cost? It doesn't matter how much money you put in upfront and how much you finance.
Let me just add a second question. I would be keenly interested in an answer to the first, but the second part of my question is: where in the world is the trust going to get 50 percent equity costs for generating capacity on those dams?
Hon. A. Edwards: The trust will get its equity from the downstream benefits return, which is going to come eventually. The downstream benefits return has not been destroyed. As you all know, it's not all gone. I have no doubt that there's going to be no progress at all until such time as there is a market. West Kootenay Power has indicated an interest in this power, and it is very well aware of the costs of generating electricity in that area. So far the Columbia River Treaty Committee has indicated that it wants to pursue those possibilities.
J. Weisgerber: As I was concerned might happen, I didn't get an answer to the first part of my question. The question is: equity aside, if the project were financed 100 percent, what would the cost of the power be? If there were a return on all the capital, whether in the form of equity or debt, and if all the capital costs of the facilities were to be serviced, as they should be -- as indeed they must be -- what then would be the cost of power generated at Keenleyside?
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Hon. A. Edwards: I can only repeat that we have asked for that information. We have asked for those calculations before we can process the application. As the regulator, we have to have that information brought to us so that we can make those calculations.
J. Weisgerber: With all due respect to the minister, aside from being the regulator, if I understand the proposal and the fanfare that went on with the announcement of this trust, it was that the province, the government that this minister is a part of, would be a partner with the trust in this proposal. Is the minister telling us that they have gone to the extent of creating a trust and raising all of the expectations around this and, as a partner, have no idea of what the cost of generating electricity at those sites would be if there was to be a fair return -- or indeed any return -- for the capital invested?
Hon. A. Edwards: The Columbia Power Corporation has done some extensive studies. They have a good sense of where it is. And we have asked for that kind of clarification so that we can proceed with the application.
Some of the early studies say that if you have a normal capital structure, the rate of return would be just under 10 percent. So as you adjust your capital structure, it will go up or down. That's part of what they are trying to determine. Until the partnership determines it, we can't give you those kinds of figures.
J. Weisgerber: Without trying to specifically pin down the number, would it be fair to say that if all the costs of capitalization were calculated into the cost of power generated at Keenleyside -- and, I assume, at Waneta and Brilliant -- the cost would exceed 8 cents a kilowatt-hour, based on today's calculations?
Hon. A. Edwards: Not 8 cents by our calculations at all.
J. Weisgerber: I'm reluctant to enter into a Dutch auction, but we can go 7 cents.... We know it's more than 5 cents, so would it be fair to say that it's more than 7 cents?
[11:15]
Hon. A. Edwards: I'm trying to make it clear that I'm not willing to say what it is. We don't know that figure. We believe it's not going to be 8 cents; we think that's a wrong figure. We believe that it could be as low as 5 cents -- perhaps lower, depending on what the corporation wants to do -- but that is up to the Columbia Power Corporation and the Columbia Basin Trust, which have been working at it. It will be up to them to make those decisions.
J. Weisgerber: I have been around long enough to know when I'm not going to get an answer. We know the costs are significant. From the minister's own words, we know the costs are 5 cents a kilowatt-hour, based on a 50 percent debt-equity ratio -- in other words, no return on half the equity or half the capital cost. I'm sure there are people far more adept at this than I, who within a matter of hours will be able to tell me exactly what the increased costs will be, so I'm not going to push too hard. I know the answer will come from one source or another in the very near future.
What I would like to do is examine with the minister the returns in the much-heralded downstream benefits. In terms of kilowatt-hours, what's the sale price on the Columbia downstream benefits? What's the blended or the average return for power on the torn-up agreement? What had the government and the negotiators achieved in terms of a price agreement for power sold on the Columbia system?
Hon. A. Edwards: I could give you what we've put out. I'm not sure if that's what you want, or whether you want something more. The agreement basically said that we would receive a cash payment of $180 million (U.S.), which is $250 million (Canadian). You know that, and that was for the reduction in the amount of capacity that the U.S. would have to deliver to 950 megawatts.
I believe that covers what you want. Are you looking at the price per megawatt? Of course, if you're looking at the price per megawatt, we don't know what it was or what it will be. We can make calculations, and we have calculations indicating that what that will amount to is $5 billion to $6 billion over the life of the treaty, and that's a fairly conservative estimate. It means that sometimes the price of electricity will be down and sometimes it will be up, but over the life of the treaty -- even with short-term contracts, which we see as part of the future -- you are not going to be able to have the kinds of long-term contracts we had before. So we will be doing short-term contracts, which in fact take more of the risk but also should get a better return. Basically we're looking at that as a figure, and we've put that figure out as openly as we can.
J. Weisgerber: The number I'm trying to get to is: if the minister estimates the number of kilowatt-hours that will be sold over the life of the treaty and divides it into the $5 billion or $6 billion in total that the Crown will receive over the life of the treaty, does that work out to 2 cents a kilowatt-hour, 1.5 cents, 1.75 cents -- what is it? How much per kilowatt-hour is the government anticipating selling electricity to the United States for?
Hon. A. Edwards: I hope the member isn't forgetting that the downstream benefits are ours for no cost. That is part of the treaty. The cost is being paid.
J. Weisgerber: I won a house in a lottery, so it doesn't matter what I get for it: is that it? No, come on!
Hon. A. Edwards: What we will be doing is selling it for the best we can get. Previous governments already paid for this power. There is lots of discussion about whether they paid enough, but they have paid for it. It is power that we take as ours beginning in 1998, and that power is ours under the agreement. The cost to us is nothing, in that sense. If you want to know what it costs Bonneville Power to generate it, I can't give you that figure.
J. Weisgerber: The minister is critical of the original deal signed. The minister and her government, at every opportunity, attack the Columbia River Treaty as having been a sellout by British Columbia 30 years ago. Now the minister says we've got this huge block of power, this valuable resource, and it didn't cost us anything. Doesn't the minister understand that the whole deal was calculated? It was a 60-year treaty, the entitlement was sold for 30 years to finance the project, and now we have an opportunity to take advantage of the cash returns for the second half of the agreement.
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What I want to know -- and I can't believe the minister doesn't have this number available -- is the average selling price of that entitlement, which belongs to us, is going to be generated on the Columbia system for the next 30 years, and about which the government had a much-heralded memorandum of agreement and about which it was so angry when Bonneville tore it up. In that agreement that Bonneville didn't want to honour, what was the selling price? How much were we going to get per kilowatt-hour for that block of electricity over the term of the contract?
Hon. A. Edwards: Our disagreement with the original contract is that it was paid for largely by people in the Kootenays. You can say whatever you like about the agreement, but they did not get a fair return, and that is a historical situation. That's our concern and a large part of why we're doing this. The Kootenay part of it is the basis for the whole thing. Whatever you do, that was paid for. If you want to argue about whether or not it was a fair deal, we are willing to argue that that part of it was not fair. The large part of the cost was never moved from the Americans to those people who paid the price in land, a way of life and whether or not they could make a living.
The figure I think you want is at today's prices. Of course, we don't know whether today's prices are going to obtain, but at today's prices the power is going to be worth more than $200 million a year. That is based on an expectation that it might be 6 cents a kilowatt-hour for residential and 3.5 cents a kilowatt-hour for industrial. Those are today's prices and may go up or down. Certainly we will have the opportunity, no matter what the situation is, to move to better contracts if the price goes up.
J. Weisgerber: At this point, I'm not getting into the debate on the benefits and costs of the system to the people of the Kootenays. But as well as the alienation of land, there were benefits in terms of flood control. The minister knows that. There were benefits and costs to the Kootenays -- nobody has argued that.
Is the minister telling me that the government is going to receive a return of somewhere between 3.5 cents and 6 cents a kilowatt-hour from Bonneville Power Administration for the energy sold to them? Or was there the opportunity to get anywhere near that price? Quite candidly, I don't accept that fact. It may be sold in the United States for 6 cents to residential consumers. It may be sold to industrial consumers for 3.5 cents. I want to know what the selling price was in the torn-up memorandum of understanding that was previously reached with Bonneville. We've established that it was going to cost somewhere between 5 and 7 cents and perhaps a bit more to generate electricity in the Kootenays. What were we selling the Columbia downstream benefits for on an average basis, on a blended basis, however you want to calculate it? Tell me what we were going to get with this agreement with Bonneville. And what are the expectations today?
Hon. A. Edwards: You want to know the original amount that was paid to British Columbia for our downstream benefits, for which we have no costs to generate -- right? The amount they gave us to pay for that, which Premier W.A.C. Bennett accepted, was a capacity buydown, so it cannot be translated into kilowatt-hours. You could calculate that, but it was a capacity buydown; that's what it was.
J. Weisgerber: Surely to goodness in the period of time starting in 1998 and going for the 30-year anticipated sale, there has to be a calculation on the amount of electricity that's going to be generated. There have to be forecasts of how much would be generated on the Columbia system over the next 30 years, what British Columbia's share would be -- half -- as well as the calculation of what that would mean in terms of a sale price per kilowatt-hour.
If you're going to say to the Americans, "We don't need that power in British Columbia; we have options in Canada to generate domestic capacity," how in the world can the government come to that conclusion unless they have calculated the selling price on the same basis as they've calculated the cost of replacement power? How could anyone logically make those two decisions in the same time frame, decisions which obviously are interconnected, without having made a calculation of what the sale price of the Columbia downstream benefits is in terms of selling price per kilowatt-hour?
Hon. A. Edwards: Perhaps it would help if I talk about the value of the entitlement in energy and capacity. The net present value of the entitlement is estimated to be $1.6 billion (Canadian), which will come from the entitlement energy. Then, of course, we also have 950 megawatts of capacity that is available for sale. The upfront sale of capacity would represent 12 percent of that total value. Does that answer some of your questions?
J. Weisgerber: The 950 megawatts, I assume, is an annual amount. We've now established what the volume is.
Hon. A. Edwards: We established that a while ago.
J. Weisgerber: Would the minister tell us how much a year the returns are expected to sell for, and what the calculation is? You can round it off at 1,000 megawatts and very quickly calculate a per kilowatt-hour return based on that. That's the number I'm trying to establish. What is the average selling price per kilowatt-hour of electricity generated on the Columbia system to which British Columbia has an entitlement and on which it has an option to sell?
Hon. A. Edwards: We've been trying to tell you as clearly as possible. By our calculations, if you look at today's rates, which are 6 cents a kilowatt-hour for residential and 3.5 cents a kilowatt-hour for industrial, the net present value of the entitlement will be $1.6 billion (Canadian) for the energy. That is what we would receive from that; we don't have to pay for it. Besides that, we would sell the capacity to the highest bidder, and we don't know what that amount would be.
[11:30]
J. Weisgerber: Is the minister telling me that the ministry and Hydro don't have the ability to translate that sale into a return per kilowatt-hour in precisely the same way as you would calculate the cost of generation, whether it be at Keenleyside, Waneta, Brilliant, Site C or any of the IPP projects? Those are all calculated and debated and valued in terms of cost per kilowatt-hour. Why in the world can't we simply get a value per kilowatt-hour for the power that the government anticipates selling in the U.S. market with an extension of the Columbia River Treaty?
Hon. A. Edwards: I think we're still at loggerheads. I don't understand what figure you would want, since we have
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no cost to this energy capacity. It is ours; we own it; it is there. We don't pay for the maintenance of the dams that require it and all of that. That is taken care of. It is generated by the Americans. It is ours. We haven't sold any yet. We have calculated a price. At today's prices, this is what it would be worth, and today's prices may be low or they may be high.
J. Weisgerber: I fail to understand what the cost has to do with your ability to calculate your selling price; they're absolutely unrelated. What the cost of something is versus what you receive in terms of a selling price are totally unrelated. As near as I can figure out, the government or the province hopes to sell about 1,000 megawatts a year for 30 years and get in return somewhere between $5 billion and $6 billion cash. Can the minister tell me, or can someone there quickly calculate, the value per kilowatt-hour of 30,000 megawatts sold for $6 billion? What does that work out to per kilowatt-hour? I don't have the time or the opportunity here to calculate the sale price. The minister is holding up her hand.
Hon. A. Edwards: Five cents -- one for each finger.
J. Weisgerber: Well, as long as we keep doing debates by standing up and responding, rather than holding up our fingers, I guess we'll probably get along more effectively.
The minister is saying that the agreement in principle, which wasn't followed through by Bonneville, essentially saw the returns at about 5 cents a kilowatt-hour. The government had an opportunity, over the life of our ownership of the benefits, to sell them for about 5 cents. I'm taking the minister's words; I'm not doing any calculations on my own.
Could the minister tell me, then, just to help me fill this equation out, roughly what would be the cost per kilowatt-hour to transmit energy from the generation sites in the Kootenays to the point of return in the Okanagan -- I think it's Osoyoos -- where the U.S. entity is obliged to bring the power back if the downstream benefits are not sold? Could the minister tell me what it would cost, instead of taking that energy back to British Columbia to the point of entry, to sell those benefits in the United States and bring power from the Kootenays to the same location?
Hon. A. Edwards: I'm advised you can't get there from here. There is not the appropriate transmission capacity to get the power from the Kootenay generating area to Oliver, which is the place on the boundary that the treaty mentions. However, I can tell you that on an overall basis on B.C. Hydro's system, the cost of transmission is approximately 1 cent a kilowatt-hour. It is, of course, always subject to negotiation.
The Chair: Hon. members, I would like to draw your attention to the time. Perhaps we might break now, or you might want to ask your question, have an exchange and then call it. I'm in your hands. We cannot go to 12 o'clock, because we have to report to the other House. We have to be aware that they may break earlier.
J. Weisgerber: I will probably be able to conclude this line of discussion within the next ten minutes. I would like an opportunity to do that if possible.
The Chair: I'm in the hands of this group. If somebody from outside says, "Let's move it," then we'll have to do that. But 11:45 a.m. is the deadline.
J. Weisgerber: I want to follow up on the 1-cent issue. Obviously distance and the need to build new transmission lines, etc., would affect that, but for the sake of argument I would accept that. The point I'm trying to make is that for our domestic supply we are looking at the option of saying to the Americans: "We need the electricity, the benefits and the entitlement from the Columbia River here in British Columbia. If we don't get it, we're going to have to depend on power that we generate in the Kootenays." Quite honestly, that is our only option other than perhaps some expansion of IPPs. We should be saying to them: "Look, 5 cents is a bargain; 5 cents is an absolute giveaway." Our best projects in British Columbia are the projects in the Kootenays. They're going to cost us whatever we want to argue, but I would say somewhere between 7 and 9 cents a kilowatt-hour to produce. The cost of transmission would be on top of that.
We should say to the Americans: "We don't think you in the United States have any better options than we have. The 5 cents that we negotiated with you earlier was a bargain price. Having looked at it again, we're going to up the ante. We need more than the $5 billion or $6 billion that we originally negotiated, because we sat down and calculated the real cost of replacement power. It's much higher than the price we had been originally prepared to sell to you for." That's the argument that I believe should be put forward, and I think it's a legitimate one. I don't think for a moment that West Kootenay Power is prepared to pay 7 cents a kilowatt-hour. I don't think customers in the United States are going to be willing to pay more than Bonneville, for example, is willing to pay. So I think that there are some serious concerns. The whole point of this questioning was to bring some clear comparison of the generating costs versus the sale price.
Having made that argument, I want to touch on two other items. I believe that we have to look at what we are prepared to pay IPP operators on the basis of the discussion we just had. I don't know how it is that we're able to tell independent power producers: "These are our costs; this is what we are selling for, but we're not prepared to pay you nearly what our avoided costs are." I will be interested in that argument.
Before we break, I want to again bring the issue of maintaining Williston Lake water levels at 2,150 into this debate. If, as the minister says, there is no present shortage of power in British Columbia and there is no foreseeable shortage of power in British Columbia, how in the world can the minister rationalize failing to give people in Mackenzie and around Williston Lake an assurance that water is going to be maintained at 2,150? The only possible argument for drawing water down below 2,150 has to be that there is a shortage of power, and that all of the other capacity has been exhausted. The argument then has to be that our only last option is to draw the lake down.
I want to remind the minister that Williston Lake doesn't fill and empty every year like the reservoirs in the Kootenays. If you draw it down dramatically, lower than it has ever been before, it won't refill in the next year or the year after. The efficiency of water generated because of the lower fall over the penstocks is significantly reduced, and water taken below 2,150 isn't going to provide the same return that is achieved from water taken at higher levels. I'm wondering how in the world the minister can rationalize all of the debate we've had today around the supply side with her unwillingness and the government's unwillingness to deal decisively with that 2,150
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issue at Williston Lake, which is a real threat to the economic stability of the community, to the transportation systems that have developed on Williston Lake and to the industries that now depend on that water. If indeed there is no shortage, as the minister stated an hour ago, how, then, can we rationalize putting the community of Mackenzie in the kind of jeopardy that would be the direct result of a drawdown anywhere below 2,150?
Hon. A. Edwards: I simply want to make a comment, and then I will respond to most of these issues after the adjournment.
I did want to say to the member that you've got to remember that our negotiations with Bonneville Power were not based on the price we are going to get for the power. That has nothing to do with our negotiations, except for us to know what the likely return is. Our negotiations with Bonneville were about points of return, transmission costs and all those things. That's what we negotiated about. As for the price we will get for that power when we sell it, that was not part of the agreement, and it will be determined by the market as we go.
Hon. Chair, considering the hour, I move the committee rise, report progress and ask leave to sit again.
Motion approved.
The committee rose at 11:43 a.m.
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