2011 Legislative Session: Fourth Session, 39th Parliament
HANSARD

The following electronic version is for informational purposes only.

The printed version remains the official version.

official report of

Debates of the Legislative Assembly

(hansard)

Tuesday, May 29, 2012

Afternoon Sitting

Volume 39, Number 6

ISSN 0709-1281 (Print)
ISSN 1499-2175 (Online)

TUESDAY, MAY 29, 2012

The House met at 1:34 p.m.

[Mr. Speaker in the chair.]

Routine Business

Introductions by Members

L. Reid: It is my pleasure today to welcome guests from the Richmond Chamber of Commerce, now known as the chamber. Today in the gallery is Lisa Wong, the chair; Howard Harowitz, director, chair of the policy and advocacy committee; Gerard Edwards, director, chair of the international committee; Craig Jones, executive director.

The Richmond Chamber of Commerce was established as a society in 1925, originating as a board of trade. Today the Richmond Chamber of Commerce represents over 1,150 companies from across many diverse industries and professions.

It was our pleasure today to join these individuals for lunch. My colleagues from Richmond Centre and Richmond-Steveston and I would ask the House to join with me in making them unbelievably welcome to our chamber.

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C. James: I have a very important member of my extended family in the gallery to introduce today. She very kindly and generously shared the care of her brother with our family for over 20 years. I knew I shouldn't look up. Although Norman is not with us anymore, he will always be a very, very special part of our family forever, as Bobbi will.

She was also a civil servant for many years in Victoria. She's since retired, and she's loving retirement and looks fantastic, so I highly recommend it to a number of people in this Legislature. Would the House please make Bobbi Mitchell very welcome.

Hon. T. Lake: The member for Kamloops–South Thompson and I were very honoured to have as our guests at lunch four Kamloopsians visiting us. Today in the House we have Rachel Lammers, Ryan Scorgie and Tom Eaves, who are outstanding representatives of the legal profession in Canada's tournament capital, and also Percy Folkard, who is an agrologist with the B.C. Ministry of Agriculture in Kamloops. Would the House please join us in making them very welcome today.

H. Bains: Visiting us all the way from Kelowna is the couple Dayleen Van Ryswyk and Eduard Van Ryswyk, who run a koi farm in Kelowna. They are here to watch the proceedings of this House. Actually, they are here to draw the attention of the Minister of Transportation. Hopefully, the minister will pay attention to their needs. Please help me welcome the couple here.

Hon. S. Cadieux: After just a little over three years in this House, I have the opportunity today to welcome my husband to the Legislature. My husband, Daniel Cadieux, is in the gallery for the first time, and I hope that everybody will make him very welcome. He certainly is.

S. Chandra Herbert: I see in the House, joining us today in the gallery, is a good friend of mine, a good friend of our caucus and a constituent, Mr. Ian Reid. We miss his deft touch, his analysis, but I also really miss his sartorial splendour. I'm wearing one of his ties today, as a way to honour his being here. Somehow it went missing, Ian. I'm sorry. Here it is. Would the House please make him very welcome.

Statements

DAY OF THE HONEYBEE

Hon. D. McRae: Mr. Speaker, if you may indulge me for two seconds here as I make my introduction. Honeybees have played an important role in B.C. agriculture since they were introduced to America by European settlers hundreds of years ago. Today, on this Day of the Honeybee, I'd like to recognize B.C. beekeepers who work hard to protect their colonies from environmental conditions and diseases that can affect honeybees.

The Day of the Honeybee was founded by a gentleman by the name of Clinton Shane Ekdahl, a beekeeper who wanted to acknowledge the critical role that honeybees play in our food system. He chose May 29 as it is the day Sir Edmund Hillary, an avid beekeeper and mountain climber, first conquered Mount Everest.

Introductions by Members

Hon. D. McRae: I'd like to introduce in the gallery today Barry Denluck, a local beekeeper who is the president of B.C. Bee Breeders Association and co-president of the Capital Region Beekeepers Association. He's accompanied by Evelyn Shaw. The association recently announced a new bee swarm hotline, which they are hoping to build a stronger bee community with. We as British Columbians can help improve local bee habitat by planting bee-friendly plants that support many different bee populations. Please make Barry and Evelyn very welcome.

G. O'Mahony: I'd like the House to acknowledge a visit from Mount Cheam Christian School, in particular two classes. Grade 7 and grade 11 had the opportunity to tour the Legislature today, and after this session I have the honour to meet with the grade 7 class, under
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the teacher Ron Neils and the parents Kareen Neils, John Klopp, Henry Klopp and Jessica Kerkoff, who graciously volunteered to help make this event possible. Would the House please make them all welcome.

N. Letnick: In the House today we have Andrew Powell. Andrew is a constituent of mine. He used to be a constituent of the Minister of Forests, Lands and Natural Resource Operations. Like many of us in this House were, Andrew is active in student politics, including a couple of stints trying out for city council. Also, he was president of the Theatre Kelowna Society, I think, for three years. Would the House make him duly welcome.

[1340]

J. Les: In addition to the introduction from the member for Chilliwack-Hope, I would like to point out that the grade 7 class from Mount Cheam Christian School includes my niece, Amy Lindhout, and the grade 11 class includes my nephew Corné Van Hoepen. I'd like to have the House make them feel especially welcome.

D. Hayer: We have three very special guests, our community leaders, very prominent members of our community. One is Dr. Amin Pirani. The others are Mr. Saleen Sayeed and Mrs. Yasmeen Sayeed. Would the House please make them very welcome.

Statements
(Standing Order 25B)

BIKE TO WORK WEEK

S. Chandra Herbert: Today British Columbians all over are biking to work. It's Bike to Work Week, organized by Bike to Work B.C. and HUB: Your Cycling Connection, formerly known as the Vancouver Area Cycling Coalition.

Bike to Work Week is about experiencing the joy of an increasing number of people safely commuting by bicycle. Safe riding training, celebration stations, bike repair stations and a heck of a lot of people getting on their bikes to ride to work for the first time can be seen in Terrace, Shuswap, Prince George, Smithers, Penticton, Revelstoke, Victoria, Campbell River, Kamloops, Nanaimo, Powell River, Vancouver and many more B.C. communities.

Here in Victoria we have the official opposition's Cycling for Change team, made up of many of our members and many of our staff. Ministry staff have teams, and hopefully, in future we will also have a government team.

Bike to Work is about leading by example. It's about building livable communities with safe roads and pathways. It's about getting fit, getting healthy. It's about helping move away from climate-change-causing pollution and a reliance on oil to more reliance on ourselves to get around when we can.

I've met many who said they could never bike to work, only to give it a try in Bike to Work Week and become lifelong cyclists. I've met many who've said they can't bike to work because it's just too far. Well, I should let the House know that the member for Nanaimo–North Cowichan has taken Bike to Work Week so seriously that he has been riding his bike to the Legislature and home again. His home is in Ladysmith, nearly 100 kilometres away.

If you haven't yet, I invite you, if you can, to get on a bike and have a fabulous Bike to Work Week.

DAY OF THE HONEYBEE

J. Les: May 29 has been proclaimed the Day of the Honeybee in British Columbia in recognition of the critical importance of honeybees to the agriculture sector and, by extension, to everyone's health and well-being.

Who would think that a creature as small as a honeybee could hold so much importance both to our food security and to our economy in British Columbia and around the world. It has been estimated that up to one-third of the food that we eat is the result of and dependent upon pollination by honeybees. They are responsible for about 70 percent of our food crop pollination. To put this in perspective, the total market value of all honeybee-pollinated crops in British Columbia is estimated at over $200 million per year.

The Day of the Honeybee recognizes how beekeepers and the province are working together to continue to improve agricultural production and stabilization of the apiculture industry. It also acknowledges beekeepers' efforts to protect their colonies from environmental conditions and diseases that can affect honeybees.

So on this official Day of the Honeybee I encourage everyone in this House and all British Columbians to make it a priority to grow honeybee-friendly plants in their gardens. Honeybees are an important keystone species, and as such, they are the cornerstone of the sustainability of our agriculture and stability of our environment.

BURNABY SCHOOL DISTRICT

K. Corrigan: It gives me a great deal of pleasure to acknowledge the incredible work of the Burnaby school district. Burnaby is a leader in academic excellence, with one of the largest advanced placement programs in Canada, high completion and transfer rates to post-secondary and scholarships of more than $6 million awarded annually.

I attended the Moscrop School leaving ceremony last weekend, and I know we are in very good hands with the talented, accomplished and well-rounded students that are graduating from our public schools.

Burnaby is also a leader in early learning and was one of the first districts to adopt programs for newborns to age five. Literacy excellence is celebrated annually with
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the WORDS Writing Project and the public speaking challenge, which I have had the pleasure to judge several times.

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The district has a vibrant visual and performing arts program — the most comprehensive in the province — and there are specialized music teachers in every school. The district also offers a wide variety of specialized programs, including French immersion, Mandarin language arts, challenge programs, sports academies and on-line learning.

Burnaby has one of the largest district-run community and continuing-ed programs, as well as comprehensive career programs with a variety of apprenticeship and ACE IT programs and is supported by literally thousands of employers who provide work experience. There are eight community schools to meet the educational, recreational and social needs of neighbourhoods. Burnaby has one of the highest levels of poverty in the Lower Mainland, but you would never know it from the success of our students.

I'd like to congratulate the new BCCPAC president, Terry Berting, who hails from Burnaby. This year we'll be bidding a fond farewell to Claudio Morelli, our very capable superintendent who should be proud of his years in the district. I salute the board for their strong and principled leadership. Finally, I'd like to acknowledge all the dedicated teachers, administrators, staff, parents and generous community partners, who work together to guide, to teach and support all of the district learners. Thank you, all.

MANNING INNOVATION AWARD NOMINEES

L. Reid: I'm very pleased to recognize the eight British Columbia residents who are nominees for the prestigious 2012 Manning Innovation Awards. The Manning Awards have been recognizing Canadians of all ages with the imagination to innovate and the stamina to succeed. British Columbians are well represented as recipients of Manning Awards since they began 31 years ago.

Since the awards were incorporated, over 35 British Columbians have received recognition as a winner of an award from the Ernest C. Manning Awards Foundation. British Columbia is indeed fortunate to enjoy a supportive business and research climate which encourages innovators and folks who are interested in bringing the economy.

The impact on the B.C. economy by innovators has been immense. This year's nominees include well-established innovators and startup entrepreneurs. Some of their innovations are now being exported all over the world, and others are in the early stages of entering markets. They deserve our attention and recognition. These are the individuals who are changing the way British Columbia, and indeed Canada, competes, manufactures, communicates and cares for each other.

Mr. Lynn Mueller of Burnaby, British Columbia, nominated for the SHaRC sewage heat recovery system, which uses raw sewage as a heat source. Mr. Terrence Bigsby of Lumby, British Columbia, nominated for Aspenwear, biodegradable wooden cutlery. Mr. Ron Hartman of Nanaimo, B.C., nominated for the iDUS Controls G-100 Tech, a compact, free-standing, battery-less internal solar-powered data collection transceiver module. Capt. Michael Lever of Richmond, B.C., nominated for the Nautilus Lifeline. Mr. David Smith of Sidney, British Columbia, nominated for ICE, a three-axis marine suspended cockpit. Mr. Ross Mitchell of Surrey, B.C., nominated for the i-Shifter bicycle derailleur. Mr. Geoffrey Auchinleck of Vancouver, B.C., nominated for BloodTrack, an advanced transfusion management system. Mr. Nigel Bennett of Vancouver, nominated for RBS Triton, a patented oil-skimming technology.

Please join me in congratulating the 2012 Manning Innovation Award British Columbia nominees.

100th ANNIVERSARY OF
FRENCH CREEK SCHOOL

S. Fraser: On Saturday, May 19, I attended a wonderful community event in Coombs…

Interjections.

Mr. Speaker: Members. It's hard to hear.

Continue, Member.

S. Fraser: …well known for its wonderful market with goats on the roof. The event was held at the French Creek School just across the bridge right next to the market. The community showed up en masse to celebrate the 100th anniversary of the school.

I was in good company. There were lots of politicians, from the federal MP to the regional district director. The member for Nanaimo, whose family history goes way back with the school, was there, along with Barry Avis. He's the nominated candidate for the NDP for the Parksville-Qualicum riding. As well, the Leader of the Opposition showed up, and took the time to witness the gala event, which included a number of speeches, a cake-cutting and the unveiling of an incredible handmade quilt to commemorate the centennial.

A one-room schoolhouse opened in August 1912, in what was at the time a Salvation Army colony. This was the very first government-built school in the area. It was constructed in what is now the village of Coombs, and it has remained open for 100 years. Some families have had four generations attend the school. The fact that this school has survived for a century is a testament to the dedication of the community and the residents who joined together to prevent at least three proposed clos-
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ures of the school.

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It was 2004 that the French Creek School received community school designation. It's the first school to do so in District 69. Now this is no longer a one-room schoolhouse. It was originally designed as one in 1912, but the school has grown. It's grown in size, certainly, but it's also grown to meet the needs of the community. The village of Coombs itself has grown with the French Creek School, and the village is celebrating its anniversary also.

Please join me in saying happy birthday to the French Creek School.

50th ANNIVERSARY OF
TRINITY WESTERN UNIVERSITY

M. Dalton: I rise today to pay tribute to a distinguished educational institution that is celebrating its 50th anniversary this year, Trinity Western University.

Trinity Western is consistently ranked among the top two universities in Canada for quality of education according to Maclean's magazine and the National Survey of Student Engagement. TWU is also Canada's only university to score a most impressive A-plus in quality of teaching and learning in the Globe and Mail 2012 Canadian University Report.

Trinity Western University is a faith-based institution that emphasizes excellence in academic scholarship while always keeping in mind how knowledge and understanding gained through study can serve the world's deepest needs. As a comprehensive liberal arts, sciences and professional studies university, it is committed to continually building on its educational vitality. TWU offers 42 bachelor's degrees, 16 graduate degrees, as well as adult degree-completion programs.

Trinity Western is Canada's largest independent Christian liberal arts institution with an enrolment of 3,600 students and over 22,000 alumni in more than 80 countries around the world. Since its inception in 1962, Trinity Western has grown from being a small private university in Langley to the modern, robust, advanced learning institution that it is today.

TWU has a presence in Ottawa with its Laurentian Leadership Centre, and next year it opens a new 20,000-square-foot satellite campus in downtown Richmond, which will accommodate up to 2,000 new students. Trinity Western also has excelled in extracurricular achievements, and it regularly wins national championships in CIS sporting events across the country.

On its 50th anniversary I want to express my congratulations to Trinity Western President Jonathan Raymond, its board, professors, staff, alumni and students, as well as its many donors.

There can be no denying that this remarkable and prestigious university has a bright future ahead.

Oral Questions

GOVERNMENT POSITION ON
COSMETIC PESTICIDES BAN PROPOSAL

A. Dix: My question is to the Premier. Will she keep her promise to ban cosmetic pesticides on lawns, parks and playgrounds?

Hon. C. Clark: First, let me thank the legislative committee, a bipartisan committee, for working on this and gathering as much information as they did. The committee got, as I understand it, more input than any committee in the history of this Legislature. They spoke to many, many people. They gathered a great deal of information. We will be considering that information and the breadth of other information that we have as we get closer to a decision.

Mr. Speaker: The Leader of the Opposition has a supplemental.

A. Dix: During the by-election campaign in Vancouver–Point Grey, the Premier was specific in her commitment to her new constituents. She said: "I support banning the use of cosmetic pesticides, and I've supported this for years now. I talked about it a lot in my private sector life when I was on the radio, and I continue to support it. I promise that I want to pursue that if I become Premier. We are going to do it."

I just want to ask the Premier if she still holds that position.

Hon. C. Clark: I'm sure that the Leader of the Opposition is not asking me to ignore entirely the work that the legislative committee did. They worked incredibly hard. It was a very rigorous examination of the evidence that was out there.

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Now that they have just recently completed their work, we are going to be taking that information that they've gathered into consideration as we get closer to a decision.

Mr. Speaker: The Leader of the Opposition has a further supplemental.

A. Dix: Well, when she was still in front of elections, the Premier said: "To put families first, we must ensure that our families are raised in safe environments. That is why I want to see a ban on cosmetic pesticides on lawns, parks and playgrounds. These dangerous pesticides are proven to increase the likelihood of childhood cancer and other illnesses and have no place near our… homes."

I know the member for Kootenay East disagrees with the Premier, but that is what she said. The Minister of Environment agreed with that. The Minister of Health
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agreed with that. It's been three years since this government came forward with a throne speech that said they were going to bring in legislation. Does the Premier still support such legislation?

Hon. C. Clark: The Leader of the Opposition has for years complained that the legislative standing committees don't do anything meaningful and that they're not heard by government. Now he stands up and says he wants government to ignore the work that they did. They did a lot of work. They have provided us with very important information that we are going to consider.

Unlike the opposition caucus, this is not a group of one. This is a government that reflects the views of the citizens and that listens to them, that gathers that information. We're working hard to try and reflect the views of citizens across the province. That was why I appointed the bipartisan legislative committee to look into it, to make sure that we did have the diversity of views and to make sure that citizens had input.

It's very, very different — we know the way that these guys like to run government — from the way that they ran it when he was chief of staff and very different than he runs his opposition caucus now. I'll give you another example of that. Just on Monday we released the results of the most extensive, wide consultation that government had done over the Internet on any single policy issue. We let British Columbians decide what day they would choose for Family Day.

We're a government that listens to people. We believe in being open. That's the way we're going to conduct ourselves. It's very different from what the Leader of the Opposition might advocate, but we believe in openness on this side of the House. We're not going to take any lessons from them on that.

R. Fleming: If the Premier wants to listen to British Columbians on the issue of cosmetic pesticides, then she should stand up in this House and reject the recommendations by the committee Chair, because they are completely out of step with British Columbians' public opinion. There are 39 municipalities that….

Interjections.

Mr. Speaker: Members.

Just take your seat, Member.

Continue, please.

R. Fleming: There are 39 municipalities that represent and govern 2.6 million British Columbians. They have bylaws in place that restrict cosmetic pesticide use, but they have no jurisdiction over the retail sale of these products.

The Union of B.C. Municipalities passed resolutions in 2008 and 2010 calling for provincial legislation to ban the sale and use of cosmetic pesticides. When he was the mayor of Kamloops, the Environment Minister sponsored the 2008 resolution calling for a provincewide ban on cosmetic pesticides. He said this: "When you have a provincewide ban, it's much more effective."

My question is to the minister: does he still agree with this position? And if he does, will he work with this side of the House — and whoever are the colleagues on his side of the House that he can work with — and pass a legislative ban that British Columbians want?

[1400]

Hon. T. Lake: I want to thank the member opposite for the work that he and his fellow committee members did. I read the report this past weekend. It was clear that there was an enormous amount of material that was considered, and I want to thank, as I said, all members of the committee.

I think it's important that we respect the work of the committee and look at the report, carefully examine it, look at the recommendations and come up with a comprehensive response to the report. We are in the process of doing that.

I can say that all of us on this side of the House agree, I think, with the members opposite that all British Columbians want a reduction in the unnecessary use of pesticides in the province of British Columbia. We will respond to the report when we've had time to fully evaluate it and give it the full credit and response that it deserves.

Mr. Speaker: The member has a supplemental.

R. Fleming: Again, this is what the Minister of Environment said when he was the mayor of Kamloops. He said: "If we want to see a true reduction in pesticide use, going with provincewide legislation is the only effective way of getting that to happen."

The minister was right when he made those comments in 2008. So my question to the minister is: does he still stand by his views? If he does, has he had a conversation with the member for Kootenay East, who is the co-chair of the B.C. Liberals' election planning and the Chair of the legislative committee that rejected the very ban that the minister has called for in the past?

Hon. T. Lake: It's no secret that I have been an advocate of a provincewide approach to a reduction in pesticide use. That's why I want to fully consider the report, along with my colleagues, examine all the material that is there and give it the full and due consideration that it deserves.

We don't strike standing committees just to ignore their work or to come to preconceived notions about it. I've always said we make our decisions based on information. I want to thank the committee for the amount
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of work they did, and I'll be happy to discuss it with my colleagues once we have had an opportunity to fully examine the report and the recommendations and the effectiveness proposed to reduce the amount of pesticide use in British Columbia.

PRIVATIZATION OF
LIQUOR DISTRIBUTION

S. Simpson: This government found time to consult on the date of a holiday in February, yet they haven't been able to find time to talk to the liquor industry about their ill-conceived decisions that will impact business and increase prices for consumers. Maybe the Premier, after her earlier comments, might want to talk to the minister about consultation.

Tod Melnyk, the chair of the Craft Brewers Guild, said: "The government seems to be rushing this through without any regards for small business in British Columbia." Raechelle Williams, the executive director of ABLE-BC, said: "We can't support this. We are absolutely perplexed why they are doing it." She went on to say: "If they could give us some documents or a business case to show us exactly how this will work or justify it, that might give us some reassurance." Instead, the industry is getting nothing.

You have a whole industry pleading for consultation and some justification for this move and a government that's ignoring them. My question to the minister: how is running roughshod over the industry while offering not a shred of evidence to support this either defensible or competent governing by the minister?

Hon. R. Coleman: This is about looking at privatizing the warehousing and distribution of liquor in British Columbia. There is no intent to do it whatsoever if it would have increased costs to the consumer in British Columbia. It won't affect the business case for any of those people that the member opposite actually mentioned in his comments, because the pricing is staying with the Liquor Distribution Branch.

Mr. Speaker: The member has a supplemental.

S. Simpson: The industry is certainly not confident about that. If the minister could produce a business case, maybe he could assure them, but he has produced absolutely zero.

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We've got about a month before the request for proposals closes for the privatization and a little more than four months until a successful bidder and plan is finalized. Over four months to go, yet we have an industry that can't get answers to any of their questions, can't get any substantive information or any sense that the government has any idea what they're doing except giving away another public asset.

Yesterday the minister was backtracking, and he repeated it again today, saying the deal would not go forward if it's not good. Yet he isn't talking to the industry. Mr. Chambers from the Liquor Distribution Branch says there's no time to consult.

Does the minister agree with Mr. Chambers, or will he commit today to a full and open engagement with the industry over the criteria about what constitutes success before he makes the decision in October? And if he won't commit to meaningful consultation, why not?

Hon. R. Coleman: We're looking at the warehousing and distribution of alcohol in British Columbia. It's presently done through the Liquor Distribution Branch. We're taking it out to an RFP with successorship, so the B.C. Government Employees Union will be protected as this goes through. We've said all along that if there's not a savings or efficiencies to both that we can find, then we wouldn't be doing it. But the RFP will tell us that.

That's why we've gone out to the private sector. I know the members opposite hate the words "private sector," but we're going out to the private sector to see if there's a better way to do it, save money for the taxpayers and get a benefit for consumers in British Columbia. I think that's the right thing to do.

GOVERNMENT PLANNING COMMITTEE
FOR BURNABY HOSPITAL

K. Corrigan: Fraser Health has an official planning process underway looking at the future of Burnaby Hospital. The committee has a budget of $230,000 and is drawing on Fraser Health's own expertise.

Now we hear that the government has struck its own committee, essentially with the same mandate, to be co-chaired by the member for Burnaby-Lougheed and the member for Burnaby North. Can the Minister of Health explain why the government wants to strike a committee to duplicate the work already being done by people who understand the issue?

Hon. M. de Jong: First of all, I am very much obliged to the hon. member for highlighting the fact that in addition to $7 billion in capital construction taking place, we are also making planning provision to renew the campus at the Burnaby Hospital. Further, that master planning exercise is engaging the direct participation of Fraser Health and the Burnaby Hospital Foundation.

I'm pleased to say that MLAs from Burnaby who are concerned, as they should be, for the provision of proper medical services to their constituents have taken the initiative to strike their own committee to engage with citizens in Burnaby. That is precisely the role that I see for Members of the Legislative Assembly in British Columbia.
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Mr. Speaker: The member has a supplemental.

K. Corrigan: Well, isn't this going to be interesting? We're going to have a community advisory committee headed by the two MLAs, which doesn't include the MLA who happens to be in the riding that has the hospital. But that's fine. And we're going to have a committee put together by Fraser Health. So we'll have two community committees. It's going to be interesting.

Interjections.

Mr. Speaker: Members.

Member, just take your seat for a second.

Continue, Member.

K. Corrigan: Well, we have the sparse terms of reference for the new government committee. This is the other committee. There are two items: provide assessment of health care needs in Burnaby and provide advice as to how to improve health care in the region.

Can the minister please tell us what expertise the members for Burnaby-Lougheed and Burnaby North have that is not already available to the planning process underway in Fraser Health?

[1410]

Hon. M. de Jong: Well, I must confess I do feel for the hon. member, but the last time we invited her to participate in a decision involving a major capital expenditure in Burnaby, the project ended up in Surrey. So it's clear the member has her view of the role that Members of the Legislative Assembly should play.

In project after project across British Columbia over the last 11 years…. I can speak from experience, because after a decade of listening to an NDP government say they were going to construct a new hospital in Abbotsford, I was the member of a local committee, along with a government, that got the job done, and that's what'll happen in Burnaby as well.

Interjections.

Mr. Speaker: Members.

M. Farnworth: On one hand, we have Fraser Health Authority, with all its expertise — the day-to-day running of the hospital in Burnaby — doing a long-term plan involving the community and involving doctors, physicians, nurses, councils, unions — involving everybody who should be there — with a budget in place.

On the other hand, we have a committee composed of two MLAs. My question to the minister is this: what is the budget that the minister has set up for the committee of the two MLAs so that they can do their work thoroughly?

Hon. M. de Jong: Well, (1) the minister didn't set up the committee; (2) there isn't a budget; and (3) it is an example of MLAs taking precisely the kind of initiative that we expect them to take.

Fourthly, in communities across British Columbia — whether it was the Okanagan, whether it was in Prince George, whether it was in Vancouver, whether it was in any of the regions of British Columbia that have received the benefit of $7 billion in capital investments in hospitals and health care facilities — there have been government MLAs directly involved, seeking input, involving their community and delivering on $7 billion in capital investments.

Interjections.

Mr. Speaker: Members.

Just take your seat for a second, Member.

The member has a supplemental.

M. Farnworth: It'll be interesting to see how many on that side throw in the towel come May of next year.

Interjections.

Mr. Speaker: Just take your seat, Member.

Continue, Member.

M. Farnworth: Fraser Health Authority didn't ask for this committee of two MLAs. The minister said that he didn't set up the committee. The Ministry of Health said that they didn't have a role in establishing the committee. The minister says that it's not going to cost any money. But the ministry is supplying administrative staff and administrative support to the committee.

Can the minister at least tell us: how much is that going to cost? Why are we duplicating work done by experts, as opposed to the work of the members for Burnaby-Lougheed and Burnaby North, when it comes to the long-term planning? Leave the job to the professionals.

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Hon. M. de Jong: I confess I'm having a little trouble with this one today. We have a hospital facility in Burnaby that admittedly is aged, well past its best-before date. As we have done in communities across British Columbia, thanks to sound fiscal management and sound planning, the health authority, in consultation with the hospital foundation, has embarked upon a high-level, long-term site redevelopment planning process. Gee, I think that's good news.

Local representatives, members of this assembly, have decided that they may have a contribution to make in marshalling the opinion of their constituents. Gee, that sounds like good news.

Confronted by the need, or the imperative, of com-
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paring their woeful record in ten years of government in failing to address the health care needs of British Columbians versus the capital investment record of this government, it doesn't surprise me that the opposition now has resorted to denigrating the efforts of members of this chamber who want to make a positive contribution. I think that's great news.

Interjections.

Mr. Speaker: Members.

REBATES FOR HOME ENERGY RETROFITS

M. Sather: My constituent, Joanne White, went through the federal ecoEnergy retrofit program and the provincial efficiency incentive program to upgrade on an eco-friendly furnace and heat pump installed in July of 2011. She got her federal rebate last year, but she's still waiting for the eco-smart rebate of $1,600 from the province, and she's paying interest on that same amount.

Now, we approached the minister's office early this month, and they assured us that she would get her rebate at the end of May. Now they've backtracked and said no rebate once again. Can the minister explain why my constituent has had to wait for almost a year and still no rebate from the provincial government?

Hon. R. Coleman: In the two programs there have been some system challenges. Those have been rectified. Your constituent should be seeing the cheque very shortly.

Mr. Speaker: The member has a supplemental.

Interjections.

Mr. Speaker: Members.

M. Sather: Excuse us if my constituent is a little bit disbelieving of yet another promise from this government. She was told in December 2011 that she would get her rebate in January. She was told in January that she'd get it in February. She was told in February that she'd get it in March, and in March that she'd get it in April. Then the minister's office said the end of May. Now they've backtracked again, and there'll be no rebate this month.

Again to the minister: when can he get it together, and how can he explain that the LiveSmart B.C. program is a year behind in sending out those cheques?

Hon. R. Coleman: First of all, I do apologize to your constituent and other people who have been waiting for this. We apologize for the delay, and we reassure anyone that has applied for incentives that does qualify that they will soon start to receive their funds.

The challenge we've had is we expect that the software that calculates the customer payments…. We've been having difficulty with the updating. It is there now to be able to complete the job, and we'll get it done.

[1420]

PREVENTION OF HOMOPHOBIC AND
TRANSPHOBIC BULLYING IN SCHOOLS

S. Chandra Herbert: A year and a half ago, when the Premier was courting gay and lesbian British Columbians for her leadership bid, she promised to make tackling homophobic bullying one of her top priorities. Since then we've had talk in the throne speech and more promises in this session. When I last raised this issue, the Premier said, "There are very few issues about which I am more passionate than this one," and promised to work with me to "bring in the best legislation, the best policy, the best methods we possibly can for addressing this issue."

Can the Premier explain why, with two days left in this session, she still has not done anything to address the fact that almost three-quarters of B.C. schools don't have strong, explicit policies to protect youth from homophobic bullying?

Hon. C. Clark: The member should stay tuned. He'll see it very soon.

Mr. Speaker: The member has a supplemental.

S. Chandra Herbert: When I told the House the story of David, a grade 9 student who attempted suicide because he was being constantly bullied at school for being gay, the Premier said: "We will be taking action on this, as I promised, in this, our second session of the Legislature." Yet with two days left to the end of the sitting, there has been no action. When David was asked if he expected the Premier to keep her promise, he said: "She's a politician. You can't really expect that much. They say they're going to do something, and they don't."

Can the Premier explain to David and lesbian, gay and transgendered students across B.C. why she has broken her promise to them this session?

Hon. C. Clark: I think one of the things that is important for us in politics is to recognize where good work has happened. I know that the member in the past has been complimentary or at least acknowledged the work that I've done on this issue in the past. I have to say that over the last five or six years of my life there is no issue to which I have devoted more passion and more concern than the issue of bullying of individuals — whether they are in schools, whether they're in workplaces or whether that happens at home or in other places in our society.

Bullying is something that scars people for life. We need to do a couple of things. First of all, we need to change the way we deal with bullies and recognize that
[ Page 12437 ]
in a bullying situation it's not like some typical disagreement you might find between two people. One is a victim, and one is a perpetrator, and they need to be dealt with appropriately. So that's one element of the plan that the member will see very shortly.

Second, we have to make sure that we are encouraging people to stand up against bullies. If there is one thing we can all do to make a difference, it's to remind each other and ourselves that when we see bullying happen around us, we stand up. When we stand up, and when we step in and protect those who are vulnerable and being bullied, we deprive the bully of oxygen. That's ultimately the way that we're going to be able to change bullying.

It's a change in culture, and it's something that I think is achievable for British Columbia. Will it be achievable in a month or two months or a year? No. But we're going to get started, and as I said to the member, we're going to get started very soon.

[End of question period.]

Tabling Documents

Mr. Speaker: Hon. Members, I have the honour to present the annual report of the Office of the Ombudsperson, 2011-2012.

Hon. K. Falcon: I have the honour to present the 2011 annual report for the Insurance Corporation of British Columbia.

Hon. S. Bond: I have the honour to present the 2011 annual report of the Forest Appeals Commission, the 2010-2011 annual report of the Environmental Appeal Board and to present the Crown Proceeding Act for the fiscal year ending March 31, 2011.

Petitions

M. Farnworth: I rise to table a petition from 1,387 people who signed a petition by United to Break the Chains against the inhumane chaining of dogs in British Columbia.

B. Simpson: I rise to present a petition — 126 signatures calling for changes to DriveABLE so that seniors can get tested closer to home.

[1425]

Motions Without Notice

REFERRAL OF INSURANCE ACT REVISION
TO PARLIAMENTARY REFORM COMMITTEE

Hon. R. Coleman: Before I do the orders of the day, I have two motions to move to the House.

By leave, I move:

[That the revision of the Insurance Act (RSBC 1996 c. 226) be presented to the Select Standing Committee on Parliamentary Reform, Ethical Conduct, Standing Orders and Private Bills for examination and recommendations pursuant to the Statute Revision Act.]

Just for the clarification of members, this is actually not a change in the legislation. It is a revision that is pursuant to the Statute Revision Act and has been prepared by leg. council with respect to the Insurance Act. Extensive reforms to the Insurance Act were adopted by the Legislature several times since the 1996 general revision but especially in 2009. The regulations adopted in 2011 will bring these 2009 changes into force as of July 1, 2012, and so the need for a revision of the statute.

I point out that a revision is not a change in the law. It is a change in formatting the existing law. In effect, it is a legal consolidation of the statute. Under the terms of the Statute Revision Act, the revised statute must be provided to the committee of Legislature for examination and recommendation to the Lieutenant-Governor and not back to the House.

Leave granted.

Motion approved.

APPOINTMENT OF SPECIAL COMMITTEE
TO APPOINT AN AUDITOR GENERAL

Hon. R. Coleman: By leave, I move:

[That notwithstanding the motion adopted on October 3, 2011 regarding the Select Standing Committee on Public Accounts, a Special Committee be appointed to unanimously recommend to the Legislative Assembly the appointment of an Auditor General, pursuant to section 2 of the Auditor General Act (S.B.C. 2003, c.2). The said Special Committee shall have the powers of a Select Standing Committee and in addition is empowered:

a) to appoint of their number, one or more subcommittees and to refer to such subcommittees any of the matters referred to the Committee;

b) to sit during a period in which the House is adjourned, during the recess after prorogation until the next following Session and during any sitting of the House;

c) to adjourn from place to place as may be convenient; and

d) to retain such personnel as required to assist the Committee;

and shall report to the House as soon as possible, or following any adjournment, or at the next following Session, as the case may be; to deposit the original of its reports with the Clerk of the Legislative Assembly during a period of adjournment and upon resumption of the sittings of the House, the Chair shall present all reports to the Legislative Assembly.

The said Special Committee shall be composed of Members Eric Foster, John Les and Ralph Sultan, and Bruce Ralston and Kathy Corrigan.]

Leave granted.

Motion approved.
[ Page 12438 ]

Orders of the Day

Hon. R. Coleman: This afternoon in this chamber we will start with committee stage on Bill 35, intituled the Pharmaceutical Services Act; followed by committee on Bill 46, intituled the Motor Vehicle Amendment Act, 2012; then followed by Bill 52, intituled Motor Vehicle Amendment Act (No. 2), 2012.

In the Douglas Fir Committee Room we will continue the committee stage of Bill 54, intituled the Provincial Sales Tax Act.

In section C, in the Birch Room, we will continue the estimates of the Ministry of Energy and Mines.

[1430]

Committee of the Whole House

BILL 35 — PHARMACEUTICAL
SERVICES ACT

The House in Committee of the Whole (Section B) on Bill 35; L. Reid in the chair.

The committee met at 2:30 p.m.

Section 1 approved.

On section 2.

M. Farnworth: Section 2 establishes a legislative framework for regulating B.C.'s provincial drug program. The legislation covers benefits provided through PharmaCare's drug plans and benefits available outside the drug plan. The act also provides the minister with the authority to administer the provincial drug program.

Can the minister explain to the House how this will be different from the current model that's in place and how the framework will work in that regard?

Hon. M. de Jong: The short answer for the hon. member and the committee is that in the very short term it doesn't contemplate large differences. It takes the plan or, perhaps more accurately, the nine PharmaCare plans that presently exist and enshrines them in the legislation. So to that extent, it doesn't contemplate any changes.

It does contemplate the possibility of providing benefits outside of one of those nine plans under a special payment or emergency circumstances. But that, too, is presently contemplated in policy. Generally speaking, what we are doing, as we talked about in second reading, is codifying the existing plan, PharmaCare — the nine PharmaCare plans that presently exist.

M. Farnworth: What I hear the member saying is that it's codifying what's existing. So it's not making any changes, either adding new areas or any new programs or deleting any existing programs. It's strictly codifying what's there and allowing, as the minister said, for changes to be made that are already contemplated in the current structure.

Hon. M. de Jong: Yes is the answer. The other provision I didn't mention is that it specifically contemplates the possibility of adding additional plans to the nine that presently exist.

Section 2 approved.

On section 3.

M. Farnworth: Section 3 deals with the establishing and maintaining of formularies. This is a section that's going to be subject to the regulations, and the minister has the authority to establish and maintain the drug formularies. But within the way it's currently structured in this legislation, there's no provision for the minister to give notice or for an opportunity to be heard if the minister decides to make a change in establishing or changing the formulary. This would include "cancelling the listing of a drug, device or substance from the formulary."

Can the minister tell us how he anticipates the regulations working, and will any intended regulations deal with issues about notice and an opportunity to be heard?

[1435]

Hon. M. de Jong: I think my first answer on this section will be rather general, and then we can drill down into a couple of the areas, one of which is the notice provision that the member has highlighted. I think the hon. member is referring to sub 3(2), (3) and (4).

The general statement that he has made is, I think, correct. It's an interesting word — "formulary." It's one that seems only to apply to this type of legislation and the PharmaCare plan. A formulary is the listing of prescription drugs that are approved for use as benefits for each of the nine drug plans.

The formulary, in the way it is used here and pursuant to the definition sections of the act, also contemplates substances like dietary substances or devices. For example, an insulin pump would qualify as a device in certain circumstances. The regulations — the member is correct — would on a regular basis be updated to set that formulary.

I am reminded that there are literally thousands of drugs that are listed as part of a formulary. It changes on a regular basis. There are drugs that are no longer produced that come off of the formulary and new drugs that are added, following testing around their clinical effectiveness and safety.

That's the general proposition that is being set out here. The member is correct. Ultimately, the formulary is set by regulation. In some instances, where agreements have
[ Page 12439 ]
been signed with manufacturers — and this is subsection 3(2) and (4) — those agreements may themselves contain specific requirements around notice for changes to the formulary affecting those products, substances or devices, and the act does not propose to excuse the state or the Crown from abiding by those contractual obligations where they exist.

M. Farnworth: Can the minister detail as to how that differs, or if it does in fact differ, from current practice — the regulations anticipated in this particular area?

Hon. M. de Jong: I'm advised that what is contemplated under the legislative regime is precisely the same process as is followed at the moment, though it would then be pursuant to statutory authority as opposed to policy.

M. Farnworth: That statutory policy would then be determined by the regulations that are going to be determined at cabinet. Are there any plans to do any consultation around this particular area with the regulations, given the fact that changes can be made?

I'll give you an example. I understand that there are thousands of drugs on the formulary and that they change. They come and go out of business. But then there are others. There will be, on that, products that are extremely widely used — or there may be insulin pumps, for example — whereby a change would have a significant impact and a change in government policy could have a significant impact.

So I'm wondering. Is there is any contemplation that there would be the ability to seek information or give notice of changes in situations like that?

[1440]

Hon. M. de Jong: Hopefully, I'll get this in the order that is helpful to the member and the committee.

Initially what's contemplated is to take the policy that we now have and enshrine it in the context of the legislation. I wouldn't want to suggest to the member that there is going to be extensive consultation around that exercise itself, because we'd be replicating what is in place now.

Going forward…. I should say this, because I may have inadvertently left the wrong impression with the member by my use of language. The formulary as it relates to those thousands of drugs is fluid enough, I am reminded, that it would not be set in an order-in-council-style regulation. It just changes too regularly for that to be workable. But there are…. Section 64, which we'll get to, talks about the regulations and the process by which they are set and the general regulatory authority.

In the example that the member has given, I would say the answer is yes. As we contemplate additions or changes of the sort mentioned…. Insulin pumps are partially covered today for youth, not generally for adults. Those are the kinds of matters that would very much be the subject of consultation. The process by which a drug is added or approved to be added to the formulary is laid out in the sections we are now coming to, and it is — as the member, I think, knows — a fairly specific process by which drugs are added to the formulary.

Section 3 approved.

On section 4.

M. Farnworth: Section 4 deals with establishing and maintaining related services lists, and again, it is also subject to regulations. So can the minister explain if there are going to be differences in how this section works, compared to how the establishment of lists and the maintaining of lists currently is in place, and again address the issues of notice or lack of notice?

Hon. M. de Jong: I think the short answer is yes. These ancillary services that relate to each of the plans….

[1445]

Such things as, for example, community pharmacists providing medication management or prosthetics specialists advising about the fitting of a prosthesis device — those are things that happen now and would continue to happen. The act is not intended to change any of that functionally or operationally.

Sections 4 and 5 approved.

On section 6.

M. Farnworth: Section 6 deals with special payments. What I'd like for the minister to talk about or to let us know is how this section is going to work — again, how it's different, if there are any differences from existing policy, or any anticipated changes in terms of how special payments will be handled under regulations that may be implemented once this particular piece of legislation is passed.

Hon. M. de Jong: Once again, I think the correct question has been asked, and I believe the correct answer is no.

There is a policy-based regime in place now that allows for the authorization of drugs, devices, substances or related services for limited coverage pursuant to certain unique sets of circumstances. There are policy rules in place now that allow for the extension of coverage or for special payments in unique circumstances where someone otherwise would not have access to PharmaCare coverage. Sometimes, for example, a baby born to visiting parents might fall into a category like that.

There are unique circumstances that arise today for which there is discretionary authority to provide coverage. This is intended to codify that ability and allow those exceptional circumstances to be dealt with on a
[ Page 12440 ]
go-forward basis, pursuant to the legislation.

M. Farnworth: Dealing with the issue of exceptional circumstances, then, it is codifying what is current practice. I take it from the minister, then, that those exceptional circumstances will themselves be discretionary in a sense, at the discretion of the ministry, as opposed to being codified or prescriptive exceptional circumstances. That's correct? And I see the minister nodding his head.

If he could just give us any idea on how often during the course of a year this provision is used.

Hon. M. de Jong: The exercising of the ministerial authority is pretty rare. The member will remember that from his time in office. This, I'm reminded, however, is also the section that allows for the physician-generated special authorizations. Those, of course, are much more frequent. This is the section that replicates the policy authority that now exists for a physician to seek a special authorization for exceptional coverage outside of the existing formulary.

[1450]

M. Farnworth: I just want to clarify with the minister. With this section when we're talking about exceptional circumstances, we're not talking about — in relation to reference-based pricing, let's say — where I go in and a physician says: "No, you need a specific drug." This would deal more with the case of a drug that is outside the formulary that physicians feel in this particular circumstance is what's required. Therefore, that's how coverage like that would be granted. It would be under this section. Is that correct?

Hon. M. de Jong: That's correct.

Section 6 approved.

On section 7.

M. Farnworth: Section 7 deals with confidential information. There's been some concern around this particular section from the Freedom of Information and Privacy Association as well as the commissioner.

Under this section, the minister may refuse to make public any information about the recommendations and deliberations that establish "(a) the listing of a drug, device or substance on a formulary; (b) the listing of a related service on a related services list; (c) the authorization of payments under section 6."

Can the minister, then, given concerns around transparency in this particular section, explain how transparency will be maintained in this section? Does this section exclude FOI requests under FIPPA, the Auditor General Act and the Evidence Act?

Hon. M. de Jong: I think the member has correctly identified…. If I'm not mistaken, he was also provided with a copy of a letter generated by the officer of this Legislature, the Privacy Commissioner, who articulated some concerns.

Let me alert the member and the committee to the balance we are trying to strike here. It is, on the one hand, to ensure that there is open, unimpeded access to the decision. The member, I think, will…. I know he understands and appreciates that these are decisions that, for the manufacturers of drugs or devices, are worth sometimes millions of dollars, and there's a great deal of interest, sometimes pressure, associated with it.

What we wanted to do was ensure there was a balance between having unimpeded access to the decision so that people understood what was being decided and could see that clearly, openly, and providing some measure of protection to the people on the advisory committee, who may wish to generate, as the section contemplates, notes relating to the deliberations and recommendations that they generate.

Without the advice that I was provided with, what I can say to the hon. member was ultimately determinative for me in agreeing to the inclusion of the language that we see here was the realization that as part of that review process, members of an advisory committee would be generating notes, would be generating documents that they would rely upon in coming to a decision around a recommendation.

[1455]

I have been persuaded that it would be appropriate to protect those notes and to protect that material, not the final decision. Decisions should be available for all to see and all to understand and criticize, if that were the case. But for the members of the advisory committee to be able to generate their own material in coming to a decision….

The last thing I'll say is this, and it's why I'm in no way surprised or offended by the questions. I asked the same ones. Whenever we are purporting to include an exception to a statute of general application like FIPPA, that's worthy of asking questions.

I was persuaded that, in the limited circumstances I've described, it was appropriate to afford some protection to the notes and material generated as part of that advisory process. But I understand that the member wishes to explore that.

M. Farnworth: I appreciate the response from the minister. I understand what the minister is saying in terms of trying to strike a balance.

We've had an initial concern expressed by the freedom-of-information and privacy commissioner and officials. My question to the minister is this. Have they met with the freedom-of-information and privacy people? Have they satisfied any of their concerns? Are they contemplating addressing any concerns through regulation to
[ Page 12441 ]
this particular piece of legislation?

Hon. M. de Jong: The answer is yes. Happily, that has become fairly standard fare now for that kind of discussion to take place.

The Privacy Commissioner identified some additional concerns — I can't remember what they were — most of which seemed to have been dealt with to the mutual satisfaction of that office and the ministry — in a couple of cases, essentially, an agreement to disagree.

I don't want to shirk or suggest that the Privacy Commissioner hasn't articulated the concerns that she has. She would, I expect, make the argument, as she has in the letter, that she disagrees with the balance — where we have landed in terms of the balance. I have been persuaded that it is a reasonable place and that sufficient protection exists, but not too much protection as to render appropriate access to information completely ineffective.

So this is one of I think two areas where we did not come to an agreement with the Privacy Commissioner on what the appropriate balance was.

M. Farnworth: The minister mentioned that there are some areas where they were able to achieve satisfaction. If the minister could get me the information of those areas that were achieved, I'd appreciate that, as well as the areas of disagreement. That would be useful.

My question to the minister would be: if issues arise in the future, is the minister open to using the regulatory framework or powers to him to address some of those concerns if ways can be found to address them with the privacy officials and the ministry to the satisfaction of both the ministry and the Privacy Commissioner?

Hon. M. de Jong: The answer is yes. Again, in fairness to the member and the Privacy Commissioner, in providing that answer to the hon. member, I should point out — again, I think he knows this — that one of the themes the Privacy Commissioner has developed and pursued is a general hesitation around government relying upon regulation to address privacy issues.

[1500]

Her preference, I think, is generally to see those types of measures included in the legislation. That notwithstanding, the answer to the member's question is yes.

M. Farnworth: I appreciate that answer, and I understand that the Privacy Commissioner would like to see things in legislation but sometimes…. This is more a criticism of government in general. That is, sometimes legislative amendments do take a fair bit of time to work their way through, and sometimes a regulatory change can resolve an issue much more quickly.

I'm going to ask the minister's indulgence at this particular point. I have some questions that the Pharmacy Association has around information and privacy. I think what I might do is ask the questions, and if the minister can give an answer now, that's fine. I would appreciate that. But they may require a more detailed answer, in which case I would ask the minister to get back to me with the information.

There are ten. Some of them deal with privacy matters in relation to the negotiations. One of the concerns from the Pharmacy Association is that there was some disclosure of their confidential proposals made by the Pharmacy Association to the Canadian Generic Pharmaceutical Association. Was the minister's office involved in, or did they give information, pass on information, to the Canadian Generic Pharmaceutical Association?

Another question is: how does the minister explain that his officials told the Pharmacy Association that they were not releasing the negotiating proposals to the generic association when FOI documents show that that was not the case?

The third question —and I'll wait for a response — is: why is it that FOI materials disclosed to the Pharmacy Association will not be published on the B.C. government's Open Information website? Shouldn't British Columbians have details of the government's discussions with generic drug manufacturers?

Hon. M. de Jong: Here's what I can do. I am generally aware of a concern that the Pharmacy Association has articulated around the events leading up to the ultimate presentation of this legislation. I can say this to the member. I've not seen any documentation from the Pharmacy Association, although I think a day or two ago I was alerted to a concern that they have.

Again, I'm going to be cautious because, not having seen any material but having heard the nature of the questions, it seems to me that the general theme of the concern seems to be around the nature of the negotiations and whether or not the government was negotiating at the same time it was preparing legislation which represented a significantly different approach.

The only thing I can say in a general way at this point…. And I'll endeavour to get more detailed information for the member. I am relying on memory now. Back in September — and the member knows some of the history of this, I think — it's clear the government was dissatisfied with the results of the negotiated agreement. It was not realizing the savings that the parties themselves had agreed upon.

I learned very quickly that it's a unique set of discussions. The agreement involves the Pharmacy Association. There are generic drug manufacturers who are obviously involved and have an interest, and influence the outcome as it relates to cost savings.

[1505]

When I met with — I think in September — both parties at the same time, I said: "Look, unless steps are taken
[ Page 12442 ]
to address this significant shortfall" — a shortfall measured in the millions of dollars — "the government has but one alternative to ensure that we do realize these savings, and it is a legislative option of the sort that you have all seen in Ontario. So if you want to give the government and the Minister of Health a problem, figure out a way to do that and have those discussions. Officials will be at your disposal to have those discussions."

Fast-forward to the new year, to 2012. I can't on the basis of my memory tell the member with certainty what date it was. But at a certain point, as minister, on the basis of advice that I was receiving from officials, I made the recommendation to the government that in order to secure the objectives that we had established for ourselves in terms of lower drug costs and cost savings, we should proceed to legislation to address those cost savings.

Now, there is another part to this legislation that's separate and apart from that, and that is enshrining PharmaCare in legislation. Arguably, that would, could, should have been done in any event, but that, I don't think, is what engages the attention of the Pharmacy Association. I think it is the chronology and what followed.

I will say this candidly. Having told the parties in September that unless the government can receive the assurance and the certainty that the cost savings targeted in the original agreement would be realized, we would be proceeding to a legislative option which, of course, is what we have ultimately done. It was not the preferred course for the Pharmacy Association, to be sure.

Beyond that, I'm not in a good position today to speak to the concerns that the member has raised on behalf of the Pharmacy Association about the exchange of information. I am told that the negotiations were conducted in strict conformity with the protocols that were agreed upon by the parties. That is a general answer to a specific set of concerns that have been raised, but that's all I can really say at this point.

M. Farnworth: I thank the minister for his response. I think what I will do is probably put these questions to the minister in a formal letter to him, and then I can get a response. I see the minister nodding. I would appreciate that.

I'll leave with just one final question I think may be possible to get an answer on here today. One of the concerns from the Pharmacy Association is, given the sweeping nature of the legislation, that only two weeks is allowed for stakeholders to provide submissions on two key elements of the bill: pricing and incentives. That is simply too short a time. Can the minister explain why the time frame was so short and why more time was not given?

Hon. M. de Jong: As part of the information I received a couple of days ago, I was also alerted to that concern. The association has, I am advised, now been notified that the period for returning written submissions has been extended by an additional two weeks.

M. Farnworth: I appreciate the minister's response. So I will get him those questions in writing, and we continue on the section 7, which is around confidential information.

[1510]

I want to just get back to a sec. The minister has outlined the issue around the need for balance and around the concerns of…. The way I understand it is for the committee to be able to discuss freely and make notes on decisions around particular medications, around whether or not a drug or a device should be added to a formulary — that those discussions should be able to take place in as open and frank a way as possible and that there is a recognition of the concern around that from the government.

So I just want to make sure, then, that I've got it right. You know, you've agreed to disagree with the freedom-of-information commissioner on a number of issues, but other issues have been satisfactorily resolved. The minister can let me know what those are. I just want to clarify. Does this section apply to the Auditor General Act and the Evidence Act? I gather it does in terms of FIPPA. That was what I heard from the minister. If I'm wrong, he can correct me. But does it also apply to the Auditor General Act and the Evidence Act in terms of being able to turn down an FOI request?

Hon. M. de Jong: Thanks to the member for the question. The first thing I will say again, because I think it's important to emphasize, is that the final decisions on what drugs will be covered and detailed explanations as to why those decisions were made are public information and will continue to be public information and available to the public.

The specific question, though, relates to the statutory override that this section represents. It is, first of all, a discretionary section, so it's not automatic, and the discretion is limited to information respecting the deliberations and recommendations. So to that extent, the inclusion of the phrase "or any other enactment" could potentially cover a request from another statutory officer. I'm not certain in what circumstances that would occur, but I want to be fair to the member. Those words are there, and "any other enactment" could include an enactment empowering another legislative officer.

But again, the discretionary authority is restricted to the deliberations as set out in that phrase — "the deliberations and recommendations."

M. Farnworth: Who would exercise that discretionary authority? Who would have the ability to decide in those particular cases?

[1515]

Hon. M. de Jong: The thing I was checking…. The section of the act, of course, says "minister," but pursuant to the Interpretation Act, the ability exists to delegate that to a specific individual. I actually think that is the appropriate step to take in this case, so there is a delegated official within the ministry.

M. Farnworth: That's what I was hoping to hear from the minister. My sense is that it's one of those things that I would prefer to see delegated to the Deputy Minister, for example. That would be one individual. But the bottom line is this. I think there is a concern around there — the fact that it is discretionary and is something that I would hope or would expect to be used in very limited circumstances.

Certainly, I don't believe that it should be intended…. I would hope that it's not intended in terms of being able to block something, for example, of the Auditor General coming in or the Evidence Act — not that I'm suggesting for a minute that there would be circumstances but you never know.

Unusual cases do arise from time to time in the same way that we have exceptions or discretion around things being added to the formulary. I would like to make sure, and I want it on the record, that I think that this needs to be used sparingly and that, as much as possible, that transparency is what should prevail.

Section 7 approved.

On section 8.

M. Farnworth: Section 8 deals with the enrolment of beneficiaries. In accordance with the regulations, a person may enrol in one or more drug plans. Persons may be required to provide personal information for the purposes of the ministry to determine eligibility.

Has the ministry looked into whether or not this section violates the Freedom of Information and Protection of Privacy Act? It does require a person to provide personal information in addition to that that's required under section 59(c) of the regulations respecting provincial drug programs in order for eligibility to be determined for a drug plan.

Has that been done? Is this in line with current policy? Are there any differences between this section and the existing practices that are currently in place?

Hon. M. de Jong: This is designed to precisely authorize the existing practice, and the most important dimension to this is, as the member knows, the sliding scale of eligibility within PharmaCare based on income. So it is the ability to access income information from the Canada Revenue Agency.

M. Farnworth: So there's nothing in this section, then, that is different from current and existing practices, and so there are no changes in this section that will impact in terms of the Freedom of Information and Privacy Act or in the way that current practices are administered?

Hon. M. de Jong: I think I understand the member's question and can answer that nothing different is contemplated under this act than what takes place today under the policy-based PharmaCare program.

Section 8 approved.

On section 9.

[1520]

M. Farnworth: Section 9 in subsection (3)(a) states that "the provincial drug program must be considered insurance of last resort." Can the minister explain what that means? Does it in any way differ from existing policy?

Hon. M. de Jong: Two-part question, two-part answer to the member. No changes are contemplated to the practice that presently takes place. The short answer to the second part of the question is that if you have coverage pursuant to another plan — for example, a veterans plan — you look to that plan first. You access that plan first, and then PharmaCare benefits would kick in after you have exhausted your benefits from that other program.

Section 9 approved.

On section 10.

M. Farnworth: Section 10 deals with cancelling beneficiary enrolment, and this is an issue which does cause considerable concern to people whenever they are cancelled. This section is subject again, like many, to regulations that will be determined at the executive council level. Can the minister explain how this section is going to work? Could he give some examples of how this section — section 10, in particular 10(2) — would in fact operate?

Hon. M. de Jong: In the previous deliberations we've talked about the various plans — nine of them. They are all in their own ways unique and contemplate different circumstances.

Here are some examples that would be applicable, which might lead to the exercise of the authority under this to cancel a beneficiary's enrolment and, to be sure, a significant step because of the implications for the beneficiary.

A couple of examples. In the general sense, someone who has left the province and no longer qualifies or meets the residency requirements — that would be an example
[ Page 12444 ]
where entitlements or beneficiary's enrolment could be cancelled. Under plan P, which is one of the nine plans, a beneficiary who is…. I'm going to be careful how I say this. Plan P refers to someone who is in palliative care. By definition, death being imminent, in a circumstance where a person happily finds themselves on the road to recovery, having been designated palliative, plan P would no longer apply. It would be a happy trade-off in that case.

A youth who no longer meets the age requirements for plan F, which is the children-at-home program, would be another case where this section might apply. Again, nothing different is contemplated to what presently takes place beyond the need to enshrine the ability within the statute that will now create the legal underpinnings for PharmaCare.

Section 10 approved.

On section 11.

M. Farnworth: Section 11 deals with the enrolment of providers. In order to be enrolled as a provider, owners of pharmacies, facilities and other places that provide drugs, devices, substances or related services may apply to the minister. If an owner has more than one facility, they must enrol each facility for the minister's consideration. The minister may designate providers as a member of a class of providers, and may also impose limits and conditions on the provider's enrolment.

[1525]

Can the minister clarify under section 11(3)…? It states that "the minister may permit a person who is connected to a place referred to in subsection (1), but is not an owner of the place, to apply for enrollment." Can the minister provide details as to how this would work?

The way I would read this, this could almost be that if I am an owner of a particular facility, I could designate somebody else. That's the way I interpret that. Is that something that, for example, a chain pharmacy in a privately owned…. A chain grocery store, for example, may also have a pharmacy. Is that what this is intended to apply to? If the minister could clarify, that would be great.

Hon. M. de Jong: I hope this will help the member, because it's an interesting section by virtue of how it's worded. The underlying principle is that each place where benefits are provided must be enrolled. There are important reasons for that.

For example, you could have a person who is not the owner of a place but connected to that place who needs to be enrolled, and you could have a pharmacist who is providing independent medication reviews at a doctor's office but who requires connection to PharmaNet. They also would have to be enrolled.

So every place where benefits are being provided must be enrolled. There will be circumstances, in the chain case or in the example that I've given, where the person may not be the owner of the pharmacy, and it may not even be a pharmacy, but in each instance there will need to be enrolment of that place and a person connected to that place.

M. Farnworth: I'll just ask a quick question, and then I'll yield the floor to the member for Abbotsford South who has an introduction.

So in essence, what this section is ensuring is that everyone who is going to be prescribing medications covered under the act, under a formulary, whatever plan there is in place, must be enrolled and that the facility…. I see that, yeah. Anybody who is dispensing has to be enrolled, whether they are the owner of the place or they're not the owner of the place, but whoever is doing the dispensing must be enrolled.

Hon. M. de Jong: The only qualification I would make is: someone representing that place where the dispensation takes place.

The Chair: Hon. Members, the member for Abbotsford South seeks leave to make an introduction.

Leave granted.

Introductions by Members

J. van Dongen: I am very pleased to introduce to the Legislature today 29 grade 5 students from Alexander Elementary. They're accompanied by their teacher, Mrs. Natalie Grieve and 11 parents and teachers. I'd ask the House to make them all very welcome.

[1530]

Debate Continued

Section 11 approved.

On section 12.

M. Farnworth: Section 12 deals with duties, and it establishes duties for the following classes of people: providers, suppliers, manufacturers, franchisors, alternate payees; and former providers, suppliers, manufacturers, franchisors and alternate payees. A considerable number of people involved in the dispensing of pharmaceuticals are covered by the act.

Can the minister do two things? One, can the minister say or let me know whether or not there are any changes in this section between existing policy and practices and, if so, what those changes are? Can the minister also elaborate on subsection 12(1)(c)? As stated, this section applies to "a person prescribed for the purposes of section 21 [incentives] or subsection (3)…."
[ Page 12445 ]

Can the minister elaborate on the meaning of that particular section there, please?

[D. Horne in the chair.]

Hon. M. de Jong: If I might venture a moment, I realize that for the students from Alexander this may not be the most scintillating debate. But I suspect, knowing Alexander as I do, that there is a doctor or a pharmacist amongst you, and I'm certain they will look back fondly on this moment in their early lives.

Actually, the biggest change of all with respect to this section is its existence. One of the challenges, one of the rationales, one of the reasons for taking the policy and enshrining it legislatively is that there were difficulties associated with enforcement.

There have been circumstances in which there have been allegations of conduct that PharmaCare, the government and most right-minded and right-thinking people would say is not appropriate. The mechanism to address that — that conduct, where it is being perpetrated by someone who is part of the PharmaCare dispensation network — did not exist. Creating a codified requirement to abide by certain conduct is a fairly significant step from the point of view of providing the Crown with the ability to enforce its expectations and the terms of participation in the PharmaCare program.

Sub 12(1)(c), and I'm sure we'll get to this discussion later, refers to and anticipates the possibility of regulations that would prohibit rebates. I think the member is familiar enough with the trade that is generic drugs to know what I am referring to there. We haven't finalized that regulation. There will be consultation around it. But the section clearly contemplates regulations that deal with the question of rebates, and that's why it appears there and in that form.

[1535]

Section 12 approved.

On section 13.

M. Farnworth: I appreciate the response of the minister. We'll be dealing with the regulatory framework or the regulations further in the act. The issue of rebates is, I think, an important one to be addressed.

I agree. I think it is important that there is a code and that there are expectations and that that is legislated. I think the absence of that does create potential problems, so I think it's appropriate that it's here.

Section 13 would go along with that. That deals with changing or cancelling provider enrolment. Section 13(1): "A provider may cancel his or her enrollment as a provider by giving 30 days' written notice to the minister."

Then subsection (2) is: "Subject to the regulations and after giving the provider 30 days' notice and an opportunity to be heard, the minister may (a) change or cancel designation made under section 11 (4) (b) [enrollment of providers], or (b) cancel a provider's enrollment."

The question I want to ask the minister is: what's the rationale on giving 30 days' notice but without giving an opportunity to be heard? Under what circumstances would that take place? Why wouldn't you give someone an opportunity to be heard if you are going to cancel a provider's ability?

Hon. M. de Jong: It is, I think, what qualifies as an extraordinary power, because it allows the Crown to step in and impose conditions or even, in a serious enough circumstance, the ability to impose very serious limits or conditions.

Two examples that I can think of are where fraud has been uncovered, as it relates to billing practices; or in a circumstance where a provider was offering incentives on a scale, for example, to a methadone patient and the Crown wanted to immediately address that, recognizing that the opportunity to be heard wasn't likely to take place for a month or maybe two months while people got their evidence together and got their advocates lined up.

It is a temporary measure, to be sure, but one that would allow the Crown to step in on an expedited basis to deal with something that was deemed egregious enough to warrant the exercise of that extraordinary power.

M. Farnworth: Who would exercise that particular power, that authority? Would it be within the ministry or the minister?

[1540]

Hon. M. de Jong: Again, pursuant to the Interpretation Act, the minister or the ministry. I have trouble imagining it being a decision of the minister, although the act certainly contemplates that. My expectation is that, based on what I have seen and the manner in which PharmaCare is managed, it would be a decision from within the PharmaCare division. But the act would authorize the minister to step in and make the order herself or himself.

M. Farnworth: Has that authority been exercised very often on an annual basis? Are there many cases where this in fact does take place?

Hon. M. de Jong: I guess the short answer is no, because the statutory power hasn't existed and won't until the act is passed into law.

To be fair, as a matter of policy, the division has taken steps to suspend payment or attach conditions. Part of why the act is here is because it has been difficult, in terms of where the authority lies, to step in. Some of it has been contractual. There are agreements in place where a provider is in violation or believed by the Crown to be in violation of the terms of the agreement remedies. But
[ Page 12446 ]
it is the vagueness around that authority that is, in part, being addressed by the establishment of the power here.

M. Farnworth: Let me just rephrase that. We have existing practices, policies and procedures in place. This particular section is codifying and bringing a lot more clarity to current practices. I guess my question would be: how common are the issues that are anticipated by this particular section at present? How often, let's say, in the past year? Now that we've got this, how often do we anticipate using this particular section, given past history?

Hon. M. de Jong: I better understand the question. Well, it's rare. I am advised of one circumstance where suspension of payment, if I can use that phrase, has been applied. I am aware of another set of circumstances where a power like this might be utilized, but I am advised that those are examples that have occurred over the course of a decade. The hope is that….

By the way, I should say this. That is because the vast, vast, vast majority of providers wish to comply and do comply with the requirements of the PharmaCare program, and do so providing good service. I certainly don't want to leave the impression that we believe there is a cadre of providers out there that are somehow surreptitiously avoiding their responsibilities. It's a rare circumstance. But where the circumstance does occur and requires intervention, the power to intervene will now be clear.

Sections 13 and 14 approved.

On section 15.

M. Farnworth: Section 15 deals with the issues around identity numbers. As we have seen in the past, there are far more CareCard numbers out there than there are people in the province of British Columbia, a number of times over.

Can the minister just elaborate on this section a bit? In particular, are there any provisions in this section that are anticipating the introduction of the new CareCards that the minister and government have talked about in the past?

[1545]

Hon. M. de Jong: Well, the member has correctly identified the importance associated with correctly identifying and confirming identity and has also correctly anticipated the linkage between this section and the beginning of the introduction of the new services card that will include the photograph, the chip and the number. That's anticipated to begin this fall, over a five-year period.

In the case of the provision of PharmaCare services, I think the member has correctly identified the importance of having a reliable identification system in place and one that can utilize some of the e-technology that has developed and will develop over time.

Sections 15 to 18 inclusive approved.

On section 19.

M. Farnworth: This section deals with emergency circumstances. Can the minister explain how this section is anticipated to work? In particular, are there any differences between current practice and what this section will do once it's enacted as law — for example, if there is an outbreak of a particular disease or an infection? I don't know whether pertussis would fall under this, or the H1N1, for example.

If the minister could outline how this section is anticipated to work, I would appreciate that.

Hon. M. de Jong: I think the member has correctly gleaned the circumstances in which this section would become relevant — an outbreak of a communicable disease. In that case the authority would exist to provide benefits irrespective of whether someone is enrolled or not, the argument being that the overall societal interest in ensuring that treatment is available, protection is available, outweighs the otherwise legitimate expectation that people would be enrolled before they received those services.

The prerequisite to that occurring is that the provincial health officer must first declare an emergency under the Public Health Act. He or she can do that as a localized event, a regional event, a provincial event. Once that triggering event has occurred, the authority exists to provide benefits, whether or not that person is a beneficiary.

Section 19 approved.

On section 20.

M. Farnworth: Section 20 deals with price regulation. In this section the minister can set out conditions and limits on the amount that is paid for benefits, but these are subject to the regulations. Within the limits and conditions established by the regulations, "the minister may enter into agreements with any person respecting prices of, or amounts that may be charged" for benefits. If the minister enters into such agreements, the conditions "include, without limitation, conditions respecting the amounts charged and the use, or prohibition of the use, of incentives."

Can the minister just clarify subsection 20(3): "…include, without limitation, conditions respecting the amounts charged and the use, or prohibition of the use, of incentives"? Can the minister outline, just clarify, what this section is intended to do and how it differs or will differ from current practice?
[ Page 12447 ]

[1550]

Hon. M. de Jong: I've just had the benefit of being reminded about the way sections 20 and 21 work together. Section 20, generally speaking, would apply to brand-name drugs, and sub 20(3) provides that ability to limit or eliminate rebates as part of an agreement, a specific agreement. When we get to the next section, we'll be talking about the mechanism by which rebates generally can be prohibited.

M. Farnworth: We can do both sections together, if that makes it easier to do this part.

Hon. M. de Jong: The member is suggesting that we have a conversation that relates to both 20 and 21, and I'm happy to oblige.

M. Farnworth: The issue of rebates and incentives is clearly a key one, in terms of how the changes proposed by this act will operate — pretty significant changes.

I'd like the minister to sort of take me through how he anticipates it working — how this will compare, for example, to what has taken place in other jurisdictions. I guess Ontario is the key model.

In terms of the discussion, incentives and rebates can pertain to particular medications or particular drugs that a drug company may wish to try and promote by offering an incentive. "If you use or promote this particular product, we will either give an incentive in a reduced price or we will give a rebate to the pharmacists or the pharmacy," in terms of either additional product or cash, or what have you.

This is, I think, central. This section is central in terms of the government wanting to achieve its goals around savings within our PharmaCare system. I'd like the minister to sort of go through what the current practice is and what this section will change, because this is pretty significant in the impact that it will have on whether or not this legislation works in the way which the government hopes that it will.

[1555]

Hon. M. de Jong: Three or four steps, I think, are important, and I am mindful of the essence of the member's question: what will be different following enactment of this bill, and of these sections in particular? There's a whole host of drug price regulations that exist today, and they will be captured and enshrined in this act.

The first key difference will be that as it relates to generic drugs, not only will the means exist, but the Crown, the government, intends to act on that new-found authority to set the price for those generic drugs, absent a negotiation. The member knows the history and commented on that in the second reading debate. But the creation of the power that will allow the Crown via this act to say, "And the price for these generic drug products will be X," is the first fundamental difference that I think most people understand going forward.

The second relates to the other matter the member raised, that in this complex supply chain the prevalence of incentives or rebates has had a negative impact on taxpayers and, I suppose, on the purchasers of pharmaceutical products. The ability will exist under these two sections combined to limit or actually eliminate that practice through the supply chain.

Those are the two key differences. I also don't want to leave any doubt in the member's or the committee's mind. The government intends to act on the powers that are created in this legislation and not simply hold it out there as some sort of a threat. The government intends to act and exercise the powers that are created by the act to set those prices by regulation.

M. Farnworth: The minister is anticipating my next question, and that is around the regulations. The key to this section is the implementation of the regulations. As we know, sometimes when legislation is passed and it is left up to regulation, regulations can be enacted or not enacted many moons down the road.

What I am hearing from the minister is that the government intends to move quickly. If he could give me some sort of timeline as to when we could expect to see the regulations enacted, that would be great.

Does the minister also have a sense of what the price is going to be set at? At this particular point in time have decisions been made and reached on that? Are we going to be at the level that Ontario is, at 25 percent?

I'll throw in another question, and that is: are we going to the 20 percent for the top ten prescribed drugs, as Ontario has announced that it's going to do?

[1600]

Hon. M. de Jong: I'm not sure I'm going to do this in the order they were asked, but I will assure the member of this. My view is that British Columbians and, by extension, PharmaCare deserve to have the benefit of the most competitive generic drug prices in the country. I have stopped short of laying a number before the member, but he probably gets a pretty good idea of where this is headed.

The transitional provisions contained later in the act have been structured purposely in a way that will allow us to move first on these two sections. That work will take place over the next few months in the summer, with the results of it being available in the fall, so the answer to that question will be verified then.

I'll add this one last thing, maybe at my peril. I'm going to meet with the other ministers, and this specific subject isn't slated to be on the agenda. But I'll take advantage to highlight for the member and the committee that in addition to the benchmarking that we do in securing com-
[ Page 12448 ]
petitive pricing…. We benchmark against brand-name prices as a percentage.

I have had the benefit of meeting with officials, learned persons, academics from UBC. Professor Law wrote an article that I'd read, and I've had the opportunity to speak with him. He correctly, in my view, points out that there may be additional savings available if the country can get together and, in a number of instances and certain drugs where there is a robust market, look at a different procurement model that does not rely exclusively on benchmarking against brand-name prices.

His short argument is that there is more money to be saved, as they have done in countries like New Zealand, where they have gone…. It may not work in all instances, but in some of the instances where generic drugs, where there is a robust enough market, a competitive enough market…. I intend to pursue that with colleagues later this week, when we sit down to discuss. But that, in fairness, is another subject matter.

I think the member has correctly identified that we attach great importance to getting on with the regulations associated with sections 20 and 21 sooner rather than later.

M. Farnworth: I appreciate the minister's answer. I think this is an important section in other areas as well. One of the criticisms that is levelled against the bill by pharmacists — for example, a pharmacy association — is that with the enactment of this particular section, you are in fact going to take away sources of revenue that pharmacies currently rely on — the incentives, for example, or the discounts.

[1605]

Has the ministry had discussions with the pharmacy associations on that and the nature of the impact on them? What has been the result of those discussions, and is there any concern about a potential negative impact on pharmacists and pharmacies?

Hon. M. de Jong: That very much has been the concern expressed. Yes, there will be ongoing discussions, and yes, we will point out that under the provisions of the agreement that was negotiated two years ago, those pharmacies have enjoyed all of the benefits associated with changes in dispensing fees and so on and so forth and very, very little of the savings that were to accrue to the taxpayer and to PharmaCare were realized.

We will have those discussions, but they will take place against the backdrop of a failed agreement that saw disproportionate benefits visited upon one of the parties.

M. Farnworth: I thank the minister for that answer.

Following up on that, I guess it's one issue in terms of major urban areas where many pharmacies are a part of either a chain or involved in selling a lot of other products besides just pharmaceuticals, but in smaller rural communities the question is slightly different.

Has the minister looked at the potential impact on rural pharmacies and rural pharmacists? Have we looked at the situation in Ontario — they've had two years of this in place — and how it has worked and how it has had an impact on their province? And are there any lessons that can be learned that can be applied here in British Columbia?

Obviously, there is a transition stage taking place. If the minister could enlighten me on that, I'd appreciate that.

Hon. M. de Jong: We're certainly alive to the issue. I think, as I cast my mind back, that was one of the issues that were featured most prominently in the debate that occurred in Ontario, the assertion being from, I think, the pharmacy side that this was going to have a devastating impact on rural pharmacies.

The analysis at this point, I'm told, reveals that there was no net loss of pharmacies. So was that an exaggerated claim? Perhaps, and in these discussions that is not unusual. That having been said, it is important for us to be alive to the need to maintain a viable environment for rural pharmacies. In fact, in many ways, that was one of the considerations that led to the negotiated agreement.

To that end, the rural incentive program was created. Support for rural pharmacies — $1.2 million since November of 2010, in addition to some other features of the agreement. There will be in the weeks and months ahead, as the regulations are finalized, a robust conversation, and I am certain that the issue around the viability of rural pharmacies will be very much at the heart of that conversation.

[1610]

M. Farnworth: This is an important change, and I think this is very much at the heart of this legislation and what the government is trying to accomplish. There are issues that the pharmacies, the pharmacists, have raised here in the province of British Columbia.

Is anything in this section…? Has the ministry looked into this with the Attorney General's ministry in regards to, for example, TILMA or any potential issues around a European trade deal in our ability to make changes in this particular area around incentives? Has the ministry addressed potential problems, looked at potential problems in those particular areas of the trade agreements that we have in place?

Hon. M. de Jong: I'm advised of no concerns expressed by leg. counsel or by the Attorney General's ministry around trade-related issues that might arise. I can't say that that's a guarantee that they won't. I can only say that nothing has arisen or no alerts have been provided.

Sections 20 and 21 approved.
[ Page 12449 ]

On section 22.

M. Farnworth: Section 22 and the following sections — 22, 23, 24, 25, 26, 27, 28 and 29 — deal with information management under the administration of the act. Again, this is one of those areas where the freedom-of-information and privacy commissioner has raised a number of concerns, as have people concerned about the use of personal information.

In section 22 concerns have been raised around the act. Can the minister tell us what discussions have taken place with the freedom-of-information and privacy commissioner around these particular sections? I think it's probably best if we can discuss…. Actually, no, we'll go through them seriatim around the particular sections and whether or not issues that have been raised by the Privacy Commissioner have been dealt with.

One of the ones in section 22 that comes to mind, for example, is: what are the implications on this section around e-health and FIPPA? Why are the new powers in this particular section needed? There are two questions right there that we can start with.

Then I guess I'll throw in a third one. The use of anonymous data for researchers has been removed. Why is that, and has the ministry considered the implications of that?

[1615]

Hon. M. de Jong: I'll say this again. First of all, there were discussions with the Privacy Commissioner. I'm in no way critical of the Privacy Commissioner for exercising her responsibilities in serving as a watchdog on government and examining in detail the statutory provisions that come before the House in the form of a bill and to render her opinion on those provisions.

I'll say this in general terms and then try to be a little more specific about the parts of the section that the member has referred to. There is — again I use this term — a balancing act. The data, I am told, that we hold and that has accumulated over the last number of years — decades, in fact — is exceedingly valuable.

I do want to pay tribute to two…. We've got a former and a present Health Minister engaged in this discussion.

The member for Vancouver-Quilchena, the first Health Minister in the life of this government, has taken a specific interest in — to his credit, I might add, and to the benefit of myself and others, and others are awakening to this — how that data can be utilized in a way that does not compromise the privacy of individuals but could serve the interests of society. There seems, at an academic level, to be tremendous interest in and recognition of the value that that accumulated data set represents.

The hon. member has travelled extensively. I mentioned outside that just last week I had the chance to be in the Middle East for the first time, in Israel. One of the conversations we had amongst researchers and academia was on the value that those data sets represent, from jurisdictions that have publicly funded health care, publicly funded pharmacy or pharmacare programs.

Ensuring that we don't limit ourselves in the way that that information and data can be used is, I think, legitimate. Ensuring that there are safeguards, that that information isn't misused and shared for improper purposes and not just shared outside of government but shared within government for improper purposes — I think the Privacy Commissioner is always on guard to look at that.

The example that I always think of as my favourite example for what I deem to be an appropriate but unconventional sharing of information within government is the fact — and it's completely unrelated to health care — that incidence of collecting maintenance arrears has improved dramatically by tying that data set to the renewal of insurance and drivers' licences.

[1620]

Now, a fairly compelling argument could be made, from a privacy point of view, that that was an inappropriate sharing of information within government. The broader societal interest in that case, I think, justified the step.

Now, we're talking about an entirely different kettle of fish here as it relates to personal information and the need to protect that in the health care setting. But these sections in their entirety, I think, are drafted in a way that seeks to allow us — allow the Crown, allow the government on behalf of society — to make data sets available in a way that does not compromise individual privacy but unleashes the benefit that exists insofar as having these data sets.

Sub 22(1)(c). To give an example of why we deemed that a necessary provision. In fairness, again, the Privacy Commissioner would prefer that sub (c) not be there. I'm alerted to the fact we are in the midst of negotiating an agreement with the new aboriginal First Nations Health Authority as part of the tripartite agreement that was signed between the government of Canada, the government of B.C. and the First Nations Health Authority.

It looks like that is going to involve the collection — because 22 is about the collection of data — or may involve the collection of data that would not be captured by the first two subsections.

It's rarely, in these cases, a matter of providing for the situations that you can contemplate. It's generally a matter, as the member knows, of making provision for the situations that you can't contemplate.

Again, I understand the Privacy Commissioner's hesitancy around that, but I would say the safeguard in this case is that we are talking about posted regulations that would be issued by the Lieutenant-Governor-in-Council. So we're not talking about some policy or document that would exist in hiding somewhere deep within the bowels of the ministry.

That's a long, rambling answer, but it's a theme that
[ Page 12450 ]
is emerging with greater regularity. The member for Vancouver-Quilchena has played a role. There's a major forum coming up in a week or two that is attacking this issue at its heart. It's the raison d'être for the conference itself, so it's very topical. We see the implications of that manifest in a piece of legislation before the House today.

M. Farnworth: I thank the minister for his answer.

I know there are some very important points that are being raised here. And I agree. The data that we have in this province available to us through our health care system, through our PharmaCare system, is second to none and is an amazing resource that can be of value to not just our health care system here in B.C. but to research around health care in general.

I agree that we should not squander that or relinquish the opportunities that that provides without a great deal of thought and consideration. I do share the member for Vancouver-Quilchena's enthusiasm for this particular topic. There is a lot that we can learn.

At the same time, there are the issues of privacy. I understand what the minister is saying and what the Privacy Commissioner is also trying to impart.

I guess the key question that it comes down to from this…. This is where I'd like a bit more clarification. The minister outlined subsection (c) in terms of dealing with, for example, First Nations. But then, when you go further down to section (3): "The minister may disclose, outside Canada, personal information collected under subsection (1) for one or both of the following purposes: (a) to conduct or facilitate research into health issues; (b) to assess and address threats to public health."

[1625]

Section (2) is: "The minister may use and disclose, inside Canada, personal information…." So there's a section dealing with inside Canada, and there's a section dealing with outside Canada.

My question is going to be: are there any differences to how those two sections are anticipated to be implemented? Clearly, one would expect that in both cases you would not be dealing with named individuals, but rather, you would be dealing with anonymized data or information. If I'm right, that would be perfect, and if I'm wrong, please tell me how I'm wrong.

[1630]

Hon. M. de Jong: I apologize for the delay. The dilemma is that I'm trying to summarize. The authority for the collection, storage and release of this sort of information is the E-Health Act. So the alignment between these two…. There are differing rules in place.

The one thing, though, I need to put on the record and alert the committee and, most particularly, the member to is: personal information as contemplated in section 3 is a defined term under the act. It does not follow that that in all cases would be anonymized. So it can be identifiable information. I'm just going to the…. Personal information is identified in the identifiable information.

What I can also tell the member is pursuant to the provisions of the E-Health Act, release of that information outside of Canada for research goes to eHealth and requires express consent of the person, the identifiable person, for research purposes outside of Canada. I'll stop there.

M. Farnworth: I think this is an interesting point. I think it's an important point. Let me back up a sec. We have the existing privacy protection act that, if this was not here, would cover these circumstances. What you are wanting to do in this act, you could do under the existing legislation.

[1635]

The question then becomes: if that's the case, then what is the purpose for having this here in this particular act at this point in time? Why now? That, the minister can answer.

The second point is on the issue of the data itself or the information that you have. If it's anonymized, it can be used for research purposes in a general way. This section allows that to be outside of the country. So when that happens, you are then, in essence…. The proprietary nature of the fact that we own it…. It is our data; it's the provincial data. It then becomes accessible literally by anybody.

So the question becomes: is it research? Is it findings that can be outside, or is it the data itself that can be taken outside of the country? If that's the case, under what circumstances and how does that take place?

I see some puzzlement. The minister is nodding. He understands what I am saying. If he could address that, I think that would be particularly useful. I guess the final question on that would be: is this section then anticipating our ability to use that information and for research to take place on that information outside of British Columbia?

[1640]

Hon. M. de Jong: I'm trying to get this into a format that is understandable and available for logical critique. Here's the legislation that will impact upon this going forward. Today we have the Pharmacy Operations and Drug Scheduling Act which has provisions that deal specifically with PharmaNet.

The overall impact of this act will be to repeal the provisions of that act that deal with PharmaNet and replace them with these provisions. They will then be responsible. In addition, the E-Health Act, as it relates to accessing personal information for research purposes and the data stewardship committee that exists, will continue to have effect.

The short answer is that for the release of personal information outside of British Columbia, that can happen
[ Page 12451 ]
where there is a threat to public health. That is authorized. It does not require consent from the individual. In the case of the release or the transfer of information outside of British Columbia for research purposes, all of the protections that exist under the E-Health Act will apply, including the overriding jurisdiction of the data stewardship committee. That comes up later in the act as well.

That's sort of the delineation between research and public health considerations in allowing for the release or transfer of information and touches on the consent provisions — when consent is necessary and when consent is not necessary. In addressing the public health threat, consent would not be necessary.

M. Farnworth: Just a question on that, and then if we could take a five-minute break. Then my colleague from Nanaimo–North Cowichan has some questions on this.

If I hear the minister correctly, if there's a threat to public health, then there can be notification. The question I would have: what constitutes a threat to public health? I guess if I come back from some foreign destination and I've got ebola virus or guinea worm or Marburg virus or one of those nasty things, then that would count. Or I guess that would be a circumstance under which….

So who makes that decision? Is it a public health officer who makes that determination? Or is it going to be done by regulation? How exactly will that determination be made?

Then on the other. As I understand correctly, then, data for outside Canada for research purposes must be anonymized. It must not be identifiable. Provisions of the act would apply in the sense that you are not able to identify an individual. If I've got that right, that would be great, and we can take our five-minute break.

[1645]

Hon. M. de Jong: What I've been trying to get straight in my own mind is, from an operational point of view: whose expertise would you be drawing on? I think, at the end of the day, it probably depends on the nature of the circumstances.

If we are talking about a large-scale epidemic-like threat to public health, the provincial health officer would be the logical person advising the minister or the ministry around the exercise of the authority under the section. But I'm also thinking about a circumstance where we might be dealing with a single individual arriving from another jurisdiction, for which there is concern, for which there might be a perceived public health threat, where advice might be sought from a regionally based medical health officer as opposed to the provincial health officer.

In both cases they would be public health officials providing advice that there is a perceived threat to public health, but dramatically different circumstances — one involving a large number of people and the other, perhaps, involving a single individual or a family. So those are operationally the circumstances that I would see, or the routing that I would see occurring here.

The Chair: We'll take a five-minute recess.

The committee recessed from 4:49 p.m. to 4:57 p.m.

[D. Horne in the chair.]

D. Routley: The previous exchange between the critic and the minister was very interesting from the point of view of the Freedom of Information and Privacy Protection Act. The minister mentioned the instances in which consent would or would not be required — that if there were a public health threat, consent would not be required.

Could the minister describe a circumstance where consent might be required?

Hon. M. de Jong: The short answer would be research that is being conducted outside of the country.

D. Routley: What form would that consent take?

Hon. M. de Jong: Section 85 of this bill is a consequential amendment to the E-Health Act and stipulates that there needs to be "express consent, in writing, to the disclosure."

D. Routley: One of the concerns expressed during a review of the Freedom of Information and Privacy Protection Act around the notion of consent was the power imbalance in the relationship.

[1700]

If a person is seeking help from the government of one form or another or a service and then is presented with the request, which may be viewed as a requirement, for consent for the sharing of information, is the minister concerned that there might be a lack of understanding of the scope of that consent — that a person might feel as though they must consent to the sharing of their information in order to acquire a service and that that may not be fair to the person who is being asked to give their consent?

Hon. M. de Jong: I think the member has raised and continues to raise an important point. When you are asking for someone's consent as it relates to research…. A lot of this research does now take place across international borders. I saw some examples of that last week — fascinating. Researchers in Israel were working with researchers in Vancouver. They've never met, and they're producing scholarship that is published in the New England Journal of Medicine. It is really dramatic and relying on access to data in that case — anonymous data.
[ Page 12452 ]

I think the point that the member makes is valid. When you approach someone for their consent to make personal information available for research purposes, they need to know that they have a choice. There are, to be fair, in the best practices that are employed by research agencies within the ministry itself, a set of guidelines and criteria about how to do that.

All of that is valuable as long as it's abided by and the people making the request communicate, in a fair and balanced way, the benefits associated with the research and how there is a broader societal good that will be served, and also the fact that individuals have a choice. That is the essence of asking someone for their consent and needs to be top of mind.

D. Routley: I appreciate the answer and understand the intent of what's been said. There is a lingering concern around the perception on the part of someone who's seeking help that this request may in fact be a requirement. That was one of the concerns that acting Commissioner Paul Fraser brought to the review committee that looked at the Freedom of Information and Protection of Privacy Act.

On the one hand, there may be a misunderstanding of the request being a requirement and, on the other hand, the possibility that the person consenting would not fully appreciate the scope of that consent. How will the scope of the use of the information be communicated to the person who is being asked?

[1705]

Hon. M. de Jong: I want to clarify with the member that I'm doing this correctly, because there are different circumstances. For example, when a constituent comes into the member's constituency office or my office, for that matter, we have them sign a release, a consent. It's a pretty broad instrument, and it's the document that ministries across government require before they will provide the member or another MLA with personal information.

[L. Reid in the chair.]

What's contemplated here is far more specific than a general release. It would be specific consent, written consent, to a particular research endeavour. Again, best practices dictate that that is the use, the restricted use, to which that personal information would be made available. I want to distinguish, for the benefit of the committee, those two different circumstances, because the release we have constituents sign is a pretty broad instrument. It certainly is.

D. Routley: Once this disclosure has been consented to and the sharing of the information has occurred, how will the ministry maintain control over that information? What provisions will be in place to ensure that the information isn't used beyond the scope for which it was collected and shared?

Hon. M. de Jong: We tried to anticipate the very scenario that the member describes, which is why sections 24 and 51 exist. They will operate in concert with the other instrument that I think the member is familiar with, this notion of an information-sharing agreement.

Statutory provisions and contractual provisions, if you will, are designed to ensure that there is an ongoing ability by the Crown to ensure that information which has been consented to be released for one purpose is not misused for another.

D. Routley: Thank you, Minister. Once this information has been shared and it is outside Canada, how will it be stored? Will there be a control over how it can be stored or if it will be maintained beyond the scope of its original use?

Hon. M. de Jong: I think it depends, and that's where the information-sharing agreement reveals its importance. It would be stipulated in a way that obviously does everything humanly possible to ensure that there is protection in place. I can't give the member a pat answer because I can contemplate different circumstances in different places of the world. But again, the information-sharing agreement would require that those arrangements be explicitly set out.

D. Routley: The basic principle under the Freedom of Information and Privacy Protection Act is that information will only be collected for a specific purpose and only used for that purpose, not stored beyond what is necessary to achieve that purpose. This provision seems to step around that principle slightly.

The basic principle is that information only be kept and stored for the length of time necessary to achieve the goal for which it's collected. My question would be: will there be control in the information-sharing agreement over whether or not that information can be kept or whether it will be returned or destroyed or otherwise handled?

Hon. M. de Jong: The short answer is yes. That's generally a standard provision of an information-sharing agreement.

[1710]

D. Routley: Currently there's a prohibition against storing personal information outside of Canada, and this is an example of how health information, and the health sector generally, is being carved out from the scope of the Freedom of Information and Privacy Protection Act. The commissioner has expressed concern over these continued carve-outs without an overall vision of what the government's plans are in terms of dealing with health
[ Page 12453 ]
information.

Does the minister share a concern that these continued carve-outs are undermining the basic principles of the Freedom of Information and Privacy Protection Act? I anticipate that he doesn't have an overwhelming concern or he wouldn't endorse this legislation, but could he share with me some kind of a reassurance that these continued carve-outs are not amounting to an undermining of the Freedom of Information and Privacy Protection Act?

Hon. M. de Jong: I think the appropriate word here is "vigilance." I'm not sure if the member was available to hear all of the previous exchange. It's why I am in no way hesitant or frustrated by commentary from the Privacy Commissioner. It is the job of that office and that officer of this Legislature to challenge, to ensure that that vigilance is being maintained and that the balance is there.

I would never speak for the Privacy Commissioner, but I think the present occupant of that office understands that there are societal benefits to be accrued by utilizing data sets and information. But I think she is correct to be on her guard about how that big organization called the state would purport to use information collected for one reason for another reason.

Again, I don't know if the member was here when I talked about how we now use data relating to maintenance arrears for kids, how we use another state instrument, the renewal of drivers' licences and insurance. It's turned out to be a pretty effective way not just to benefit children but actually to save folks from accumulating massive amounts of arrears that they get buried under and can't do anything about over time.

The member is correct. The legislation is here because at the end of the day, having asked many of the questions that the member and his colleagues are asking, I was satisfied that there was an appropriate balance being struck against protecting privacy interests versus the benefits associated with making data available for study and research purposes and protecting public health interests.

I hope that the member will never be confronted by me dismissing concerns around the use of information and protection of privacy interests, because I think it is fundamentally important that we do so.

D. Routley: Thank you to the minister. I do accept that reassurance and appreciate his concern.

The provision for not storing information outside of Canada was partially put in place, as I understand it, to resist the loss of control of information and the potential use of that information by state security agencies — for example, in the United States. Will the data-sharing initiatives restrict the potential use of that information when it comes to agencies such as the Homeland Security agency that might impact people's personal freedoms in one way or another?

[1715]

Hon. M. de Jong: Look, I don't want to dismiss the suggestion that there is always some element of risk. The risk that I think the member is talking about here is the situation where a proper research protocol, an information-sharing agreement has been negotiated, arrived at and approved, and some foreign governing authority decides to swoop in and secure access.

I can't think of a circumstance, but I also am not in a position to dismiss out of hand the possibility that one day that might occur. We assess that risk through the information-sharing agreement and try to minimize it through instruments like the one the member mentioned, by eliminating the period of time that the personal information is kept outside of our borders.

Now, it gets tricky, because the member is harkening back, I think, in his question to some of the issues we were confronted by. At one point in trying to address that problem we created a circumstance where a physician who wanted to stay on top of his patients' files during a trip to Palm Springs was technically in violation of the law for taking that information across the border and storing it in his or her hotel room.

We try to find practical ways to protect privacy, facilitate the kind of work that we want done and minimize the risk that somewhere along the line there will be a violation. I suppose one of the toughest and most unpredictable would be a circumstance in which a foreign government suddenly swooped in and decided, contrary to all protocols, contrary to all international understandings, to secure access or ownership over a data set that researchers were using in a foreign country. One tries to minimize the risk of that, but I can't suggest to the member that it's eliminated altogether.

Sections 22 and 23 approved.

On section 24.

M. Farnworth: Just a question on subsection 24(1)(c). It says, "A person to whom the minister discloses personal information under this Act must not use or disclose the personal information for any purpose other than the purpose for which it was disclosed to the person, except...." It then outlines the various scenarios or purposes, and then: "(c) for the purposes of court proceedings."

Does that include family court? If it does, has the ministry looked at the implications of that?

[1720]

Hon. M. de Jong: The best way I can answer the specific question is to first point out that the section was included specifically to facilitate an investigation and pursuit of allegations of fraud against a provider. That's the rationale for its existence.
[ Page 12454 ]

Whether it would apply in a family court setting is an interesting question. I'm trying to think about a circumstance in which a person to whom the minister disclosed personal information…. I suppose it's possible, and then the question would be whether or not the person would be in a position to refuse to disclose in court and whether this provision would operate to require them to disclose in court. I don't know the answer to that. I'd have to find that out.

Sections 24 to 27 inclusive approved.

On section 28.

M. Farnworth: Just so the minister can clarify the issue. This is in 28 and 29, the issue around attaching and removing protective words. Exactly what that entails and what it's about would be appreciated.

Hon. M. de Jong: This provision is designed to give statutory effect to a practice that has been in place for some time, which allows a person to attach a protective word to their personal information in PharmaNet. Only the health professionals with whom the person shares that protective word — code word, if you will…. It's like a password. Only those health care professionals who have that password or key word can access the person's record.

M. Farnworth: Just in a nutshell, so I fully understand. It's similar to when I do on-line banking, and I phone the bank requesting information to go on line. They may ask me a question like: "What was your mother's maiden name?" or "What was your first pet's name?" You either know the answer or don't know the answer, and I guess that's what is meant by this particular section.

Hon. M. de Jong: That's the idea.

Sections 28 to 30 inclusive approved.

On section 31.

M. Farnworth: Section 31 deals with advisory committees. The minister may establish committees for the purpose of advising the minister respecting any matter under this act in relation to the listing of drugs, devices or substances, blah, blah, blah. Well, it doesn't quite say blah, blah. I would imagine committees like that are currently in existence, and this in essence is codifying the practices that are already taking place.

Hon. M. de Jong: The answer is yes, the drug benefit committee being the most graphic example of that.

Section 31 approved.

On section 32.

[1725]

M. Farnworth: Section 32 is whistle-blower protection. Can the minister outline how this is intended to work? Is it based on codifying existing practices? Is it a significant change from where we currently are now, and if so, how? If they are existing practices, how often have they been used?

Hon. M. de Jong: It does mirror protection that presently exists in the Pharmacy Operations and Drug Scheduling Act and imports it into this regime. I think, just to state the obvious, it is designed to protect people who report contraventions of the act — who do so in good faith — from any sort of sanction, dismissal or penalty. It has now become an increasingly regular feature of statutory provisions to codify that protection in the governing statute.

Section 32 approved.

On section 33.

M. Farnworth: This section 33 is immunity from legal proceedings. Is this comparable to the sort of standard practices that we currently have in place for dealing with these issues?

Could the ministry give an example, for example, around subsection 33(4), where "Subsection (2) does not absolve the government from vicarious liability arising out of anything done or omitted by a person referred to in that subsection for which the government would be vicariously liable if this section were not in force"?

In other words, immunity from legal proceedings does not absolve the government from its liability if there was an omission or if that person would be liable if things were in force, if I'm reading this correctly.

Hon. M. de Jong: What I can advise the member, firstly, is that these provisions…. It's actually an astute question, because the practice now is to take provisions like this to a statutory immunity committee of the Ministry of Justice to ensure a measure of consistency, because they are significant provisions, and it has approved this extension of the notion of immunity and this codification of the immunity.

I think that the member correctly described subsection (4), which is intended to ensure that the government is not absolved from the vicarious liability to which it would otherwise be liable. The provision ensures that the responsibility and accountability of government is maintained in accordance with established law regarding its vicarious liability as an employer.

Sections 33 to 36 inclusive approved.
[ Page 12455 ]

On section 37.

M. Farnworth: This part is dealing with enforcement, and audits and inspections. The appointment of inspectors we have just passed, and audits and inspections.

General records — they may be inspected. "An inspector may require the production of or electronic access to any record that is (a) in the possession or control of a practitioner, and (b) relevant to the provision of a benefit by a provider or former provider who is the subject of an audit or inspection," and a practitioner must comply with these requirements.

[1730]

Is this in line with current policy? How does this deal in terms of information that applies to an individual…? Are an individual's private records or personal records part of the general records definition? Or does this primarily relate to billing issues?

Hon. M. de Jong: Again, it is in line with existing policy. But of course, this elevates it to something more than just policy and provides a statutory authority for the inspection of records and to compel the production of records for purposes relating to the review of the provision of benefits, billing and business practices.

The hon. member made a reference to personal records. If he was referring to the personal records of a provider versus personal information…. And yes, because in the case of an audit or an investigation around allegations of fraud, the dispensing document would have a name on it, and the bill. To that extent there is personal information involved.

M. Farnworth: So it would be in terms of verification purposes that that access, that information, would most likely be used, would be the primary?

Hon. M. de Jong: Correct.

Sections 37 to 39 inclusive approved.

On section 40.

M. Farnworth: This section deals with warrants, and under section 40(1): "Without notice to any person, the minister may apply to a justice of the peace for an order under this section." And: "(2) A justice of the peace may issue a warrant authorizing a person to enter and search a place...."

I take it this is in the context of fraud or criminal activity. If there are any other reasons behind that, the minister enlightening me would be great. Otherwise, we can move on.

Hon. M. de Jong: Yes, it would generally relate to allegations, investigations relating to fraud or contraventions of the act. The allegations of criminality, whilst they may result in the obtaining of a warrant, would generally be pursued by the police pursuant to the normal processes around a criminal search warrant.

Sections 40 to 42 inclusive approved.

On section 43.

M. Farnworth: Section 43 deals with sharing information for compliance purposes.

Can the minister explain or let me know if sections 43(2) and (3) provide the minister with more access to personal information than the current regulations allow for? Does this allow for additional access to information?

[1735]

Hon. M. de Jong: I think the answer is no. This is an enabling piece. I think the reason the answer is no is that we can't think of a similar explicit provision that exists right now for compliance purposes. I think the member can see that the section permits the exchange of personal information between professional colleges, health care bodies, public and private insurers, and the ministry for the purpose of determining whether someone has been in compliance.

Again, the same rationale applies, because in its simplest form it would be about deciding whether or not a particular prescription had been duplicated or the accounting for a particular transaction had been duplicated in a way that was inappropriate. In that case, that would involve, again, documents that contain personal information.

Sections 43 and 44 approved.

On section 45.

M. Farnworth: This deals with the suspension of payments, so this would be in place if there is an issue with an individual — a suspicion or reasonable expectation that there has been a contravention either of policy or of a criminal matter. Then there's a suspension of payments. It allows for, under subsection (3), the resumption of payments if an enforcement action is not commenced within three months of the suspension or the grounds for suspending the payments no longer exist.

Can the minister give an example of how this has happened in the past? I guess I'm looking at specifically…. Would this impact if there is a suspicion or a charge, and nothing happens for three months? Would the payments have to resume, or would they have to wait until a charge has been dealt with? Is this section impacted by something like that?

[1740]

Hon. M. de Jong: I think the laying of a charge, if you will, under the offence provisions would be sufficient to satisfy the three-month rule. The charge need not be disposed of or concluded. The initiation of, I think the language is, the enforcement action will have been commenced, and that will satisfy that provision.

I want to make sure I'm not leaving the impression that this is happening on a daily or weekly basis. But by way of example, if an audit had been commenced and it became apparent to the ministry that they were satisfied that fraud was occurring, that would be a situation in which these provisions…. The payments occur on a weekly basis to the pharmacies.

That's a scenario in which it's entirely possible that the decision would be made to suspend payments under the provisions. Again, this is not happening, nor do we expect it to be happening on a weekly basis or a monthly basis or anything like that, but it does provide clear authority to address a circumstance like that, were it to arise.

Section 45 approved.

On section 46.

M. Farnworth: I was going to suggest that sections 46, 47, 48, 49 and 50…. We could deal with those all together if the minister can go through them and just outline if they are standard practice, what we are doing today. Is there anything different in this legislation as to the way we currently would deal with the matters covered by these particular sections, or is there is anything new? If he could tell me, that would be great.

Hon. M. de Jong: I think the hon. member astutely pulled the sections together. Again, aside from the pricing element of this, the absence of any authority for these remedial provisions has largely motivated the creation of the act in the form it is. So it would be incorrect for me to suggest that these things have…. The authority for these remedial provisions does not exist. They are, to that extent, new.

Sections 46 to 50 inclusive approved.

On section 51.

M. Farnworth: Again, sections 51 and 52 — in essence, what they're doing is codifying and allowing us to do what would be the policy. There is nothing different with these sections other than that it is now being codified and given the authority. Is that correct?

Hon. M. de Jong: Well, in the sense that this represents a deliberate attempt to prevent certain activity from occurring, it is not new. The fact that the statute creates a specific offence for contravening these provisions is, and that's the difference. It again codifies that an offence has occurred where one of these contraventions take place.

Section 51 approved.

On section 52.

[1745]

M. Farnworth: Just a clarification from the minister. If a person who "commits an offence listed in section 51 (1) or (2) [offences]," or an offence established in the regulations "is liable on conviction to a fine not exceeding $200,000 or to imprisonment for a term not exceeding 6 months, or to both" how is that determined? On what basis is that determined?

I'll give an example. Let's say you uncovered sort of a massive fraud scale. I'm just using it as an example, hypothetically. A $200,000 fine could be seen, in essence, as the cost of doing business as it were. What's the rationale for this number in here and for the six-month limitation?

Hon. M. de Jong: The best answer I can give the member is that the intention was to align the penalty provisions in this statute with the provisions in the E-Health Act, the Medicare Protection Act and the Pharmacy Operations and Drug Scheduling Act. E-Health has a maximum penalty of $200,000. Pharmacy Operations and Drug Scheduling Act, $200,000. Medicare Protection presently, I think, is $2,000 or six months in jail or both. The Offence Act applies with respect to the term of incarceration. I can't recall if it sets…. It may well set a maximum of six months, but I can't be sure of that without checking.

Section 52 approved.

On section 53.

M. Farnworth: Section 53 deals with fines and incarceration of a person who commits an offence listed in section 51. Sorry, I'm on the wrong….

General provisions, 53, "Person not to be charged with both administrative penalties and offence." "(1) A person subject to an administrative penalty must not be prosecuted for an offence in respect of the same incident that gave rise to the administrative penalties. (2) A person charged with an offence must not be subject to an administrative penalty in respect of the same incident that gave rise to the charge."

I take it that would be in line with existing practice and policy and is related to, I guess, that you can't be charged twice — not being a lawyer like my learned colleague. It's that double jeopardy provision, I guess. Is that what that is?

Hon. M. de Jong: That's correct. It hasn't been an issue
[ Page 12457 ]
thus far, because without the act we haven't had offences per se. But it is the essence of the fairness argument that the Crown must decide which route it wishes to pursue.

Sections 53 to 58 inclusive approved.

On section 59.

M. Farnworth: We're now, I guess, at one of the more…. It's all interesting in this piece of legislation, but it's the issue around regulation. As you're well aware, there are provisions in the act that are enacted with the passage which are in fact legislative provisions. Then there are provisions in the act coming into force when they are passed by the Lieutenant-Governor-in-Council, when cabinet passes the regulations. This is a key part of the bill in that sense, in terms of (1) the timeline for when regulations are to be enacted and (2) the nature of those regulations. How those regulations are determined is all-important.

[1750]

The minister has stated that with regards to pricing, for example, the government intends to move quickly to get those regulations formulated and put into place. I think that that is important.

Section 59 deals with regulations respecting the provincial drug program. Can the minister outline the nature of regulations being anticipated and what timeline they have in place, if any, for their implementation and development?

Hon. M. de Jong: We've already discussed the immediate priority will be the drug-pricing regulations. By virtue of the transitional provisions contained within the bill…. This is actually important. All of the existing policy around the drug plans — eligibility, enrolment — will remain in place.

Following the completion of the OICs, the regulations relating to the drug pricing, the work will turn to packaging up the OICs relating to these other provisions — the drug plans themselves. During that time the existing policy framework pursuant to the transitional provisions of the bill will remain fully in force and unchanged.

M. Farnworth: I thank the minister for his answer. In fact, I think we can probably move on to the next section then.

Section 59 approved.

On section 60.

M. Farnworth: Section 60 deals with regulations respecting beneficiaries. Again, similar questions as in section 59. Are there any significant changes that the ministry is anticipating? What's the timeline for implementation of the regulations regarding beneficiaries?

Hon. M. de Jong: The same answer I gave with respect to the previous question would apply here, as well, in terms of the transitional provisions ensuring that today's policies remain in force pending the transition to an OIC regulation.

[1755]

M. Farnworth: Section 61. I'm glad the minister is working with me on this. "Regulations respecting providers and others." For the information of my colleagues….

The Chair: Pardon me, Member. Are you on section 61?

M. Farnworth: Yes.

Section 60 approved.

On section 61.

M. Farnworth: I thought we had already done that.

Section 61, for the information of my colleagues who may not be familiar with this particular section, "Regulations respecting providers and others":

"61 (1) The Lieutenant Governor in Council may make regulations respecting persons described in section 12 [duties] as follows: (a) respecting the information that must be supplied by a person applying to be enrolled as a provider; (b) respecting the criteria a person must meet to be enrolled as a provider, or to continue enrollment; (c) respecting records that must be kept and the period of time for which they must be kept; (d) respecting changes to a provider's designation and the cancellation of a provider's designation or enrollment; (e) prohibiting providers from charging beneficiaries for drugs, devices, substances or related services for which the provider receives payment from the minister under this Act; (f) requiring providers to make certain information available to the public."

And it goes on.

Again, these are going to be important regulations which providers, of course, are going to be concerned about. I expect the minister will answer the same as he did before, that the existing practices will be in place while the transition takes place. I'm wondering if the minister can give any sense, in this particular section, how long the transition time period is anticipated and any particular issues that they are looking to have to address during that transition period.

Hon. M. de Jong: The sequencing of events for this would be the same. I think importantly, again, the maintenance of the existing policy structure pursuant to the transitional provisions of the bill will ensure continuity, pending the completion of the drafting work.

Section 61 approved.
[ Page 12458 ]

On section 62.

M. Farnworth: I have some questions on here, and my colleague from Vancouver–Mount Pleasant, I believe, also has some questions on this particular section.

This is one that I know, in terms of our conversation that we had earlier in the discussion on the legislation, was of an area of particular concern around pharmacists and pharmacies, and how prices will be regulated and the impact on pharmacies.

At the time I asked the question around the discussion period or the period for input — that there have been some issues around this time being too short, that two weeks was too short. The minister at that particular point indicated that the time frame had been extended by an additional two weeks.

My question to the minister is: has the Pharmacy Association indicated any other areas where they would like either additional time to be extended to them or any additional issues they would like to have addressed under the issue of price regulation?

At the same time, have there also been any issues that have been identified with the drug companies themselves that are going to need to be addressed during the transition period, and if so, what are they? Is there an expectation as to how long this particular period is going to take?

Hon. M. de Jong: Well, this one is number one on the hit parade, of course. This is the one that will have that written submission process take place and then, through the month of July, face-to-face meetings.

[1800]

To be fair, certainly the pharmacies, at least, and maybe the generic drug companies would prefer not to be having this conversation in the context of legislation at all, but my suspicion is that the House is going to pass this bill. That's what's going to take place.

But they'll have the extended period for the written exchange and then the face-to-face meetings in July. The objective is to have this part of the work done by the fall.

M. Farnworth: I thank the minister for his answer.

I think there will be, no doubt, considerable discussions around this taking place over the next couple months. I hope the minister is able to stick with that timetable. I think it might be a bit ambitious, given the nature of the issue involved and the concerns pharmacies have — and, no doubt, drug companies as well.

Having said that, yes, I fully expect that it will be nemine contradicente when the vote is called. But having said that, there are still important questions, I think, that need to be answered and questions that should be addressed.

In terms of the pharmacies themselves, are they now aware that the discussions are to take place throughout the summer and that's been communicated to them?

Hon. M. de Jong: That's correct.

J. Kwan: To the minister and his staff: my apologies. I've only just entered the chamber for this segment of the debate, so there may well be questions that were canvassed earlier that may apply in terms of the answers. I apologize in advance if there's repetition here.

Just sort of catching on that last little exchange, it seems to me that the minister is talking a little about the consultation process around the price regulations with pharmacies and so on. I wonder if the minister, just for my benefit — and I fully understand I perhaps am being repetitive here — could just run through the process for me so that I can get caught up on it. Then I can ask some questions on behalf of a constituent who's written to me on the issue.

Hon. M. de Jong: I'm not sure the member wants to be burdened or bored by my recent accounting of the history of the meetings I had in September and saying to the Pharmacy Association that our joint expectations under the negotiated agreement haven't been realized, so our option is legislation. "If you want to present the government with a problem around that decision, then demonstrate how these savings are going to be realized."

At the end of the day, my recommendation to the government was that the assurances that we needed around those savings and the fact that they would be realized weren't presented in a form that I could confidently say would make them a reality. Therefore, we've exercised, the member knows, the legislative option. That's not something that the Pharmacy Association is happy about, but there it is.

When the dialogue has begun…. We've made it clear that we are anxious to work over the next period of months with the Pharmacy Association to address as best we can the concerns that they may have.

But obviously, that discussion is taking place — or it will take place — against a very different backdrop. That is the ability that the legislation ultimately will give to the government to move unilaterally. The negotiating dynamic, or the discussion dynamic, will change appreciably if the House chooses, as I expect it will, to endorse this piece of legislation.

[1805]

That's roughly where we're at now. The invitation to receive written submissions has been extended, at the request of some of the stakeholders, for two weeks and thereafter will follow a series of face-to-face meetings to address a variety of issues.

Those discussions, of course, will take place in the context of what we learned from Ontario a month or so ago about a decision to benchmark generic drug prices at a lower rate than has been the case.

The member may not have heard my submission to the committee. Although I did not assign a specific number,
[ Page 12459 ]
I disclosed my view that British Columbians and their agent, PharmaCare, deserve, in my view, to pay as competitive a rate for generic drugs as anywhere else in the country.

J. Kwan: So if I understand the minister, the consultation process, the written submission consultation part of this, has already begun. Then it has been extended by another two weeks. That would bring us…. Sorry, I don't know exactly when the start date is, so I don't really know what the two-week time period means. Would that be the end of June?

Hon. M. de Jong: That's correct. We anticipate receiving written material until the end of June.

J. Kwan: So that would be the end of June. Did the people invited to come and provide their points of view to the minister…? Would that be just to the B.C. Pharmacy Association, or is it to individual pharmacies as well?

Hon. M. de Jong: The plan is — and there is a willingness — to accept written material from independent pharmacies, from individual pharmacies. In fairness, the plan for the face-to-face discussions and meetings is to rely on the two associations — the B.C. Pharmacy Association and the Association of Chain Drug Stores — in terms of the face-to-face discussions that would follow.

J. Kwan: So for the written submission part, the individual pharmacies can certainly write to the minister. Am I assuming correctly that they should write directly to the minister, or is there some branch of the ministry to which they should address their submissions?

Hon. M. de Jong: They can write to the Minister of Health, the Minister of Health's office. I would suggest that they make it clear — re Pharmaceutical Services Act regulations, or something like that — to ensure it gets properly routed.

J. Kwan: I'm going to put on the record a letter that I received from a constituent. In it — it's interesting — in the last line, basically, the individual was asking whether or not the minister would commit to consult the B.C. Pharmacy Association first before the final reading of Bill 35.

Clearly, that is not happening, because we're in debate on Bill 35 at the moment. But I'm wondering, before I read the letter into the record: was that point of view expressed by the B.C. Pharmacy Association to the minister before the bill was brought to the House?

[1810]

Hon. M. de Jong: Thanks to the member for the question. I may have missed the subtlety of the question, but I want to be clear. There have been discussions dating back months. Certainly, this is one of those cases where I can say that I was, as minister, directly involved. The nature of those discussions, as I alluded to a few moments ago, was that we signed an agreement. The agreement was predicated on the fact that we would work together to realize X number of millions of dollars in savings. That hasn't happened.

So that discussion began with: "Why hasn't it happened?" It actually wasn't: "What are we going to do?" It actually was: "What are you going to do to fulfil the obligations that you assumed as part of that agreement?"

Eventually, that would have evolved into a discussion when it became clear. We notified the Pharmacy Association: "All right, we're going to legislation. That decision has been made. If you have thoughts or ideas, recognizing that you as a group are disappointed with that decision…. But that is now the decision."

So there has kind of been an ongoing discussion. What will follow now is a discussion that relates specifically to regulations and formal instruments. But there has been a pretty steady, ongoing discussion that began as a negotiation and has turned into a discussion now that it's clear we're legislating.

J. Kwan: Well, thank you for that, Minister. Putting the letter on the record for my constituent, addressed to me, it reads:

"On April 24, 2012, the Minister of Health"— and names the minister — "introduced Bill 35, the Pharmaceutical Services Act, into the Legislature for first reading. This legislation has been anticipated for some time and provides a legislative governance framework for PharmaCare B.C. B.C. was the only province not to have such legislation.

"The Pharmaceutical Services Act is very comprehensive and covers all the aspects of pharmacy practice in the province. Some of the key provisions in the act are that it enshrines PharmaCare into law; enables the Ministry of Health to establish and set the conditions and criteria for the formularies and the list of related services, clinical services; enables the Minister of Health to regulate drug pricing in B.C.; enables the minister to establish new rules respecting rebates and incentives, including creating new prohibitions, limits, reporting requirements, auditing powers and penalties; gives the minister new investigation and enforcement powers, including order-making power and the power to impose administrative penalties of up to $5,000 per individual and $50,000 per corporation; creates new offences that, on conviction, can result in fines of up to six months in jail; significantly loosens the privacy rules currently protecting the personal information in PharmaNet; and empowers the minister to make detailed regulations in respect of all of these areas.

"Under this act, retail pharmacy owners and pharmacists must apply to be enrolled as a provider. The current PharmaCare enrolment agreements are deemed to continue until after the regulations respecting the requirements for enrolment are published.

"Current formularies and related-services lists are also continued under this act. While not mandatory, advisory committees that advise the minister in respect of decisions about the formularies or their related services lists can be formed.

"The act provides for sweeping new powers and appears to require onerous new reporting requirements related to rebates
[ Page 12460 ]
and incentives that are likely to impose new operating burdens on pharmacy.

"The new investigative and enforcement rules suggest that the minister may intend to establish a new oversight or enforcement mechanism. These details are unknown, as a great deal is left to be fleshed out in the regulations.

"The Ministry of Health has stated that throughout the summer it will be drafting the regulations related to drug pricing, which will involve consulting with stakeholders and others. It will also have to draft regulations to provide further details on how the act will be implemented and enforced and what the requirements for enrolment in PharmaCare will be.

[1815]

"As the owner of an independent pharmacy, we are worried about the cap of the max dispensing fee to $10, and the generic drug pricing would reduce to 35 percent of the brand-name drugs.

"The high overhead costs of running the pharmacy cannot be covered by the revenues generated from PharmaCare in the future. We hope the Minister of Health should consult with the B.C. Pharmacy Association first before the final reading of Bill 35."

It's signed by the pharmacist from Owl Drugs, which is a pharmacy in my riding.

It's in this context that I was canvassing the questions — to get clarity on the consultation process that has been done in advance of Bill 35 coming to the floor and, of course, the consultative process that will continue as the regulations are being drafted and being made available. The minister has answered those questions.

I heard September at some point in the debate. I'm wondering: is September the timeline where the minister expects that all the regulations would be completed and be put into force?

Hon. M. de Jong: No. I wish that were so, but it won't be, given the volume of work that needs to be done. The fall target relates to the pricing regulations specifically.

The reason for that is as follows. Because of the transitional provisions, the existing policies, formularies and plans will all remain in place unchanged so that we can operate on that basis under the statutory provision. The new piece is respecting the drug pricing, and that is very much the priority going forward.

I should say this, because I know the member will undoubtedly provide the author of the letter with a copy of the exchange here — on the, I know, absurd assumption that he isn't watching the exchange today. There's very little in the letter that I would quarrel with. There are a few things, so I don't want to offer an absolute endorsement, but it is in large measure a fairly accurate description with a few notable exceptions that I would characterize differently.

It does highlight, again, the two significant features of the legislation. One is most certainly the pricing, the generic drug pricing, but the second is to take a program that has served British Columbians well for a number of decades and give it the structure and the statutory foundation that can only occur by virtue of the passage of legislation. I think the author of the letter, from what I heard, has touched on both those points, and I think they are both important.

J. Kwan: Well, thank you for that, Minister.

I was going to ask the minister, too, to comment on the letter overall to ensure its accuracy. If there are areas where there is a departure, in the author's understanding, from what is taking place in Bill 35, then it would be good for that to be identified so that the individual knows that. So I thank the minister for those comments.

In terms of the notification process for individual pharmacists to provide their written submissions, can the minister advise: what sort of process did the ministry undertake? Were there advertisements, for example, in community newspapers, or that kind of stuff? How were people notified to provide the input?

Hon. M. de Jong: I think, in fairness, we have generally relied on the associations. I'm told that about 70 percent of the operating pharmacies are members of one or the other. We have not advertised in local newspapers or otherwise to solicit responses.

Sections 62 to 106 inclusive approved.

Title approved.

Hon. M. de Jong: I move the committee rise and report the bill complete without amendment.

Motion approved.

The committee rose at 6:20 p.m.

The House resumed; Mr. Speaker in the chair.

Report and
Third Reading of Bills

BILL 35 — PHARMACEUTICAL
SERVICES ACT

Bill 35, Pharmaceutical Services Act, reported complete without amendment, read a third time and passed.

Committee of the Whole (Section A), having reported progress, was granted leave to sit again.

Committee of Supply (Section C), having reported progress, was granted leave to sit again.

Hon. T. Lake moved adjournment of the House.

Motion approved.

Mr. Speaker: This House stands adjourned until 1:30 tomorrow afternoon.
[ Page 12461 ]

The House adjourned at 6:22 p.m.

PROCEEDINGS IN THE
DOUGLAS FIR ROOM

Committee of the Whole House

BILL 54 — PROVINCIAL SALES TAX ACT

(continued)

The House in Committee of the Whole (Section A) on Bill 54; D. Black in the chair.

The committee met at 2:34 p.m.

On section 1 (continued).

B. Ralston: The minister had a question, and he was going to answer it upon our return.

Hon. K. Falcon: I apologize to the viewing audience, who I know have been seated or lying with great expectation. The question was asked, and then we had to break, of course, for question period, etc. So all these poor people are left out there wondering what the answer to this question is. I'm apologizing, on behalf of the viewing audience.

Here we go. The answer is now here.

[1435]

Just to remind the audience that's watching us today and those gathered here that we were discussing the definition of "sale." Under the definition of sale, we were talking about subsection (k), which is a subsection that talks about things that are not included in the definition of sale.

In subsection (k) it talks about provision of property, software services, telecommunication services that in prescribed circumstances, are "merely incidental to a contract for the provision of services that are not subject to tax under this Act." The question from the member opposite was for some examples of what we mean by the description of "merely incidental to a contract."

An example would be if you engaged architectural services and they presented blueprints to you. Those blueprints would be considered part of the architectural services and are incidental to the contract. They would not form the definition of tangible personal property that would be utilized in the definition of sale. So too, if you hired a graphic designer to do work under contract to provide you graphic design services and they provided you at the end of it with a disk that perhaps had what the design looks like or a piece of paper with the original graphic design on it, that would not be considered a part of a sale or would be captured by the definition of the sale that is specifically excluded.

A better-known example for people is when you go to pick up your dry cleaning and you get the hangers with your dry cleaning. Those are considered incidental to the provision of the dry-cleaning services. Those would not be included.

So those are the kinds of incidental examples of services that would not be covered under the definition of sale.

B. Ralston: Turning to short-term rental vehicle. This was included in the previous section, but the reference to 28 days has now been added. I gather that was in regulations previously, and I take it that this is being added because this particular tax is now being returned as a result of this statute. Is that correct?

Hon. K. Falcon: That is correct.

B. Ralston: The definition of "tangible personal property" is one that we've touched on in some of our previous discussion. I'm looking at the previous definition. The only change seems to be (e). And although we may have touched on this in our discussion of the definition of a fixture, can the minister explain why that was added to this section?

Hon. K. Falcon: This qualifies as an example of the complexity of the old act that was of great frustration to anyone who had to deal with it. In this case, fixtures were covered under the old act under the definition of tangible personal property and subsection (d) was "fixtures, other than prescribed types of fixtures." You then had to go to the regs, under section 2.52. What you would find if you went to 2.52 under the regs is subsection (e) there is "an improvement to real property or part of an improvement to real property…" etc.

[1440]

So what we've done is…. Again, part of the incredible complexity of the PST in the past was that you would be sleuthing around between regulations and the law trying to figure out what is covered and what isn't covered. So here we've now made it simpler: "tangible personal property." Rather than having to go, under the old system, and check reg 2.52, you can now just read the 2.52 reg as part of the description of tangible personal property.

B. Ralston: I'm glad I'm giving the minister a chance to talk about these important definitions that are intrinsic and integral to the statute.

The next definition is "tax." There's a further elaboration or qualification that speaks of section 187(2). "Bulk transaction" appears to be when someone goes out of business or is transferring all or a substantial amount of their stock or inventory.

Why was it felt necessary to include that particular additional qualification to the definition of tax?
[ Page 12462 ]

Hon. K. Falcon: The general rule here remains the same as it was under the old Social Service Tax Act. It was found under section 99 of the old Social Service Tax Act . It wasn't clear in the old act that the person purchasing was going to actually be liable for the tax, so we've put it in the definition of tax to remove any ambiguity. This will clear up some evident ambiguity that existed in the past.

B. Ralston: Just parenthetically, I suppose if the minister could advise whether that was the subject of any litigation that assisted in the drafting of this particular section.

But I'm now looking at section (b). It refers to section 222. I'm wondering why it was necessary to include that further elaboration in this particular section. Was there a similar problem in terms of ambiguity with this particular aspect of the definition?

[1445]

Hon. K. Falcon: Yes, I'm advised that this is very similar to the last answer, except different sections. This existed under section 104 of the old Social Service Tax Act. It is now being included as part of the definitions here under the new act.

B. Ralston: "Taxable component" is not part of the previous set of definitions. I would take it that this is simply being added for greater clarity, in the sense that if tangible personal property is separated or divided, one would expect that the tax would be apportioned according to the respective values of the component parts. But perhaps there's something more to it than that. Maybe the minister can help.

Hon. K. Falcon: The definitions were in the regs prior to this under subsection 12(1). The definitions were found there. We've now included them here in the definitions to again try and make it clearer and easier for folks to find and understand their responsibilities.

B. Ralston: The definition of "taxable service" is fairly straightforward, although I'm noting an absence of a reference to a prescribed service such that one could add services by regulation later. I'm wondering why that was omitted. Or is it felt to be included in subsection (a) or (b)?

Hon. K. Falcon: I'm advised that the fundamental issue of why we don't have that provision there is that we don't impose tax by regulation. It must be as part of the act. So if, for example, government — whether ours or any future government — decided to, say, expand the PST to cover other services — architectural services or just pick an example — then we would be required to come back and add that new category under the definition of taxable service to include beyond what is already laid out there in sections (a) to (f). But we don't — nor, I understand, is it the practice to — give ourselves the ability to impose a tax by regulation.

B. Ralston: That's a helpful answer. Section (e) refers to legal services, so obviously, this was a subject of much controversy and litigation from the time it was initially introduced in the late '90s and all the way through. But it seems to have persisted.

Just so that I'm clear, then, the minister is saying that if a tax were to be imposed on, say, other professional services, it would require an amendment, a legislative amendment, to this particular definition to include that in there. Is that correct?

Hon. K. Falcon: That is correct.

B. Ralston: The next definition I want to turn to is "use." This is a very broad and comprehensive definition. I'm wondering if the minister can describe the principle that's operating here. It does refer in the first section to tangible personal property. Obviously, there are a number of ways in which property can be used. There's also a qualification relating to software, to taxable services, to accommodation and to telecommunication services. I think those are the broad outlines of the principle groupings of areas that are described.

If an overview could be provided, bearing in mind that tax statutes are strictly construed in favour of the subject, according to the legal authorities, and the precision of this definition is important to the government's ability to achieve its legislative objective.

[1450]

Hon. K. Falcon: A retail sales tax applies to the end user. To make that work, you need to have a definition of what use is. This is an inclusive definition, so there's the conventional definition of "use" and then, for further clarity, we have added these other elements of what use is.

That's an important distinction. As I say, in a retail sales tax environment, because the end user is the one that actually pays the tax…. Although the tax may have been paid on different products and tangible goods at different stages, the final purchaser, the end user, is the one that will be paying the PST.

I'm advised that this definition of "use" is an inclusive definition that just provides greater certainty and clarity for those that need to understand the term "use."

B. Ralston: In (xi) there is an exception, and it appears to revolve around tangible personal property being brought into British Columbia for the sole purpose…. The words are "being processed, fabricated or manufactured into, or attached to or incorporated into, other tangible personal property that is to be transported outside British Columbia."

Would that apply to a manufacturing operation where
[ Page 12463 ]
goods were brought in for assembly, and then they were designed for export and not for sale or use in British Columbia?

Hon. K. Falcon: That is correct. That is the same, I understand, as what was there before.

B. Ralston: The other exception is (xiii): "the storing, keeping or retaining of…personal property for the sole purpose of resale." Can the minister explain why that wouldn't qualify or why it's being exempted as constituting a use?

Hon. K. Falcon: Again, this is a good example of a description that goes to the very heart and the whole principle of a retail sales tax, which is that it is a tax that will be paid for by the end user. If you're buying it as, say, inventory to sell to end users, then you are not using it. You were not using that stuff.

If you were buying inventory for your store that you're going to be subsequently selling to someone, you're not personally using that, therefore, it does not and should not trigger a PST requirement. But once you are selling that to the end user, then there would be the provision or the application of PST.

As it says here, if it's "personal property for the sole purpose of resale," then it is exempt.

B. Ralston: There's a fairly extensive definition of use of software, but I think we've dealt with that in our previous discussions.

[1455]

Over the page, in section (f), it says "in relation to a telecommunication service," and there is a very expansive definition of telecommunication service.

I'm interested in how and on what service the provider is taxed. Obviously, we have some telecommunications companies that are headquartered here. Is it only the signals or the contracts that are accessed in British Columbia that are subject to tax? Or if they're outside of the province — for example, Rogers, which has a head office in Toronto — how does that affect the eligibility for a taxable service?

Hon. K. Falcon: Again, in the case of telecommunication services and following the principle we talked about earlier, the key principle of retail sales tax is that the end user of that telecommunication service would be the one that is taxed. So in the case of a cell phone, for example, if the end user is in British Columbia using that cell phone, then they will be paying tax, even if the company is headquartered in Toronto, as the member pointed out, with Rogers, or even in the United States. Again, the principle of that end user being the one that pays is consistent here too.

B. Ralston: In that situation, then — where if there is an American company, for example, but the end user is here — is the telecommunications company at its headquarters in the United States or Toronto designated as a collector? Or how does that work?

Hon. K. Falcon: The answer is not necessarily always. Different factors will determine whether or not they will be designated a collector. Essentially, it comes down to the key question as to whether they are carrying on business in B.C.

Most cell phone companies typically have a presence in the province because to sell their cell phones and service, most consumers, customers, want to know that they've got somebody to deal with locally in the event of an issue. So they typically do business in the province and thus are collectors.

[1500]

The key is that whole issue of whether they're carrying on business in British Columbia. If, by chance, they weren't and someone was using a cell phone but carried on no business in B.C., then the end user would still have an obligation to self-report the fact that they are utilizing and making a purchase that would have a tax obligation associated with it.

B. Ralston: It seems evident from the definition, but I just want to confirm that this telecommunication service would also apply to the providers of cable television service and the ambit of communications that cable companies now provide. I think the definition is "send, receive, download, view or access one or more signs, signals, writing, images, sound or intelligence of any nature," which would seem to capture them, but perhaps we can just confirm that.

Hon. K. Falcon: That is correct.

B. Ralston: I'm looking at (iv), and it says: "the storing, keeping or retaining of a telecommunication or telecommunication service for any purpose." What activity is that intended to capture?

Hon. K. Falcon: A good example of this would be if you ordered a movie, say, from Netflix. You download it. You store it in your computer. You may not watch it right away. You've already paid for it. You may be watching it a week later, two weeks later or a month later, what have you. You are still the end user of that product, and it would still qualify under the definition here.

B. Ralston: The value of this service that's being provided in telecommunications — is that simply the purchase price, or is there any other way in which the value of the service is calculated for the purpose of tax?
[ Page 12464 ]

Hon. K. Falcon: The short answer is yes. It is the consideration of the price paid, and we apparently get into that a little bit more when we come to division 2.

B. Ralston: I'm now going to turn to the definition of "vendor." I suppose all collectors are vendors, but not all vendors are collectors. I think that's what I'm reading here. This is a very expansive definition of "vendor."

Can the minister just briefly explain…? I'm just going to check my notes here. Some of this is repeated from previously, although I think subsection (4) has been eliminated and subsection (3), I think, has been substantially rewritten.

Perhaps the minister can explain the revisions that have taken place in the definition from the previous statute to this one.

Hon. K. Falcon: Under the old definition, Member, it's really just that paragraph beside the word "vendor" that applied under the old definition. Under the new definition, we're basically taking the same definition, but the areas where you'll note the difference are the same as we've discussed before — where we are separating out and clarifying tangible personal property, software and the taxable service provisions.

[1505]

Again, it's for clarity purposes, and we will see this, I think, probably in different parts of the act, where we continue to separate those out for a greater clarity.

Section 1 approved.

On section 2.

B. Ralston: Looking at the definition — this is "Proof of residence in British Columbia" — in subsection (c), it refers to the "enrollment of the individual as a beneficiary under the medical services plan continued under the Medicare Protection Act."

As the minister will be aware, as I understand it, there's a process underway to convert the standard MSP card to a more, I suppose, difficult to reproduce or duplicate kind of card, which will have features of individual identity and make it very difficult to reproduce it, therefore being a more reliable and valuable demonstration of the person's identity. Is that what's intended and referred to in (c)?

Then I have some subsequent questions.

Hon. K. Falcon: This, I understand, is the same as existed before under the old act, the principle being that if you are a member of the Medical Services Plan of British Columbia, then you are not able to say: "Oh, I shouldn't have to pay PST because I'm not a B.C. resident." We deem you to be a B.C. resident if you are receiving health care services under the Medical Services Plan of British Columbia.

B. Ralston: The minister may recall that earlier in the session — I believe it was this one; they all tend to blur together — there was a discussion about data linking, where data collected under the auspices of one statute could be used for the purposes of another. Is this an example…?

Looking quickly at section 2 in the previous act, this is the same provision. Is this a question of data linking, in the sense that data collected under the MSP provisions is now apparently being used to verify residence under the Provincial Sales Tax Act?

Hon. K. Falcon: This provision was the same provision that was under the old act. I'm advised that we always have had and still have the authority to enter into access-sharing agreements with MSP if necessary for tax purposes. That is an ability that we had in the past and we still retain under the new PST.

B. Ralston: Given the, I think, expressed concern of the Privacy Commissioner in some of the comments that were made at the time of the amendments to the bill that was recently passed through the House, was this included as part of the broad discussion about data linking and commented on by the Privacy Commissioner?

I appreciate that it may have been a practice in the past, but I think there's a heightened sensitivity, at least from the Privacy Commissioner, about the use of data collected for one purpose and being used for another.

[1510]

Hon. K. Falcon: No, I understand that this is a provision that has been long, longstanding — probably decades — in the old social service act and in the current act. It has nothing to do with broader data linkages or any of that. It just is saying that if you are enrolled as a beneficiary under the Medical Services Plan, that is deemed to be sufficient proof of residence — that you are a resident of British Columbia.

We, of course, in the Ministry of Finance often enter into specific sharing agreements for tax purposes, information-sharing agreements, but those are fairly prescriptive in terms of what information can be shared. It has to be very specific around the requirement of the government to fulfil its authority under taxation.

B. Ralston: Given that this refers to enrolment in the Medical Services Plan, is the minister then saying that there is a specific data-sharing agreement to use this data for the purposes of the Provincial Sales Tax Act? If so, has it been passed before the Privacy Commissioner? I would take it that given that we're reinstituting the act, it would be a new agreement, the previous one having been terminated. Perhaps the minister can confirm that.
[ Page 12465 ]

Hon. K. Falcon: Just as we had agreements in the past, now that we're going back to the PST, we have to enter into new agreements. All agreements that we enter into have to go through the lens of the Privacy Commissioner and the rules thereto.

B. Ralston: Has the specific agreement that would empower this access to this data been signed yet? Has it been passed to the Privacy Commissioner in draft, or is it work that remains to be done?

Hon. K. Falcon: It is not completed yet, but there is a team working on all those kinds of information-sharing agreements that will be necessary once we're back into the PST retail sales tax world.

B. Ralston: By an agreement, is there a reciprocal agreement on the part of the people administering the database of registrants and collectors to share the other way, in terms of potential eligibility or not for a medical services benefit?

Hon. K. Falcon: We will be coming up to this whole issue of confidentiality under section 228 of the act. So I don't know….

B. Ralston: It could be awhile.

Hon. K. Falcon: Yeah, it could be awhile, so do you want me to go over it now?

Essentially, it says under this section that a person "who has custody of or control over information or records under this Act must not disclose the information or records to any other person except as follows," and it lays out…. Rather than read it all into the record, I'll let the member just sort of catch up and have a glance at it. It's fairly clear, and my understanding is that this is the same language that existed under the previous act too.

[1515]

B. Ralston: The confidentiality provision, the most important one, is an agreement that exempts it when it's between the government and another government — so between departments of the government, presumably. It also says that it "provides for the disclosure of information and records to, and the exchange of similar information and records with, that other government."

For example, the medical services premium data. There's a program to collect — and this comes up in the constituency office — outstanding medical services premiums that are owed to the government. What aspect of the data exchange would be provided to the people administering the provincial sales tax?

If a person is delinquent in their medical services premiums, perhaps they might be delinquent in the remission of the sales tax to the authority provincially. Is there any data exchange there, in an effort to assist the collection of outstanding obligations to the government?

Hon. K. Falcon: We don't have any of our revenue branch officials here. Though we can guess at the answer, we'd rather not do that. It really boils down to a question of whether a taxation enactment would include the medical services act. I believe it would, but I don't want to say that definitively without having the proper staff here. We'll get that to the member later.

B. Ralston: Perhaps the minister, then, just for the record, could provide that information in writing, say by the end of June. I'll make a note in my follow-up letter.

Perhaps I could move to the next section.

Section 2 approved.

On section 3.

B. Ralston: This repeats some of the language that we saw earlier in the definition of "user." The minister explained it as foregoing the possibility of a person who buys the tangible personal property, pushing it off and saying it was someone else, even though that person may be their agent or acting on their behalf.

This deeming provision appears to broaden the scope and bring them into the act for the purposes of taxation. If that's correct, perhaps the minister can confirm that.

[1520]

Hon. K. Falcon: This existed under the old Social Service Tax Act, under sections 1, 2, 3 and 4. What we're doing is that it is all now being put in one place here under the interpretation of "Deemed expenses of a person." But it is the same information that was in the old Social Service Tax Act on page 18.

Section 3 approved.

On section 4.

B. Ralston: This section appears to give the director — and that's defined in section 1 — the power to intervene and overturn a designation of a sale in a certain way. Can the minister give an example of when these powers of the director might need to be used?

Hon. K. Falcon: This is a rather obscure, complicated issue around…. It's an anti-avoidance rule, in effect. It's so obscure that we had trouble thinking of an example. Nobody could think of one. The best I think I could try and explain this is to say that if there is going to be a transfer that takes place, there has to be….

[1525]

If there's not a written agreement that is transferring
[ Page 12466 ]
title but someone is in possession of an item, tangible personal property, then the director can deem that there was a transfer even if there is no proper written evidence that is suggesting there has been a transfer.

I don't want to go much further than that because it's very complex and confusing and apparently never used or rarely used.

B. Ralston: Well, I suppose it's good that it's there. If it's possible, then what I would appreciate to understand it would be maybe an example of where it's used in the past. If it hasn't been used in the past, then so be it — but just in order to understand it. With that, those are all the questions I have on that section.

Section 4 approved.

On section 5.

B. Ralston: This section establishes a definition of what carrying on business in British Columbia means or how it's determined. This appears to be different from residence, but there's reference to telephone directories, addresses and telephone numbers.

I take it that's a rubric, also, for some signs, either electronically…. I suppose most people would identify by an e-mail address or an IP provider. That may be more difficult to physically locate in British Columbia. Is it meant to include that aspect of people's business identity? Or for the reasons that I've said, is that it's too vague to assist in a decision as to whether or not the person is carrying on business in British Columbia?

Hon. K. Falcon: The effort here is to ensure that if someone is carrying on business in British Columbia, there is some reasonable way to determine and interpret whether or not they're carrying on business. So if the individual has an address or a telephone number, a B.C.-based telephone number, that is sufficient evidence that they are carrying on business in British Columbia.

Going back to the example that we talked about before with cell phones. If you have an address in British Columbia and you've got a local 604 or 250 number or whichever number identifies you as a British Columbia business or individual that's doing business, then that would qualify under our determination as to whether or not you are carrying on business in British Columbia.

B. Ralston: I thank the minister for the answer. I was looking, perhaps, for some comment on an electronic or web presence. It would seem to be one way that, then, you could avoid the regulatory impact of the tax — by simply providing a website but without a telephone number or any specific address in British Columbia — yet carry on business in British Columbia. I appreciate that may involve some regulatory or enforcement concerns, but I'm just interested in the degree to which that has been taken into account in writing this section.

Hon. K. Falcon: I understand, I'm advised, that under section 5(a) here that we're talking about, when we say "is listed in a telephone directory," that definition would include a web or electronic form.

[1530]

Further, under subsection (b), where it talks about "the person's name, or any name under which the person carries on business, appears or is announced in any advertisement," that advertisement would include a website. So between the definition of telephone directory and advertisement, that would include websites and electronic means that the member has talked about.

B. Ralston: Well, then I suppose I would wonder why the language wasn't expressed in capturing what the minister just said. I think it's well known, and I'm looking at The Construction of Statutes by Mr. Driedger. It's a well-known legal text on the interpretation of statutes.

It's axiomatic, I think, that tax statutes are strictly construed in favour of the subject. In other words, the argument might be that if it's not stated here expressly in the statute, then it wouldn't be captured, because it would be interpreted in favour of the subject. In other words, the doubt would be resolved in favour of the person rather than in favour of the state that's drafted the statutory language.

I wonder if the minister could respond to that or explain why it's not included in that more expansive sense in the statute.

Hon. K. Falcon: Some of this comes from the previous section 11 under the old act. Some of this we have borrowed from the Business Corporations Act. We also rely on the Interpretation Act in terms of making these sorts of determinations.

I understand that sections 5(a) and (b) are referring to those from out of province that may be carrying on business here. There needs to be some way to determine that they're carrying on business. So (a) and (b) attempt to define what those may be. That's where we get into directories, which, I guess, under the Interpretation Act is sufficient to include websites and other electronic means. Advertisements are, I guess, sufficient, as I am understanding it, to include websites. So it apparently is expansive enough to include the concern that the member has raised.

Then under section (c) it's very specific that if the person has in British Columbia any employees or other representatives or any warehouse, office or place of business, then clearly you're doing business. But (a) and (b) are capturing those that may be out of province but still have a presence and are doing business in B.C., even if it is just through a local phone number or website or what
[ Page 12467 ]
have you.

[1535]

B. Ralston: Then just to, perhaps, reiterate. Is the minister saying that if a business, say, based in Alberta, in Grande Prairie, has a website with no specific references to British Columbia yet carries on business, say, in Dawson Creek and Fort St. John selling whatever, that would be sufficient to capture that business under this section? It doesn't expressly say that.

It refers specifically to phone numbers and addresses, which obviously are one hallmark of carrying on business, but electronic commerce is really the order of the day for many businesses. I'm frankly a bit surprised that that specific language isn't in here.

I guess the question is: is the position of the minister that it's included implicitly in those words or, since it's not there, that it's not intended to apply to those kinds of businesses?

Hon. K. Falcon: We have other provisions that actually capture people that are soliciting business in B.C. from out of province, which we will come to. What this says is that under section (b), if they are engaging in any advertisements, including their website, "in which an address or telephone number in British Columbia is given for the person," then that would capture them.

Now, there are other means by which we would capture them if they're running a website that does not include an address or telephone number in British Columbia, and we will be coming to those too. This is just one part of this issue.

B. Ralston: Just before we move on then, could the minister just refer me to the sections where there might be other indices of the activity of carrying on business in British Columbia and how that might be decided before we move from this particular section? As the minister knows, once the section is passed, it's not possible to go back.

Hon. K. Falcon: Certainly. I would reference the member to section 172, which is headlined "Person located in Canada but outside British Columbia must be registered." It goes on to talk about how individuals "must be registered under section 168 at the time the person causes tangible personal property or software to be delivered into British Columbia if the person is located in Canada but outside British Columbia and, in the ordinary course of business, does all of the following...." Then it goes into some subsections that talk about soliciting persons in B.C. for orders to purchase, accepting orders to purchase tangible personal property, etc.

For the benefit of the member, that's on page 135 of 187 of the bill.

Sections 5 and 6 approved.

On section 7.

B. Ralston: This section is entitled "How tax is to be calculated." That's relatively straightforward. I assume in most cases that would be decided by software that would be available to the vendor and the collector.

Can the minister explain the purpose of…? I'm looking at subsections (2), (3) and (4), which appear to have some deeming provisions of when a sale will be deemed to be a single sale — the purpose of those sections. I think subsection (1), at least to my eyes, is fairly straightforward.

[1540]

Hon. K. Falcon: This is the same as the provision that was in the old section 18. Essentially, this is simply saying that if you were buying…. The best way is by an example, probably, at least for me to understand this.

If you're going to Home Depot and you're buying a bunch of nails, if somebody wanted to avoid paying PST and ran each individual nail through because it would be under 15 cents, which is sort of this amount we'll come to later — a threshold amount to trigger PST — theoretically, they could game the system by running a nail through each time instead of 100 nails bulked together.

Interjection.

Hon. K. Falcon: I know. This is unbelievable.

Nevertheless, this is a provision that is in place to ensure that when you are making those kinds of bulk purchases, you are doing so on the basis of…. It's considered as part of one transaction so that you're not able to try and game the system by doing it in the manner which I described.

Sections 7 and 8 approved.

On section 9.

B. Ralston: This speaks of the purchase price of tangible personal property. Then there are some subjects…. I'm interested in subsection (e) which talks about the "depreciated purchase price of tangible personal property." In other words, it would be deducted from the price before calculating the final price, and that refers to section 25. Over in section 25(2) the depreciated value, because this is what this is referring to, will be "determined in accordance with the regulations."

Just for the record, then, I take it that the regulations have not yet been proclaimed but would follow the previous regulations in the old PST. Is that correct?

Hon. K. Falcon: That is correct.
[ Page 12468 ]

Section 9 approved.

On section 10.

B. Ralston: This deals with what's called the "Original purchase price of tangible personal property." Can the minister explain the difference between that and fair market value? There was a definition that we discussed in the definitions section. My guess or suspicion is that the fair market value determination would only come in if the director rejected the original purchase price as being an accurate reflection of the value involved in the transaction. In other words, there'd be an ability to reassess what's called the "original purchase price."

Perhaps he could clarify the difference between original purchase price and fair market value.

[1545]

Hon. K. Falcon: Taxes payable on the purchase price, the PST…. It's always the case that the tax is payable on the purchase price. But if the purchase price does not seem to be representative of fair market value, this essentially allows the director to apply fair market value. So if there is a situation where the purchase price is very suspiciously low, then the director has the ability to apply that fair market value.

The Chair: The committee will take a short recess for five minutes.

The committee recessed from 3:47 p.m. to 3:57 p.m.

[D. Black in the chair.]

B. Ralston: We looked at 10(2)(e) and (f) in relation to the definition earlier. But I do have an additional question on (g) and (h). I'm just wondering why "the purchase of ready-mixed concrete" would be selected and singled out. Is there some special problem in assessing the tax on ready-mixed concrete? I'm just wondering why it would be chosen, of all products, to be directly incorporated into the statute.

Hon. K. Falcon: I'm advised that a long time ago there was some litigation around this issue. So this is the same provision that existed under the old Social Service Tax Act.

B. Ralston: In subsection (h) it refers to "any charge, including a royalty or licence fee" being included in the purchase price. How is that to be distinguished from the exemption that we spoke of earlier, where a service was being provided in addition to the tangible personal property?

[1600]

Hon. K. Falcon: To the member: in this case the primary purpose, as you can see here under subsection (h)(i), is relating to the use of the tangible personal property, whereas in the other section the tangible personal property was incidental to the contract. This is directly relating to the use of the tangible personal property.

An example on the licensing side — a licence fee, for example — could be team jerseys from a sports team, maybe an NFL team or a National Hockey League team, where the sale of jerseys may involve a licence fee associated with them. It would capture those kinds of examples.

B. Ralston: Then I have a question about the interaction of section 10 and section 9. Section 10 appears to add increments based on specific additional costs to the calculation of the original purchase price, yet in section 9 there's a series of deductions that takes place. Would the process be to calculate the purchase price, look at the original purchase price, add whatever elements are required and then look at section 9 and deduct whatever elements are appropriate to arrive at the purchase price? Is that the process that one is to go forward with?

Hon. K. Falcon: Section 9 lays out the interplay of the purchase price provisions between the different sections, whether those are coupons or trade-ins, etc., — all of the different provisions laid out in different sections. Section 10 is just the general calculation of purchase price.

B. Ralston: I'm just wondering. The ultimate goal that you're arriving at is the purchase price, then? In order to get the original purchase price, you have to take into account the elements in section 10, and then you go back to section 9 and read subject to section 9(a). That's what you have if it's not subject to the exceptions that are (b), (c), (d) and (e) in section 9. Is that the basic process that we're going through in order to arrive at the purchase price?

Hon. K. Falcon: That is correct.

Section 10 approved.

[1605]

On section 11.

B. Ralston: This refers to the purchase price of affixed machinery and improvements. There's an exemption that's detailed in section 79, which basically appears to exempt a contractor when goods are purchased for the purposes of fulfilling a contract. There's an exemption…. I guess it's not designed for the original. It was for the end user, and there's no tax payable on that interim step. Is that what is being set out here in section 11?

Hon. K. Falcon: This is to cover off situations where you hire a contractor, for example, to do some work. In
[ Page 12469 ]
the billing approach they're going to take, they're going to lay out specific items where the purchaser will ultimately buy those items — whether it's a bathtub or a sink or what have you — as part of the work performance.

They're entitled to do that, but they can't, for example, put an artificially low price, saying, "Well, this sink costs $2, and the bathtub only costs $5." That's why, under section 11, it says that "the purchase price of tangible personal property is equal to the greater of the following" — the greater of what the contractor actually paid or what is actually on the invoice.

It's really an anti-avoidance rule to ensure that they're not trying to shirk their tax obligations.

Section 11 approved.

On section 12.

B. Ralston: The construction of 12 and 13 appears to have the same relation, one to the other, as 9 and 10 in the sense that one calculates the lease price of a tangible personal property and section 13 refers to the original lease price. Those are all the additional charges that may or may not be applicable, whereas 12 talks about potential reductions. I suppose that's the first question.

Then the second question would be…. In order to calculate the value of the lease…. Say, typically, you lease a car for four years, and there's a per-month price. Then there's an aggregate value of all the payments. That dollar amount is — I'm taking it, according to these two sections — the value on which the PST is assessed. Is that correct?

Hon. K. Falcon: That is correct.

B. Ralston: And the relation of the two sections is the same as the relation between 9 and 10. This is just for leases. Is that correct?

Hon. K. Falcon: That is correct.

Section 12 approved.

On section 13.

B. Ralston: I'm looking in section 13(2)(c). It says: "any payment or consideration, including a membership fee, that is in addition to payments or considerations for rental periods…."

[1610]

I'm wondering: what would be an example where you were leasing a product and there was an additional membership fee in connection with the lease? I'm sure there's an explanation, but it's not something that's coming to mind readily.

Hon. K. Falcon: This is a provision that was the same as what was there before. Essentially, this is one of the downsides to this — I won't call it a bad word — particular tax.

Under the HST, of course, all goods and services were taxable, so it simplified things. Under retail sales tax, of course, that is not the case. Therefore, you have to have all of these wonderful things to ensure that people aren't engaging in behaviour in an effort to avoid tax by saying, "Well, this is a membership fee. It's not really a lease obligation or payment. I'm already paying a membership fee, so I shouldn't have to have my lease payments form part of that."

So all of these kinds of joyful things that are included are part of the wonderful world of the provincial sales tax.

[1615]

B. Ralston: I'm just trying to think of a circumstance where a membership fee might be used in that kind of circumstance. I'm thinking of common lease arrangements, whether they're musical instruments or cars or home appliances or televisions. I know there are discount retailers, such as Costco, that assess a membership fee, but I'm not sure they lease property that's commonly used. I'm just wondering if there's an example that can illustrate the practice that's to be avoided here.

Hon. K. Falcon: An example that we came up with could be a car cooperative, for example, where someone says: "Well, gee, I'm a member. I paid a membership fee, and therefore I only have to pay a very modest amount for the use of this car" — maybe, for the sake of argument, $2, where a non-member is paying $10. So this is a way of ensuring that we haven't got a situation where the use of the term "member" is actually being used in a way to avoid obligations associated with the true cost of using the vehicles.

B. Ralston: Just to follow that, then it says "a substantial benefit of which is a reduction in the lease price." So then the membership fee would be rolled into the lease. I'm not sure that in that phrasing there's any jurisdiction to deem a higher price. Or would that go back to the broad powers of the director to deem the price of a transaction as being below fair market value? Is that what the minister is then referring to?

Hon. K. Falcon: The member has got it largely correct. If there was some circumstance in which the director, in the director's judgment, considered that they were still trying to sort of monkey around with things to try and avoid the PST obligation through the use of a membership fee, then they would have the ability to step in and determine what real fair market value is.

Sections 13 to 15 inclusive approved.
[ Page 12470 ]

On section 16.

B. Ralston: This section sees the intersection of two special categories, software and promotional distribution. I take it from our previous discussion about promotional distribution and multilevel marketing that…. Pardon me. Promotional distribution is a separate category. I'm just wondering why it's felt necessary to have an entire section devoted to the intersection of software, which is a special category, and promotional distribution, which is a special category. Once again, does it pose special problems in terms of calculating the purchase price?

[1620]

Hon. K. Falcon: These rules existed under the old act, and what we're saying here is, for the purposes of this act, in relation to tangible personal property or software that is being provided by way of promotional distribution, the promotional distributor's purchase price of the tangible personal property is established through subsections (1) and (2).

B. Ralston: Well, I suppose if the issue is a rationalization of clarity and simplicity as much as possible, then I'm just wondering why what appears to be a special instance of the general case is required to be mentioned in this separate section. Is that for historic reasons, or are there special problems that have arisen in terms of litigation or interpretation surrounding the combination of promotional distribution and software?

I did have a question about software earlier, because it does seem to be selected out for a lot of statutory treatment, and I just wonder why this is necessary.

Hon. K. Falcon: This comes back to that earlier discussion we had, where under the old act there was a requirement, an expectation that people would read in the fact that software was included in the definition of tangible personal property; whereas in this case, as we have seen so many times previous in our discussions, we specifically spell out tangible personal property or software.

This is just laying out the same provisions that existed under the old act kind of all over the place. These provisions are just laying out as we go forward here in a very clear and easy-to-understand manner for people to understand how we are making determinations of purchase price for various products or services, whether they are tangible personal property or software.

Sections 16 to 18 inclusive approved.

On section 19.

B. Ralston: This is one of the specific examples set out in section 17, which we've just passed — related service, accommodation, legal service or telecommunication service. I just wanted to be clear that the original purchase price of accommodation includes, under section 3…. If it includes accommodation and meals, the tax is assessed on the combined price of both, notwithstanding that meals might otherwise be tax exempt.

[1625]

Hon. K. Falcon: In this case, the provision here is talking about the amount that is attributed. I'm reading the last sentence here of the section: "…the purchase price of the accommodation is the amount attributed to the purchase of the accommodation in accordance with the regulations." The regulations set out provisions that typically will ensure that if you're purchasing sort of a package deal through your accommodation, it may include some meal costs, etc. Meals would be non-taxable, but the accommodation portion would be taxable, so there's a formula in which they are able to determine what portion of your accommodation costs are indeed taxable.

B. Ralston: Then the meals exemption would be set out in the regulations. That's one of the principal exemptions, as the minister is well aware, that's been discussed. That would be excluded from the base on which to calculate the tax, whereas the accommodation would be included — even in the case of, say, a bed-and-breakfast, where the very name implies a combination of the two. Is that correct?

Hon. K. Falcon: I am advised that the regulations are likely to mirror what we had in the previous act.

Essentially, what we're trying to do here is say that if you are purchasing the kind of accommodation, to use another example, that involves, say, bear-watching, and if as part of the bear-watching they include accommodation, meals and transportation to get you out to the site, through regulation we have a formula that determines what portion of that is the actual accommodation, the taxable portion of that.

That will be defined in accordance with the regulations which will follow, but the regulations will, as I say, be similar in nature to what was there previously.

B. Ralston: In that case, the vendor couldn't assign values themselves. It would have to be calculated according to the formula, and that would presumably be incorporated in the software, I suppose, for ease of application, if the vendor had sufficient volume to require software to do the calculation.

Hon. K. Falcon: I am advised that is correct.

Section 19 approved.

On section 20.
[ Page 12471 ]

B. Ralston: This will be of interest to those in the legal profession, how to calculate the tax on their services. It says that the purchase price includes the fees and charges, disbursements and other prescribed disbursements. Presumably, the prescribed disbursements are going to follow in regulations. If this is following the previous practice, could the minister briefly indicate what those prescribed disbursements are, because (a) and (b) seem to include most likely charges.

[1630]

Hon. K. Falcon: Other prescribed disbursements. I could refer the member to the regulations under the former Social Service Tax Act regulations, sections 8 and 8.1, which lay out what those would be. My understanding is that we would be mirroring those in the new regulations that would follow under the prescribed disbursements.

Section 20 approved.

On section 21.

B. Ralston: This is a calculation of the original purchase price of telecommunication service, and there's a list of charges — sign-up charges, access charges, airtime charges, usage charges and service charges. We know how those can run up. In fact, I think some provinces have enacted legislation to limit the ultimate cost of cellular charges to customers.

So (2)(b) is "access charges." On both the TELUS account and on the cellular accounts there's, I think, a $5 a month fee for what's described as system access. I think it's described as going to the 911 service, or it has something to do with the 911 service. Is that what is meant by access charges and is that subject, therefore, to tax?

[1635]

Hon. K. Falcon: I am not familiar with the access charge the member is referring to, although it is unlikely to be an access fee to access 911 emergency calls, which I am advised are not something that they can or do charge a fee for. I can't speak knowledgably about that specific example.

The access charges we're referring to here…. In fact, this list of charges is an inclusive list. It's referring to only charges that you are paying to access that monthly network service, and it is inclusive. This could be your monthly Internet fees, or it could be your telephone monthly network access fees, whatever the case may be. But it is meant to be inclusive by covering off these various sections.

B. Ralston: I wonder if the minister would agree that if I were to forward a letter with a more specific question and perhaps with a bit more detail, he could answer that in terms of its application to this section. I think that might be the better course, given that I'm not entirely certain of my facts at this point. Perhaps the minister could just confirm that would be agreeable.

Hon. K. Falcon: I'd be happy to.

Section 21 approved.

On section 22.

B. Ralston: This speaks of a reduced purchase price or lease price. Can the minister just explain the purpose here? It appears to take into account reductions that I suppose are genuine in terms of the purchase price or the lease price and that factor into the final price. We've covered those in a more high-level way in the earlier sections with section 17 or 18, I believe. Is that correct?

Hon. K. Falcon: I'm advised that this case just is referring to and trying to provide clarity around situations where the seller is offering, as an example, two for the price of one or some such situation where you're purchasing perhaps more than one, or there's some offer to reduce the original purchase price upon certain conditions that have been met by the purchaser.

Then in those cases the purchaser is able to only have PST paid on the lowered purchase price if they've met the conditions that are set out. This is really just trying to capture that — buy a shirt or something and you get the second one for half-price, or two-for-one purchase kinds of arrangements.

Section 22 approved.

On section 23.

B. Ralston: This concerns the use of coupons to reduce purchase prices. I take it sort of as an issue of principle or first principles that the coupon itself has no taxable value, even though it results in a reduction if the merchant gives a coupon, or if you find a coupon and it's distributed as a promotional item. The coupon itself isn't subject to tax, and it simply reduces the ultimate purchase price. Is that accurate?

[1640]

Hon. K. Falcon: This depends on the type of coupon that you have. The member is partially correct, but he's not entirely correct. There are some coupons where the manufacturer will pay some portion of the purchase price. In that case you will still, I am advised, be required to pay the PST on the full price even though the manufacturer coupon is paying part of the price of the good that you are purchasing.

There are other coupons — for example, those coupon books that kids sometimes sell door to door, or what have
[ Page 12472 ]
you — that will not have any PST on the purchase of the coupon book, but when you then take the coupon to the store to use your coupon you will pay a tax based, in most cases, on the new reduced price as a result of you walking in with the coupon.

So you buy your coupon book. You've got a coupon in there for a discount on dry cleaning, and you go to the dry cleaning…. Well, maybe that's not a good example, because dry cleaning doesn't get covered. Sorry, it's an excluded service. All the dry cleaners out there: don't panic. That was not meant to cover you.

Let's use an oil change, because services to cars were added in 1992. An oil change is a good example. You go with your coupon out of your book to get your oil changed, and the oil change, instead of being $39, is going to be $29, and the taxable portion would be on the $29 as a result of you having your coupon.

B. Ralston: Well, that will be welcome news to all the extreme couponers out there.

The electronics purchase, then. Typically, I think, the manufacturer's discount is in electronics, where it's referred to as a manufacturer's or distributor's rebate. What the minister has just said is that you'd pay the tax on the full purchase price, and then after that the rebate would be deducted from that price with the tax on the full purchase price. Is that correct?

Hon. K. Falcon: That is correct.

Section 23 approved.

On section 24.

B. Ralston: This is the calculation of the purchase price where a trade-in is allowed on the purchase certificate. That would be in the automobile market. Can the minister explain briefly the trade-in value, presuming that it's at fair market value, and its reduction of the ultimate purchase price? What price would the tax be paid upon?

Hon. K. Falcon: If you trade in your used car for a new car, the purchase price of the new car is reduced by the credit that is allowed, so not necessarily fair market value. It could just be whatever the credit is that is being provided by the seller.

[1645]

I imagine that covers off those situations where they say, "Bring in your piece of junk, and we'll give you $1,000 for it," or whatever. It is the credit that is allowed. The sales tax will only apply to the new reduced price after that credit has been deducted.

Section 24 approved.

On section 25.

B. Ralston: We'd briefly referred to this earlier in our discussion of the definitions section. The calculation of depreciation will be prescribed by regulation, and there'll be a formula, then, available to engage in the calculations that are referred to in this section. Is that correct?

Hon. K. Falcon: That is correct.

Section 25 approved.

On section 26.

B. Ralston: This refers to what's called a bundled purchase. It refers to a situation where there's a taxable component sold with a non-taxable component in a single price. I think we dealt with that in an analogous way in the reference to hotel accommodation and meals, but can the minister briefly explain what this section means?

Hon. K. Falcon: This is an example, in the case of bundling, where, by way of example…. Subsection (2) of section 26 is really the key here. "Subject to subsection (3)" — which has some other specific provisions "for the purposes of this Act, the purchase price of a taxable component is equal to the fair market value of the taxable component."

Again, welcome to the joys of the provincial sales tax. What you have to do is determine…. If you receive a gift basket, for example, that has food in it, the food is not taxable, but of course the cups, perhaps coffee mugs, maybe some plates, would be taxable. Therefore, the fair market value of the taxable component would attract the PST, but the non-taxable components would not.

Section 26 approved.

On section 27.

B. Ralston: We touched on this earlier in relation to the definitions section. The director is designated by the minister, I take it. I'm just looking back at my definition of director here — yes.

[1650]

In practical terms is there a single director? Are these interventions of valuation by the director relatively rare, or is this something that's routinely done? Can individual citizens make a reference to the director to ask for a valuation if there's a dispute between two parties?

Perhaps just give some colour to the duties of the director. This does confer fairly broad power on that person.

Hon. K. Falcon: I'm advised this provision is substantially the same as the old provision. There is a single director, but that director does have the power to delegate
[ Page 12473 ]
some of the director's powers under the act. The director is appointed by the minister.

B. Ralston: The ability to make determinations — presumably, where the director is not satisfied that the price that's being reported is accurate. Once again, is it possible to give a bit of a sense of how frequent those decisions or interventions might be not only by the director but by any delegated persons within the ministry?

Hon. K. Falcon: I'm advised that it didn't get used a lot under the Social Service Tax Act. Where it was used fairly extensively was examples when people were…. In the course of purchasing an automobile, there's a requirement to write in the value that you've purchased the automobile for. It was not at all rare that very expensive vehicles were, surprisingly, being sold for extremely attractive prices. A $10,000 vehicle was being sold for $10, those kind of things.

That does, in situations like that, allow the director to intervene and determine whether that is the appropriate market value of, in this case, the vehicle.

B. Ralston: In subsection (3) it refers to paragraph (m) of the definition of "sale." That goes back to the provision by a registered charity of "tangible personal property of nominal value as a gift in return for a donation."

Is this a situation where the registered charity can come forward to the director and ask for a determination? Or is this, after the fact, a power to reassess?

Hon. K. Falcon: They could do either. They could come forward, or it could be used after the fact, I am advised.

B. Ralston: There appears to be a related provision in the definition of "use" that also relates to registered charities. The "provision by a registered charity of tangible personal property of nominal value as a gift in return for a donation" is in the definition of "use."

Briefly, how frequently is that used? Is that widely known among charities, or is it something that has been identified as an issue? Or is this simply in the statute and is rarely used?

[1655]

Hon. K. Falcon: This was a benefit that was actually introduced in 2008. At the time we introduced it, we did so because it apparently provided charities and businesses some real clarity and benefit here. This has to do with situations where a charity, for example, is trying to raise money by giving out pins or gold hearts or whatever the case may be. You'll see those occasionally in stores where people can make a donation and then take one of those pins or hearts or whatever the case may be.

Under this provision what happens is that when the charity originally buys all of those hearts or lapel pins or what have you, they pay the PST on them. This ensures that there's no requirement for the people at the tail end, the donors that are picking these up and making donations, to have to pay PST.

What was happening in the past is that it was a total mess, because there was confusion about whether PST applied, didn't apply. Some stores were applying the PST; others weren't applying the PST. We brought in this provision to make it clear that it would not be required. My understanding is it was very well received and communicated to all of the charity world.

Section 27 approved.

On section 28.

B. Ralston: We are beginning a new part now, "When Tax Is Payable," which is obviously a serious consideration. I'm looking at subsection (3). This is the day in terms of calculating the tax on purchase or lease of tangible personal property. That would appear to be fairly straightforward.

I think it's in section (4). It's the calculation of the taxes due in the payment of a lease. I think we've discussed how the tax on a lease is calculated. If you lease a car for four years, obviously there's a down payment. There are 48 separate payments, maybe a lease buyout. The tax is assessed on all those up front. Is there in the calculation here, and does section (4) confirm this, in the monthly payment that there's an element of the PST in each monthly payment? Or is it all due either at the beginning or at the end, which seems unlikely? But that's the way it might be better understood.

Hon. K. Falcon: You pay when you're paying the invoice lease payment. Whatever regularity you're making that payment, usually monthly, is when you would also be paying your provincial sales tax.

[1700]

B. Ralston: Subsection (5) talks about…. It seems to be a general provision about tax being required to be paid monthly, and then there are some exceptions which follow, at least in (6). Is, basically, the substance of subsection (5) that a payment is required at least monthly?

Hon. K. Falcon: This section is just to cover off the situations that often exist out there at some furniture warehouses, etc., where you have opportunities to buy now, pay later. This just sets out the rules associated with that to ensure that, in fact, the tax gets paid, even if you're in possession of a piece of furniture, as an example, but you don't have to make payments until some future date. There is still a requirement here that the PST "becomes due on or before the last day of the month immediately
[ Page 12474 ]
following the first month in which...." And then it lays out some of those details there.

B. Ralston: I'm looking at subsection (6). This would appear to apply, at least in part, with the reference to pipeline, to an energy product. The tax would simply be paid along with the regular invoice, assuming that there's a regular invoice. That would be the timing of the payment of the tax. Is that correct?

Hon. K. Falcon: That is correct.

B. Ralston: Looking at subsection (7), it's not clear to me what situation this is designed to apply to, so perhaps the minister could just clarify. It does refer back to subsection (5), which the minister has spoken about in terms of the "take possession of the goods and then pay later." Perhaps that could be clarified there.

Hon. K. Falcon: We had a previous discussion about situations where you can have deferred payment arrangements. Under subsection (7)(a) this is essentially saying that you are paying on the portion of the purchase price that is known at the time and, of course, you would pay in accordance to whatever the payment schedule is.

Subsection (b) is effectively saying…. In some of these cases you know that if you make your payments all on time, there is sometimes…. As long as you don't miss any payments, there will be a lower price than if you miss payments or are late in payments or what have you. Then you may pay a higher final purchase price.

Subsection (b) is just referring to whatever the final known — or at the time it may be unknown — full price, which may not be ascertainable on the day that you're effectively making the purchase but will only become known later, subject to whatever the conditions may be.

[1705]

B. Ralston: Looking at subsection (9), it deals with the issue of deposits. What it appears to say is that if the deposit is not included as part of the purchase price, but it is, I suppose, intended to be redeemed to the purchaser at the end of the lease period, then it doesn't form part of the purchase price except if the purchaser applies it, say, perhaps at the end of the lease or as a final payment.

Is that a correct interpretation of this provision?

Hon. K. Falcon: What this section is doing is ensuring that deposits are not going to necessarily attract the PST until it is attributed to the actual payment that is being received.

[D. Horne in the chair.]

An example of this is: you book a hotel, you provide a deposit for the hotel room, and then you check in. You stay in the hotel for a few days, then you'll get a bill. The bill will then be what you're paying PST on, but it would not likely include the deposit, which was there just for the purpose of holding the room. So this section is just simply saying that until it is actually attributed to an actual payment, it will not attract the PST.

Section 28 approved.

On section 29.

B. Ralston: Can the minister explain the circumstances under which section 29 would be relevant?

Hon. K. Falcon: In the case where a collector has not collected the relevant and appropriate tax, there is a self-assessment requirement that's set out here that just requires the person to pay the tax under the relevant provision and file and pay that tax to the director. I believe that is essentially what it says.

Section 29 approved.

On section 30.

B. Ralston: This is something that we discussed briefly earlier in terms of the assessment of tax on a vehicle. The minister had mentioned that there has been occasion for the director to intervene and reassess the value that's declared on the form.

This appears to say that when the application to register the vehicle is made, the tax is due, and if there is not an application made, then it's due at the end of the month in which the vehicle is purchased, as I read it. Perhaps the minister could just confirm that timing.

[1710]

Hon. K. Falcon: I think the member is largely correct here. It's just saying that the tax is payable on the earlier of the time that the vehicle is registered or the last day of the month after the month, and then it sets out the provisions there.

Sections 30 and 31 approved.

On section 32.

B. Ralston: Once again there's a provision for software as well as tangible personal property. Can the minister explain what is meant by a tax payment agreement? It looks to be directed by regulations, but I'm assuming that this may have been something that was engaged in, in the past. So can the minister explain what an agreement in relation to payment would look like?

Hon. K. Falcon: This was a change that we introduced
[ Page 12475 ]
in 2007 to try and provide some benefit particularly for larger organizations that are making very large purchases and situations where the companies are making very, very large purchases of tangible personal property, where the tangible personal property may be used for taxable use or non-taxable use.

Under an agreement with the director, they can purchase all these items without taxation and then self-assess the portions that are being used for taxable purposes and those that are being used for non-taxable use. This was a way of clarifying, again, a situation that was just an enormous headache for businesses particularly that were making very large purchases. I'm talking very large purchases, in excess of a quarter million dollars — large.

B. Ralston: Probably to illustrate the principle, an example would be helpful at least for me, speaking for myself, to understand that.

[1715]

Hon. K. Falcon: A good example, by way of example, would be lumber mills. So lumber mills are purchasing huge quantities of parts for machinery, some of which would be for taxable use, some of which would be for non-taxable use. Under the joy of dealing with a provincial sales tax or a retail sales tax, they had to know, at the moment they were buying the parts, whether they were for taxable use.

The problem is that that was very difficult to ascertain, so often what they would do is say: "Well, we'll just pay all tax on this because we don't want to have to deal with the assessment that we may get later on." Then they would have to deal with figuring out which refunds they were entitled to. It would involve an enormous amount of bureaucracy for the company, for the government. Again, it's one of the great frustrations that the business community…. That's why they hate this tax, by and large.

What we did here was to say: "We will allow you to purchase all of these parts that you need without having to pay PST on it, and then you will self-assess, based on how you actually use them, what portion of the parts are going to taxable, what's going to non-taxable. You self-assess and then deal with us on that basis. You can do that in the form of an agreement that sets out the conditions in which the self-assessment will take place with the director."

This was, as I say, something we introduced in 2007 to try and lighten some of the crazy administrative burden that is involved around the provincial sales tax.

B. Ralston: I'm not sure that the example is the best one. As I recall, in the interpretation bulletin for mills pretty well everything, as a result of the decision to exempt machinery and equipment in 2001, was exempt. There is very little that was not exempt.

Perhaps a better example might be…. I know that machinery used on the cutblock was exempt, but if a vehicle was then partly on the public road, there would be some apportionment of tax in that way. So I think I understand the principle.

Was the availability of these agreements available to…? Was there a value threshold above which you have access to these agreements? Or is it something that others could apply to? Obviously, it does involve a certain additional administration of the agreements that might cause some administrative burden if it were widespread. Perhaps the minister could just clarify the circumstances in which these agreements would be offered and available.

[1720]

Hon. K. Falcon: I refer the member to — under the old Social Service Tax Act regulations, under division 19 — 19.1, "prescribed circumstances" sets out where the commissioner may enter into an agreement, referred to in section 93.1 of the act, with the person in the following circumstance.

It lays out some of the requirements — particularly, the requirements in terms of, under subsection (3)(a), "where the person has in the previous three calendar years (a) purchased or leased, on average, not less than $250,000 per year of machinery or equipment eligible for an exemption from tax under division 13 if used for an exempt purpose." It goes on — no point in reading the whole thing. But it's laid out in subsections (a), (b) and (c) of the regulation.

Sections 32 and 33 approved.

On section 34.

B. Ralston: We're moving into a new division, Mr. Chair. This deals with rates of tax. I have a couple of questions about that. The general rate is, of course, 7 percent. But the rate of tax payable on liquor is 10 percent of the purchase price of the liquor. Can the minister explain why the difference between the 7 percent general rate and the 10 percent for liquor?

Hon. K. Falcon: The rates set out therein are the rates that existed previously. So the liquor rate of 10 percent was the rate that was under the old PST. The 7 percent was the rate of the PST. Of course, as the member would know, it was increased in the 1990s from 6 percent to 7 percent and expanded to a number of services. But the rate and the expanded services are included as part of the PST which we're going back to and introducing here today.

B. Ralston: Looking at subsection 34(3). It speaks of the rate on the purchase of vehicles, boats and aircraft — but particularly vehicles — as 12 percent of the purchase price. I know this has been the subject of some public de-
[ Page 12476 ]
bate over the recent past, but perhaps the minister can explain the rationale. I think there's a belief that the 12 percent rate came into effect with the HST and that it would be reduced by 7 percent down to the GST rate only. But in fact, there was a separate tax statute, and I think there's not widespread understanding of that. Perhaps the minister can explain that.

[1725]

Hon. K. Falcon: The member will recall that in Budget 2010 we established the 12 percent rate for private sales of vehicles, aircraft and boats. I announced in Budget '12 that we would continue with the 12 percent tax on vehicles, boats and aircraft. It would continue at a rate of 12 percent to ensure that there was similar treatment between GST-registered businesses and those involving private sales.

This was something that had long been an issue of concern, as I understand. Though it predated me, I certainly heard the arguments over the years of the auto industry in particular.

They were dealing with a significant problem of individuals who were effectively in the business of selling vehicles — not unlike the GST-registered vehicle sellers, the car dealers, were — but were doing what was commonly referred to as curbing. They were constantly buying and selling vehicles without being appropriately licensed and not paying the same tax that was being paid by GST-registered businesses.

We made a public policy decision at the time that we were going to level that playing field to make sure that there wasn't going to be that disparity which allowed that kind of curbing to take place. I announced in Budget 2012 that we would continue with that public policy decision, which was separate and distinct from the HST, though it has the same rate.

What we have done, though — similar to what we did with the Hotel Room Tax Act, where we rolled that into this Provincial Sales Tax Act so that we don't have multiple acts dealing with the issue of these kinds of taxes — is rolled them all together, including this one, into this act to ensure that everything is all in one place — whether it's the room accommodation taxes, which were formerly under the Hotel Room Tax Act; the tax associated with the sale or the purchase of vehicles, boats and aircraft; or, in fact, the PST.

All of that is now in one place and laid out, in this case, in part 3.

B. Ralston: The minister may have been approached by the same people. I'm not sure. There's a subset of the secondhand or used car market which buys and sells, as a hobby, vintage or antique vehicles. I forget the distinction between. One is over 20 years and one is over 25 years old, in terms of the definition.

The view that's been expressed to me is that they are seeking a return to the exemption from a requirement to pay the provincial sales tax, as being what was in existence before. They seek a return to that now. I invite the minister's comment on that position.

I've received representations myself. It's a relatively small part of the market in the overall tax value that's assessed and remitted as part of the used car market. I'd be interested in the minister's response, because I know there are people who are lobbying individual MLAs for consideration of this kind of treatment.

Hon. K. Falcon: I am familiar with the group. They certainly were lobbying for an exemption. It's worth pointing out that there was no exemption under the PST, though it was admittedly at a lower rate. As I said to that group, just as I've said to others and as I don't mind saying to the member, when we brought this in, it wasn't universally applauded. I absolutely acknowledge that. No tax ever is. Certainly, I wouldn't applaud any tax, generally speaking.

In this case the rationale behind doing this was to ensure that there was going to be similar tax treatment, as I say, between GST registrants or registered businesses and those private sales that, unfortunately, were attracting a considerable number of individuals who were effectively in the auto business without having to play on the same playing field as GST-registered businesses.

That was the underpinning of the public policy decision. Though I have heard the entreaties from the vintage vehicles association folks, I have advised them that there wasn't an exception before, there won't be currently and it will continue to apply.

[1730]

B. Ralston: I'm looking at subsection (6), which is the escalating tax on the purchase price of passenger vehicles based on a $55,000 threshold, and as the price goes up, it increases. Can the minister explain the rationale for that tax treatment of vehicles at that price?

Hon. K. Falcon: This is restoring what used to be commonly referred to as the luxury tax under the old PST. It returns under the new PST — same threshold, same amounts. Effectively, what it does is increase the rate of tax based on the value of the vehicle.

It's 7 percent of the purchase price of a passenger vehicle if the original purchase price is less than $55,000. If it's $55,000 or more but less than $56,000, it goes to 8 percent. If it's $56,000 but less than $57,000, it's at 9 percent. It seems strange to have it for a thousand bucks, but anyhow. Then it's 10 percent if the purchase price of the vehicle is $57,000 or more.

As I say, this is what existed…. If memory serves me correctly…. I'm not sure when it was introduced — the luxury tax.
[ Page 12477 ]

Interjection.

Hon. K. Falcon: Okay, it was '93. Anyhow, it's restored, as I say, to the same thresholds and the same rates.

B. Ralston: Subsections (7) and (8) refer to tax payable on the purchase of a manufactured modular home and manufactured mobile home. Perhaps the minister can just advise. Does that repeat the tax treatment that existed in the previous act, or is this a new provision?

Hon. K. Falcon: It repeats what was there under the old act.

Section 34 approved.

On section 35.

B. Ralston: These are the same provisions in relation to leasing a more expensive vehicle. It reproduces the same dollar values as subsection (6) of the previous section does.

When it refers to the lease price, that's the total value of the lease, but it's not 7 percent. Unlike the purchase price, it's the rolled-up lease price over whatever it is, 36 months or 48 months. Then the assigned percentage is derived from the fair market value of the vehicle itself, separate from the calculated value of the lease. I think that's a fair description.

Hon. K. Falcon: The member is correct. It is based on the value of the vehicle itself, not on the schedule of the lease payments.

[1735]

Section 35 approved.

On section 36.

B. Ralston: This is an area where, obviously, there would be some concern about avoidance of tax and perhaps even illegitimate avoidance of tax. Can the minister explain briefly the policy rationale in terms of gifts?

It particularly refers to vehicles and aircrafts and boats. The rates appear to be the same, and reference is made to fair market value. So presumably, there is a deeming provision that's operating in terms of…. Given that there is a gift, there is no purchase to derive any value from. Is that basically the principle on which this section is operating?

Hon. K. Falcon: There was previously a tax on all gifts from out of province. What we have done now is provided a consistency for gifts in province and out of province for vehicles, boats and aircraft.

The member is right. This is to deal with a very substantial problem associated with people that, to avoid paying tax, were claiming that an item was provided as a gift rather than purchased. As an example, last year there were hundreds of high-end, late-model vehicles — including BMWs, Porsches and Mercedes — that were reported as so-called gifts from so-called friends. It was quite clear that there was widespread abuse taking place here.

Now what you will have is consistency and clarity with respect to the provision of gifts of vehicles, boats and aircraft, whether coming from out of province or whether in province.

[1740]

B. Ralston: I thank the minister for that explanation.

Then, prior to this legislation coming into force, if a gift is made within the province, it doesn't attract any tax at all under this act. Is that correct?

Hon. K. Falcon: I'm advised that yes, before, if it was a true gift and there was no consideration, the tax would not apply. But as I say, what we have discovered is that we apparently have an extremely generous number of people in the province. Last year almost one-third of all private transfers of vehicles were reported as gifts instead of sales. And of those so-called gifts, 40 percent were between unrelated individuals.

Happily, though it hasn't happened to me yet, there are individuals that are gifting high-end Porsches, Mercedes and BMWs to people that they are unrelated to, out of the goodness of their heart. Though I appreciate the generosity of British Columbians, we're going to ensure that that doesn't happen in the future as it has been happening in the past.

B. Ralston: Given that policy, will there be a provision, though, for what appears would be the very rare occasion or relatively rare occasion of the genuine gift, or will they all be swept up in the new legislation?

Hon. K. Falcon: No, it's a very good question, actually. There will be an exemption where the donor previously paid tax and the gift is from a family member or an inheritance or a donation to a registered charity, which is generally consistent with the treatment of gifts in other provinces.

What we've really done is aligned B.C. to other provinces. It stops the abuse but protects the legitimate cases of people that are gifting to family members or to registered charities, etc.

B. Ralston: The policy that the minister just spoke of. Would that be, then, in a regulation? It doesn't appear to be. At least, I don't spot it here in the section.

Hon. K. Falcon: The member is correct. It would be spelled out in the regulation but consistent with what I
[ Page 12478 ]
have stated here.

Section 36 approved.

On section 37.

B. Ralston: It refers to just tax on purchase. There are a number of exemptions that are set out. I'm not clear what additional ingredient this section adds to the rates. We're in the section on rates. I'm not clear what additional ingredient it adds. Can the minister explain what the purpose of this particular addition to the statute is?

Hon. K. Falcon: This division is the primary charging provision of the act. The division, I'm advised, is generally consistent with similar provisions in the old Social Service Tax Act. This is where we are imposing the tax on the purchases of tangible personal property, and it's laid out here in section 37 and beyond.

Sections 37 to 39 inclusive approved.

On section 40.

B. Ralston: This appears to just impose the same tax on vehicles leased outside of British Columbia but registered in British Columbia.

[1745]

So if you were close to the Alberta border and you leased a vehicle in Grande Prairie and you were using it in British Columbia, then tax would be due on this basis. I think that would seem to be the interpretation.

Hon. K. Falcon: That is correct.

Sections 40 and 41 approved.

On section 42.

B. Ralston: This deals with the issue of breach of lease. I suppose it's where a person doesn't make their payments and payments are spread out over the life of the lease. Can the minister explain how this section operates to collect the tax that was calculated at the signing of the lease?

Hon. K. Falcon: Section 42 is just referring to cases of lease arrangements with tangible personal property where there is a breach of the lease. You may have, say, ten months of payments still outstanding. This recognizes — and I'm advised that it's similar to the provision in the old act — that the PST owing on the balance would now become due and payable. This just sets out the conditions for ensuring that takes place.

Section 42 approved.

On section 43.

B. Ralston: This, I believe, reinstitutes a previous provision in the old act which applies to rental car agencies, where there's an additional tax on a rental car as a financing mechanism for the Transportation Financing Authority. It's $1.50 a day. There are conditions on that. Can the minister just confirm that or not?

Hon. K. Falcon: The member is correct. It's reverting back to the way it was under the old Social Service Tax Act, including the provisions that are laid out there in terms of which kinds of leased vehicles and rental vehicles apply and on which basis.

B. Ralston: Is there any estimate of the amount of revenue that this will raise for the B.C. Transportation Financing Authority, based on previous history — and perhaps some projections of likely revenue?

Hon. K. Falcon: It's been a few years since we've had it. The most recent estimate that we had would have been in 2008, when it generated about $12 million.

Section 43 approved.

On section 44.

B. Ralston: There's a reference here to exemption from the tax if there is a sale and immediate leaseback arrangement. Can the minister explain how that would exempt one from tax?

[1750]

Hon. K. Falcon: This takes care of situations whereby if you purchase…. Say I go out and purchase some form of tangible personal property and then immediately sell it to someone and lease it back.

This is not unusual in business, where you might want to have some of those ongoing maintenance costs or what have you looked after by someone else. But in a situation such as that — where you've already paid the PST on your original purchase and you're now, then, selling it to someone and leasing it back for some period of time — you're going to be exempted from having to pay the PST again. So it's just covering off those kinds of situations.

Section 44 approved.

On section 45.

B. Ralston: This provision — I believe it was in the previous act — just permits a person who can demonstrate to the director that they've used leased property outside of British Columbia…. They can get a refund from the director.
[ Page 12479 ]

What would be the hallmarks of use outside of British Columbia? Would that be proof of residence or business activity? Were there any regulations attached to this previously as to what would be the prescription required in order to be eligible to receive the refund?

Hon. K. Falcon: This is a provision that is primarily used by the business community. It is based on the actual use of the tangible personal property outside of the province.

Documentation will be provided to the director by the business. That documentation could vary depending on the kind of business it is, but the director has to be satisfied that it is indeed being used outside of the province. Thus, if it is, it would allow for a refund that would be based on that portion that is being used outside of the province.

[1755]

Sections 45 and 46 approved.

On section 47.

B. Ralston: This initiates a new division, division 4, on the tax treatment of tangible personal property brought into British Columbia. The first is the definition, and the minister is probably aware by now that I like looking at the definitions because that's helpful in the later interpretation.

This refers to the "calculation year." Is this changed in any way from the previous act? If so, what are the changes?

Hon. K. Falcon: The substantive definition is the same as it was prior, except that the term "12-month period" has been changed to read, under section 47, "calculation year." This is, I'm advised, a way to ensure that things are easier and clearer for people trying to follow this.

Section 47 approved.

On section 48.

B. Ralston: This deals with the exemptions. I note in (e) "software." Once again, software seems to get particular and special selection for inclusion in some of these divisions. Why is it excluded?

Hon. K. Falcon: What this is saying here is that this division does not apply to those items, including software, as the member has mentioned, because they've already been covered off in the earlier sections that we discussed. We want to avoid a situation in which there would be double taxation on these kinds of things.

Section 48 approved.

On section 49.

B. Ralston: The provisions here seem to refer to B.C. residents, and throughout. I would assume that if a non–B.C. resident brings tangible personal property into British Columbia, there would be some treatment of that. I take it, from my recollection of reading these provisions, that there are separate sections that deal with that. Perhaps the minister could just confirm that B.C. residents are dealt with here when they bring property into British Columbia, and others who may not be B.C. residents are dealt with elsewhere.

Hon. K. Falcon: The member is correct. Actually, under section 52 you'll see there's a heading called "Tax if tangible personal property brought into British Columbia by non-residents." We will be coming to that section.

Section 49 approved.

On section 50.

B. Ralston: This is taxation on registration of a vehicle brought into British Columbia. This is commented on from time to time, just anecdotally: people may bring a vehicle into British Columbia and not register it here and sometimes, at least, for a year or two drive it on the registration in another province. It's ostensibly for insurance purposes, although I'm not sure that the policy would be valid in those circumstances.

[1800]

What is the obligation that's set out in this section to register upon bringing…? How long is permitted to elapse before there's a requirement that it be registered and then, thereby, attract tax?

Hon. K. Falcon: We don't set out when people have to register. That is actually set out in the Motor Vehicle Act. What this is saying is that any person who registers a vehicle brought into B.C. pays the tax, whether they're a resident or not. That's what this is stating.

Section 50 approved.

The Chair: Shall we take a really fast recess for about five minutes?

The committee recessed from 6:02 p.m. to 6:07 p.m.

[D. Horne in the chair.]

Hon. K. Falcon: I've been remiss in not introducing the staff that are with me today, and I apologize for that. I do want to introduce, for the benefit of the members opposite and the viewing audience, the very, very efficient
[ Page 12480 ]
and excellent public servants that are here with me today.

I'm joined by Elizabeth Cole, who's the executive director of tax policy. I'm also joined by Jordan Goss. Jordan is the executive director of the consumer taxation branch. I am also joined, in the back here, by Anne Foy, who is the strategic adviser of tax policy.

They've been a delight to work with over the last number of years as we've spent an inordinate amount of time, it seems, on the issue of tax policy. So I thank you for giving me that opportunity.

On section 51.

B. Ralston: I do want to echo the minister's compliments to the staff. Just from observing them and the minister conferring, there's an enthusiasm and a palpable excitement in responding to these questions, which really speaks of their commitment to the work they do. Despite the rather lengthy session that we're engaged in here, they seem fairly tireless, at least from my observation over on this side of the room. So I echo your compliments to them.

I'm looking at section 51. This includes a formula for calculating tax due if the use of the tangible personal property brought into the province is only temporary. It seems to be set out in section (6). I take it it's simply an apportionment based on the relative use in British Columbia and the other jurisdiction and that it's no more complicated than that. That seems to apply…. Perhaps it's more probably used in relation to vehicles and other equipment used in the natural resource industry where, typically, they may cross over from B.C. to Alberta and back again.

Can the minister just confirm that that description of this section is more or less accurate?

[1810]

Hon. K. Falcon: The member is largely right with respect to (6). By the way, this reflects what was, again, under the old Social Service Tax Act. The only slight differentiation I would take with the member's characterization is that for each time the equipment comes in for a temporary basis in a one-year period, the tax is applicable — not based on its use but each time it is coming in for a temporary basis in a one-year period.

Section 51 approved.

On section 52.

B. Ralston: This refers to the taxation treatment of tangible personal property brought in by non-residents. But the qualification for non-resident does include a property qualification — that's either an owner of real property or leases real property in British Columbia. I'm wondering why that is there in the definition of "non-resident," because that does appear to be a fairly narrow subset of non-residents.

Hon. K. Falcon: This is the same as the provision under the old Social Service Tax Act. It's intentionally narrow, Member, because what we're trying to do is capture people that we know have a longer-term attachment to British Columbia, not people that are maybe just spending a summer here or are here for a couple of months. We are intending, through this provision, to capture those individuals that have, as I say, a longer-term attachment in the form of either a long-term lease or the ownership of real property in the province.

B. Ralston: The definition that's particularized, then, applies throughout this section? There are other subsections that refer to the same non-resident. I'm assuming…. I'm reading down, which is standard statutory interpretation, but I just want to confirm if that's correct.

Hon. K. Falcon: That definition of "non-resident" only applies to section 52 in its completeness. It is only applying to section 52.

B. Ralston: Then by extension, if a non-resident enters the province, bringing a car or a boat, stays for the summer and then returns to their home province, that wouldn't attract tax? It seems a reasonable position, but perhaps you could just confirm it.

Hon. K. Falcon: That is correct.

Section 52 approved.

On section 53.

B. Ralston: This would be an exemption. It's referred to as the "minimum threshold" for the use of the tangible personal property. That would be decided by regulation, I'm assuming. Perhaps the minister can confirm that.

Hon. K. Falcon: The member is correct. That will be spelled out in the regulations. I'm advised that the definition used in the past for "temporary use" was generally six days, but that would be spelled out in the upcoming regulations.

Section 53 approved.

On section 54.

[1815]

B. Ralston: This initiates a new division. Noting the hour, I don't think I'll be too long on my question because I expect we'll be wrapping up shortly, at least for today.

There are some exemptions that are set out. I'm assum-
[ Page 12481 ]
ing, like previous sections, these exemptions are exemptions because they are dealt with elsewhere in the act. There are multi-jurisdictional vehicles, goods for commercial use and prescribed tangible personal property. I think there are one or two others there as well. So these are dealt with elsewhere in the act and are therefore excluded from this section.

Hon. K. Falcon: Yes, these impose a tax, with these exceptions that are put in place. I forgot what the rest of it was.

Interjection.

Hon. K. Falcon: Because they're generally covered elsewhere.

You can see that I have reached my limit here today. Noting the hour, I move that the committee rise, report progress and ask leave to sit again.

Motion approved.

The committee rose at 6:18 p.m.

PROCEEDINGS IN THE
BIRCH ROOM

Committee of Supply

ESTIMATES: MINISTRY OF
ENERGY AND MINES

(continued)

The House in Committee of Supply (Section C); J. Thornthwaite in the chair.

The committee met at 2:36 p.m.

On Vote 19: ministry operations, $50,234,000 (continued).

Hon. R. Coleman: To my left I have my ADM, Les MacLaren. On my right I have the CEO of B.C. Hydro, Charles Reid, and behind me — I should almost get them all to stand up and take a bow — Susan Yurkovich, who is the executive vice-president responsible for Site C; Greg Reimer, the executive vice-president, transmission and distribution; Cheryl Yaremko, chief financial officer; Steve Vanagas, director of communications; Neilane Mayhew, executive finance officer, Energy and Mines; and Steve Carr, my deputy minister.

J. Horgan: It's a pleasure to welcome our guests from B.C. Hydro back to the Legislative Assembly for another round of know your binders, which is always something I enjoy doing. I have a binder myself this year. It is dwarfed by comparison to those who have been walking in the door, but I'm quite proud of it. I'll see how we can go through the next short while.

For those who've come from Vancouver, I apologize. We're tight on time, so I'm going to be kind of rapid-firing here. The upside of that is that we'll hopefully get through a lot of material.

I wanted to start with…. I understand the integrated resource plan is out. We're going to be touring the province. I'm checking my summer schedule. I hope to join you in as many locations as possible.

But I want to touch upon what I do know. I have to confess that I haven't pounded through the documents yet. I look forward to that for my summer reading.

If I look back at demand projections from 2001 and compare them to actuals and if I compare the 2006 projections to actuals, it strikes me that we're off by a lot. In 2006 Hydro estimated an increase in demand —significantly up, to almost 60,000 gigawatt hours.

I'd like to know if the minister, through his staff, could advise me what the actuals were. The 2006 projection was 60,000 gigawatt hours. What was the actual in 2011?

[1440]

Hon. R. Coleman: In 2010 it was 50,233 gigawatt hours, and in 2011 it was 50,607 gigawatt hours.

J. Horgan: That's about 9,000 gigawatt hours off the initial projections from 2006. Do the minister and his staff have an explanation for that significant falloff?

Hon. R. Coleman: Most of it is probably the economy. The second part is that we have about 3,500 gigawatt hours of savings on our demand-side management conservation programs.

J. Horgan: So it wasn't a falloff in industrial load demand. It wasn't a slowdown in the housing market. It wasn't the usual explanations. If not, did the corporation purchase new sources of supply to meet the projections that were predicted in 2006?

Hon. R. Coleman: It was less industrial demand and less industrial growth.

J. Horgan: And did the corporation purchase new supply to meet the projected growth to 59,000 gigawatt hours?

Hon. R. Coleman: There was a power call in 2006 and a Clean Power Call in 2008.

J. Horgan: I thank the minister for the response.

What was the average cost per megawatt hour for the clean calls in '06 and '08, and how much of that electri-
[ Page 12482 ]
city is surplus to current demand?

[1445]

Hon. R. Coleman: The 2006 call was an average of $87, and the 2008 call was an average of $124.

J. Horgan: I note from the markets today that the spot price, mid-C price, for off-peak power is negative 30 cents a megawatt hour. Can the minister, with his staff, tell me what the differential cost would be to B.C. Hydro of purchasing more supply than was actually required based on projections in 2006?

The current cost of that — negative 30 cents off peak. What was the loss to the corporation as a result of the first purchase and the opportunity today?

Hon. R. Coleman: I'm advised that you can't really compare the two and do the measurements because you can't compare spot prices to long-term pricing. Our policy is not to try and rely on the imports, so we buy and sell in the U.S. As well, we make money on some of this stuff.

But you can't compare long-term contracts versus just spot prices because the spot prices are just exactly that. They're spot prices, and they can change. What you're trying to do is have a long-term power supply for your customers that's stable and that you have for the long term.

J. Horgan: Could the minister explain how we actually make money on this stuff when we're buying at $120 a megawatt hour long term and our competitors are selling it at negative 30 cents?

Hon. R. Coleman: Yeah, we're buying it at negative 30 cents, and we're selling it into the California market.

J. Horgan: Again, you'll have to help me. I'm a simple Langford resident. It seems to me that the facts are that by policy, the corporation was directed to purchase more energy than it required, planning for self-sufficiency at drought conditions annually.

[1450]

Their projections missed by 9,000 gigawatt hours on top of that policy direction. In the climate we have today, the budget forecast material assumptions are that the long-term price for electricity will be under $50 a megawatt hour. We bought at $124 long term and today, off peak, at negative 30 cents. I don't know how you make money in that scenario.

I'm wondering, with the aid of all of the vice-presidents and the CEO you have with you today, if you could confirm that it's really difficult to make money under those conditions.

Hon. R. Coleman: The long-term contracts are always more expensive, as the member knows. We don't know what the spot price will be a year from now, two years, five, ten, 15 years from now. You try and buy your market to the long-term supply. At the time that we negotiated these contracts, those were the prices.

This year we have a high-water year at this moment, which has an impact on us. At the same time, in general, we think that we're going to need all this power and then some.

J. Horgan: I don't disagree with that. I believe, long term, that a mix of long-term, fixed-priced contracts and using the spot market is a prudent course of action. You don't want to depend solely on the spot market. I've never advocated that, and I know the minister is not suggesting that.

What troubles me is that we had a review by three deputy ministers, not any of them with any particular expertise in electricity policy, and they concluded that there would be sufficient savings from the loss of 1,000 jobs at the corporation to result in a 50 percent reduction in the projected rate increases.

Maybe the minister could tell me what the total savings was from the labour costs of shedding 1,000 employees and what other initiatives the government has directed Hydro to undertake to realize the cost reductions to consumers that are projected.

[1455]

Hon. R. Coleman: The savings to date over the three-year period will be $176 million, approximately. We've reduced 700 positions, which saves us about $70 million a year. We've had some procurement changes in contracts, saving us $15 million a year. The rest of it is included in various changes in issues in and around consultants and contractors and other services — maintenance, delivery and other efficiencies; materials and supplies; travel; those types of things.

J. Horgan: What other measures has the corporation undertaken consistent with a position that a 17 percent rate increase would meet current obligations, whether it be for power supply, human resources, new infrastructure, capital projects, deferral accounts, and so on? It seems to me that the challenges are significant.

I know that the staff are doing their level best to manage expectations. That's always a challenge in any business, whether it's a public business or a private business, but it seems to me that that number the minister just gave me, over three years, is modest relative to the demands on the corporation. I'm wondering if the minister could provide a little bit more explanation on where those savings are going to be realized to meet the 17 percent rate increase target.

Hon. R. Coleman: We're reducing our total costs by $819 million over three years. The first number I gave
[ Page 12483 ]
the member was the operating cost. Then you go from there to the forecast and trade income, at $136 million, and that's been proven out in fiscal 2012 to be within the budget. In miscellaneous revenues we have lower costs with regards to demand-side management's side.

[1500]

We've actually had a substantial saving with regards to the cost of interest — which, frankly, we were very happy with — to the tune of quite a substantial millions of dollars. Plus we have the change in the amortization period of demand-side management to match up to the programs. There are a number of other things that all came up to the $819 million.

J. Horgan: I thank the minister for his response.

Standard and Poor's analysis of the province of British Columbia in its recent rating, April 2012. "Contingent liabilities: B.C. Hydro. It's our opinion B.C.'s primary contingent risk relates to its local energy provider, British Columbia Hydro and Power Authority, which is a wholly owned Crown corporation."

Can the minister comment on Standard and Poor's looking at B.C. Hydro as a risk? And is he aware of any other time that a bond-rating agency — Standard and Poor's, Dominion or any others — has considered B.C. Hydro to be a contingent risk on B.C.'s credit rating?

Hon. R. Coleman: My understanding of this, as I will try and come back to…. I'm sure they'll tell me if I got it wrong from what they gave me. That has happened before. Basically, they've done it a number of times, where they say that if the regulator were not to allow costs, then this would be a risk. That's basically what that refers to.

Standard and Poor's uses a rating system different than the other rating agencies. The other rating agencies have rated B.C. Hydro triple-A. Standard and Poor's equivalent to triple-A is double-A high. That's what they rate B.C. Hydro at.

J. Horgan: A couple of things. Quoting from the report: "We believe exposure to significant hydrological risk, a lack of fuel diversification and a highly leveraged financial risk profile compared with that of global peers particularly offset the company's strengths."

The minister's comment that the regulator may not allow costs. It's ironic, I think, to be in a position where the government has directed the corporation to not seek costs, yet one of the challenges from the bond-rating perspective is that the regulator may not do that.

Maybe the minister would like to comment on that. And we'll get into the recent order-in-council.

[1505]

Hon. R. Coleman: Well, because we found $819 million in savings, we were able to do that. But just so the member knows, we do a lot of work with universities and what have you with regards to hydrological stuff and to make sure that we're well within our forecasts with regards to the future, as best we can — water supply and all that sort of stuff.

The company maintains a minimum of 20 percent equity in the company, which is not unusual for utilities.

J. Horgan: Last week, May 22, the government issued an order, a special direction, to B.C. Hydro, or to the B.C. Utilities Commission, with respect to rates, the deferral accounts and a host of other issues. My memory of my time in government is that orders of that nature were flagged by leg. counsel with a either red flag, green or orange. I'm colour-blind. It's always troubling for me. Fortunately, there are other people that make those decisions when the papers come by.

I'm wondering if that system of symbols is still in place or if it's been replaced with something else. And what tag did leg. counsel give to the order that was issued on May 22?

Hon. R. Coleman: It still exists — green, yellow and red tagging. It's usually based on legal advice with regards to an order-in-council. Although I'm advised that I shouldn't get into too much of how legal counsel gets to their tagging and colours and what have you, this was a green-tagged order.

J. Horgan: Fair enough. Let's change pace for a minute. I've got my colleague from North Island with me here for the estimates.

In her constituency rests the John Hart dam. I'm very excited for the job opportunities that that will create in her community, but there is some uncertainty about whether or not there will be a project labour agreement in place for the upgrades.

That has been a hallmark of B.C. Hydro over the decades — providing secure, long-term unionized jobs with a commitment from the provider of services, construction work and so on, that they will be fixed-price and there will be no labour stoppages. Does B.C. Hydro plan to continue with this practice and put in place a project labour agreement on the John Hart dam?

[1510]

Hon. R. Coleman: We're not there yet, to be able to answer that specifically. We're in the procurement process. What traditionally happens is that when the vendor is selected, we sit down and then work out that piece of the puzzle. We've done that on the power lines both with union and non-union contractors. Usually they sit down with the union and work out the labour piece as we get to procurement. Since we haven't selected a proponent yet, we're not at that level of discussion.

J. Horgan: In preparing for this project, certainly the
[ Page 12484 ]
corporation has an inventory of approved companies that are capable of doing this type of work. It's been a longstanding tradition at B.C. Hydro. In fact, the Allied Hydro agreements are templates for other jurisdictions to follow.

It would surprise me if B.C. Hydro and the government of British Columbia would want to deviate from past practice that has served us very well and provided us with extraordinary infrastructure at reasonable cost and with family-supporting jobs in communities right across British Columbia.

My colleague from Columbia River–Revelstoke is here, and I believe the new units at Revelstoke are being installed under a project labour agreement. If that's not the case, maybe the minister could tell me any other recent capital projects that Hydro has undertaken which didn't have project labour agreements.

Hon. R. Coleman: Basically, the Mica and Revelstoke do. The only project that doesn't have one right now is the Columbia Valley transmission line project, which is a non-union group. They don't have an agreement, but all the rest of them do.

J. Horgan: Then would the minister agree with me, and his colleagues and senior executives at B.C. Hydro, that using temporary foreign workers for B.C. Hydro capital projects is something that they wouldn't contemplate and that they would make every effort to ensure that even in a difficult skills market, we would be doing our level best to either find local or Canadian skilled tradespeople or we would train them to do the jobs we need over the next five to ten years?

[1515]

Hon. R. Coleman: That's correct, hon. Member. We do our level best to use local and British Columbia labour, but obviously we are a country, and there are times when we need other people in Canada to come.

The only time we would ever consider temporary foreign workers is if we had an acute shortage in a specific thing that we needed somebody from outside the country to perform. That's possible on some of these projects.

If you take a look at the complexity of John Hart, there's actually a number of pieces to the dam. There's a significant tunnel that has to be drilled and bored. There is a powerhouse to be built, and there's all the seismic upgrade that's got to take place, basically. We think that would be fine in Canada, but you can't always make a blanket comment that we could never, ever have to bring in somebody from outside the country for specific skills that we may not have.

J. Horgan: As a Vancouver Islander, I certainly would prefer to see displaced forest workers and others that have experienced job loss through the downturn find that training, and I know the minister will commit to doing that.

I would've preferred to hear him say that…. I'll interpret from what he said, and he can deny it in his response, that it is going to be the objective of B.C. Hydro on this and other projects to ensure, to the greatest extent possible, local jobs, local training, Canadian jobs — foreign workers as a last resort. I think I'm getting a nod on that, and the minister can confirm that or not when he's done.

I want to move to the northwest transmission line, if I could. In 2006-2007 — '08 maybe — the announcement of the northwest transmission line was made. A capital cost estimate was $404 million, from Bob Quinn to points north. Scope creep has come into that project. I understand that. The last reliable figure I had was $525 million. I think it's even higher than that now.

Could the minister, with his staff, give an estimated cost on the northwest transmission line and, in doing so, give me a breakout of the federal contribution, the contribution from the private sector and what the ratepayers will be on the hook for?

[1520]

Hon. R. Coleman: We have a range when we do…. So $404 million was the number we gave to Canada. We operate on a plus-30 or minus-10 calculation. We're within that range. So $561 million is the projected cost, and $130 million of that will come from the federal government, and $180 million comes from the private partner, which is AltaGas. We expect to recover on our remaining $250-some million from mines and other industrial activities that comes through, to keep the cost down pretty low for the ratepayer.

As a matter of fact, we don't know what the final recovery would be. But given the activity we're seeing up there, it may be actually very good. This is a very good price for us to have built a line this size as to what it really cost us in the end.

J. Horgan: So the contribution-in-aid-of-construction component that the various mines in the corridor are expected to pay…. It's the view of the minister that that contribution plus the benefit of profit, one assumes, on providing supply to these facilities will make up that $250 million.

Also, I just want a clarification on the $180 million from AltaGas. That was part of a long-term contract — I believe the longest of the long-term contracts — signed with private power producers. I would expect that AltaGas is an income trust, so cash is not an issue for them. I think it's a 60-year contract. You can check me on that. That's coming from memory.

But a 60-year contract will make up that $180 million pretty quickly, and in fact we'll be paying for that by paying higher rates than we would normally on the cost of that power.
[ Page 12485 ]

Hon. R. Coleman: Yeah, it's a 30-year contract with a 30-year renewable. AltaGas is making the investment into it. And you're right. That's the power project that they have up there.

They are also working with the Tahltan and a number of other opportunities in the area with regards to power, to move it up and down Highway 37 obviously. Highway 37 moving power southbound is good if we can get power out of it that we can actually find up there, because that would take us into Kitimat. The member and I talked earlier this morning about the LNG issue. So that's where that sits.

J. Horgan: I suspect that in the IRP that's underway, the corporation will be looking at their demand up that corridor. Again, as we talked about this morning — and the people from Vancouver didn't have the benefit of listening to our riveting discussions on the issues that we canvassed in the morning — we've got LNG. We've got five or six possible mining projects. Has the minister got a guesstimate?

Let's assume the two first, the Apache and the Shell proposals for LNG and Galore Creek, Shaft Creek and Red Chris. Do we have numbers on expected demand there, or is it just way too premature for that? And if it is, I'm okay with that.

[1525]

Hon. R. Coleman: These are total estimates, so I caution the member. But we estimate Shell will be around 1,100 to 1,200; Apache about 500; Galore, 100. Shaft Creek will be quite small. I don't have a number on that. Red Chris will be about 65 — so pushing close to 2,000 megawatts of power.

J. Horgan: So that $250 million provincial contribution which currently would be the responsibility of ratepayers — how does the corporation see spreading that $250 million? With that projected increase in load, how long would it take to extinguish that $250 million liability to the rest of the province?

Hon. R. Coleman: Realistically, we think we should recover the cost of that over the next ten years.

J. Horgan: I thank the minister for that response. We don't know when these things are coming. In our discussions about the mining sector last night, we didn't even talk about Galore. We talked about Red Chris as a likely customer. Assuming two LNG facilities, that's a significant amount of energy that we're going to have to provide.

In my discussions with proponents, whether they be in the mining sector or in the oil and gas sector, there's an expectation that the tariff structure for new customers will be the same as the tariff structure for old customers. I know there are some internal discussions. I don't know what the extent is. One of the challenges of these jobs, hon. Chair and to those that may well be watching at home, is that sometimes you hear stuff, and you're not sure if it's official or just what people are thinking.

So I'll put the question to those assembled that should have this information. It's fairly straightforward, I suppose. Is it likely that we're going to be able to provide that level of supply at the existing industrial rate without it being an enormous cross-subsidy by residential ratepayers?

Hon. R. Coleman: It's not the intent to pass this on or to give the same rate as we would have on the other. Basically, an industrial load over 150 megawatts is required today to contribute both to infrastructure and energy. That's the same contribution we're expecting out of the LNG.

J. Horgan: There are no plans, there are no discussions, there are no proposals to revisit the current tariff structure in light of this projected — according to the jobs plan — massive increase in demand in the north? Those industries want to pay as little as possible, and so do ratepayers in the Lower Mainland — residential and commercial ratepayers.

So is the tariff structure going to remain as is, in view of this increase in industrial demand?

[1530]

Hon. R. Coleman: With the LNG, which we should keep over here because it's such a big piece, there are separate negotiations on price. There is no intent whatsoever to put that onto the ratepayer. The other industrial customers that may come along at 150 megawatts and higher would still be subject to the infrastructure and energy contribution that we have today.

We are going to enter into discussions with policy and with the commission for new customers with regard to the future industrial rates.

J. Horgan: Do you have a time frame for that discussion?

Hon. R. Coleman: The plan is that we will be consulting on the terms of reference this fall, and we will hopefully be finished the discussions and make the recommendations by next year — about a year from now, I guess.

J. Horgan: I'm going to ask a couple of questions so that maybe we can get some binder activity behind you while you're thinking about the first question. That's just because I'm running out of time. You guys have to stay here. I have to go, and I regret that.

Interjection.
[ Page 12486 ]

J. Horgan: Yeah, I'll do what I can.

The B.C. Transmission Corporation was wrapped up a couple of years back with much fanfare and an announcement of annual savings of some $30 million. It seemed odd to me that the government would disaggregate the utility, claim it was a cost saving by doing so and then, years later, stick it back together again and claim another cost saving. I'm being a bit glib about it, but that's what happened.

It wasn't on your watch, Minister, so I'm not holding you accountable for that. In fact, many of the people behind you weren't involved in that either.

There was an expectation of savings. Has the corporation quantified those savings over the past number of years so that they can continue to make the case that it was a good idea? That's question one.

Question two. My colleague from Delta South has arrived. I had a question I wanted to ask, and she may want to follow on to it, which is in the putting in place of the Tsawwassen transmission line, a number of private homes were purchased.

[1535]

I want to know how many of those homes are still held by the corporation, and if it is none, what the cost was of holding those properties. Was there a benefit? Was that quantified? That's my question. I'm sure that the member for Delta South will want to add on to that and maybe have some other questions as well.

Hon. R. Coleman: First of all, let's deal with B.C. Transmission Corp. When it was created, it wasn't created to save money. It was created to meet the FERC rules that we were facing at time. Basically, we thought we wouldn't be able to trade in power if we had an integrated company with both the power transmission and the production of power in the same place.

Those subsequently became less onerous over time, and it was deemed to be worthwhile at this point, because it wouldn't affect us on our trade, to reintegrate it back into the company. When we reintegrated it, we achieved a saving of $25 million a year. That's been built back into rates.

On the Tsawwassen home purchase. All properties have been sold at a full list price or very near to list price. The average sale price was $545,000. The total all-in acquisition cost to acquire the homes was $63.3 million. Our net loss on the sales of the homes was $6.5 million. We had financing costs of $6.2 million. Some upgrades that we did, some project maintenance and security, those types of things…. We figured that when all is said and done, it would cost about $20.2 million.

J. Horgan: Adding in that $20 million in additional costs to the completion of the transmission line, what was the total cost of reconnecting Vancouver Island to the grid? And how much was it over budget?

[1540]

Hon. R. Coleman: We don't have those numbers right here. We'll get them for you.

J. Horgan: In terms of other transmission upgrades and infrastructure, if there's a $25 million savings in the reintegration of BCTC and that was passed back to ratepayers through the Utilities Commission process….

We've got the Lower Mainland project. We've got the proposals in the northeast. We've got the proposals in the northwest. In terms of the capital projects that are on the inventory, how many were not excluded from Utilities Commission oversight by the Clean Energy Act?

Hon. R. Coleman: Could you repeat the question?

J. Horgan: There are a whole host of transmission upgrades and expansions in play — northwest, northeast, into the Lower Mainland. Many of them were exempt from the Utilities Commission oversight and reviews. Of those projects, are any of them subject to oversight, and what other future transmission projects does the minister expect will actually go to the Utilities Commission?

Hon. R. Coleman: The only transmission project that was excluded was the northwest transmission line. The Okanagan–Lower Mainland transmission…. It's actually the Interior to Lower Mainland transmission line. It's subject to BCUC. So was the Columbia Valley power line. And the Dawson Creek–Chetwynd power line, transmission line, is actually with the commission now.

J. Horgan: We don't have new load requirements in the region, yet government still felt it was appropriate to exempt the northwest transmission line from commission review. Why was that decision made if we don't need to get power somewhere right away? Why wouldn't we have taken the time to ensure that the dollar numbers that we were talking about earlier on — $250 million to the corporation and a federal contribution, which also comes from taxpayers in British Columbia…?

If other transmission upgrades are appropriately reviewed by the commission, why not NTL?

[1545]

Hon. R. Coleman: The other ones serve large amounts of customers. This was actually about opening an area of the province for future development. I remember being part of the discussion — I wasn't the minister at the time — and saying that I thought this was a unique opportunity on Highway 37 to get to billions of dollars of mining activity.

At the same time we were doing that, we knew that we needed to make the line bigger if we were going to actually be able to just not have it for a mine or whatever, so
[ Page 12487 ]
that meant somebody had to make an investment.

There was timing with regards to, I believe it was, the federal moneys, so it had to be a quicker decision. All of that came together in the decision to try to make an investment of what we thought was an investment in the future that government decided to do at the time.

J. Horgan: I appreciate the notion of opening up an underserviced area and providing opportunity for economic development, but as I understand it, absent any mines, absent the Forest Kerr IPP, the number of potential customers is under 1,500 residential customers in that corridor. Is that correct, or are there more customers just waiting to hook up to the grid and I just don’t know about them?

Hon. R. Coleman: Yeah, it's about 1,500 customers. The federal government wanted us to get that community off diesel as a result of this, and that was one of the reasons for their investment in the line. It takes this community off diesel.

The whole idea was because we had a list of…. We had some pretty good information about the possibilities of the mines up there — Red Chris, Galore Creek and the others. So it was about making the investment bigger.

You might have been able to get a power line to a certain point because of a mine, but to actually extend it to Iskut, to be able to get the community off diesel was one issue. To be able to have enough so that you can move power up and down the Highway 37 corridor, to move it through other industrial bases, and also to, obviously, do more than just one mine….

If it was just one mine that was paying, they would only build a certain level of power line versus making the bigger power line make the economic sense.

J. Horgan: Again, I'm an advocate for this. I support it. I want to make that clear as a disclaimer, but if you take away the AltaGas contribution, you've got ratepayers and the federal government on the hook, currently, for $380 million for 1,500 customers.

I don't know what climate action plan makes any sense to spend that kind of money to remove some diesel generation. We need to see progress on those mines. Galore's capital plan went in the tank after this decision was made, I think — or it was very close to it — and that obviously disrupted prospects in the short term.

In the long term I'm hopeful that this works out, but I think that we all have to acknowledge that this is a big risk. That's why the Utilities Commission is there. I think by circumventing the commission in this instance…. There wasn't a time issue. It was a question of whether or not $380 million for 1,500 customers would've been passed. I doubt it would've been. I'm going to leave that, and the minister can comment if he likes.

I'd like to move on, if I could now, to smart meters and….

Do you want to comment on that?

Hon. R. Coleman: I understand what the member is saying, but this wasn't just about getting somebody off diesel; this was about making an investment in the future.

Quite frankly, I remember being in the discussion on this and saying to the folks around the table when we made this decision that this would be a decision that maybe 15 or 20 years from now, we'll be sitting around saying: "We were really smart to have done that."

Just like some people were very smart in the Kootenays at both the Mica dam and the Revelstoke dam to blow out the additional areas for two other generations and putting the penstocks in 40 or 50 years ago so that when we needed the power we could go in and get it. I believe that this is one of those decisions that will be at that level of success.

[1550]

J. Horgan: I certainly hope the minister is right. I'm certainly prepared to take that risk as well, but I don't think we should be oblivious to the significant capital outlay that's being made today for 1,500 customers. We'll just have to see how it unfolds. Certainly, my colleagues and I support the initiative. We want to see it succeed. I'm hopeful that the minister's prospects will be realized.

I want to move to another exemption within the Clean Energy Act, and that's the smart meter program. In this process some years ago, I think it was 2009 or '10, the member for Peace River South and I were engaged in this discussion. Some of the people that are here today were here then. I asked the minister if the smart meter program would be reviewed by the Utilities Commission, and he assured me and the Legislature and the people of British Columbia that that would happen.

It hasn't been the case, and the result has been, in my view, a whole bunch of trouble that may well have been avoided had due process been followed.

My first question with respect to the smart program is, first of all, why did the government make the decision to not use due process to ensure that the public had a complete understanding of the technology and its benefits to the corporation? Secondly, again, in the interest of time because we're running out of it, how many direct complaints has the corporation had from ratepayers about the installation of smart meters?

Hon. R. Coleman: My understanding is that a number of things were exempted in the Clean Energy Act to be part of the foundation for a future plan for clean energy and power in B.C. Those exempted items in the act included smart meters and the smart grid, the Site C dam, some Clean Power Calls on bioenergy, and the northwest transmission line. That's how that came about.

With regards to the smart meters themselves, our re-
[ Page 12488 ]
fusal rate is not quite 2 percent. As of Friday, May 25, we had installed 1,236,446 smart meters representing 67 percent of our total 1.845 million customers. The refusal rate — not complaints but refusal rate, because there is a difference between a complaint and a refusal — is approximately 2 percent, or about 41,000 customers. Other jurisdictions that have implemented smart meters have experienced as much as a 5 percent refusal rate, so ours is quite low.

[1555]

Then what happens is when they have indicated that they don't want a smart meter…. This is how they can tell us: a phone call, letter or e-mail, signed notice on a meter, a cage or a lock on a meter, or a verbal request that a customer makes directly to an installer.

When B.C. Hydro is contacted by customers concerned about the new meter, B.C. Hydro will hold off on installation while staff work with the customer on an individual basis to address their questions or concerns. We're starting that process now to go back and present the opportunity to have the meter moved to a different location, to have a conversation with them about the smart meters.

As a result of starting that process, more than 2,400 people have already changed their mind and allowed the installation after they got the facts. The education will continue till the completion of the project, and then we will go back and continue to work with those customers.

J. Horgan: Has the corporation reviewed possible opt-out programs that are in place in other jurisdictions in North America? Have they costed any of these opt-out programs? Have they contemplated offering an opt-out program to those who are adamant that the meter not be installed on their home?

Hon. R. Coleman: Our plan is to complete the process of the 1.845 million. We have been looking at other jurisdictions on opt-out trends and having discussions, but that's where they're at today. No decision will be made on that until we've gone through the first run on the installation of the meters.

J. Horgan: Can the minister advise how many jurisdictions in North America have opt-out programs?

Hon. R. Coleman: At this point there's only a handful of them. The two prominent ones that we know of would be California and Quebec.

J. Horgan: In those circumstances, were the opt-out provisions at the cost of the utility or of the ratepayer?

Hon. R. Coleman: They're at the cost of the ratepayer.

J. Horgan: Part of the justification in the business plan…. I've heard this minister and previous ministers — there've been many ministers on this file in my time as critic — talk about the analog meters being difficult to service and obsolete in terms of a digital age. The challenge, however, is that the analog meters are like old Chevys. They run forever and ever.

I've had former Hydro employees that were responsible for maintenance and upgrading of analog meters saying that they could keep them going forever. You know what it's like, Minister. You lift up your hood in a parking lot anywhere, and you'll have a whole bunch of old guys coming over to tell you what's wrong with your car.

I appreciate that, of course, knowledge on the meters and the grid system of former Hydro employees is high. Their expectations and perhaps their thoughts on their abilities to keep them going forever are greater than reality. But when you've got integrated circuits and digital technology….

I know I'm on my third BlackBerry in three years. I'm sure that Itron, when they're making their smart meters, are using skilled workers and the highest quality parts, but what's the lifespan of a digital smart meter versus the historic lifespan of an analog meter?

[1600]

Hon. R. Coleman: Annually we have to replace about 40,000 of the old analog meters. Manufacturing is stopping on those, so we won't be able to replace them. Even though the old Chevy is available, if you want to restore it, there's nowhere else you can…. You're going to get to the point, like some of the Model-As and Model-Ts, where you can't buy the parts for them anymore.

Anybody seeing me opening my hood would all be coming over to give me help, because I have no mechanical knowledge. The mechanic in my household is my son and definitely not me.

The smart meter, however, should have the same life span as the analog meter.

J. Horgan: I am assuming that in the business plan that calculation was made and that there's an expectation that the new technology is as vigorous and long-lasting as the old technology. I find that, again, as a consumer of electronic products from around the world and seeing them stacked up on the side of the road as new models come along…. I know quite often people just like the bigger screen or the different feel of a piece of technology, but it has been my experience that stuff made today isn't as long-lasting as stuff made yesterday. I stand to be corrected on this.

On the question of the wireless technology, many of the people who have contacted me who are concerned about this project are concerned about the EMF issues. Has the corporation reviewed the cost of installing wired meters for those citizens who have expressed a concern
[ Page 12489 ]
and have been able to demonstrate, with doctors and others, that they have genuine health issues?

Hon. R. Coleman: That's why we do work with people to move the meter on the property. If it moves a bit away from the house, there are no EMF issues with these. They are very low in emissions, as the member is probably well aware.

When we actually considered doing a procurement process for this, nobody made a wired proposal. It was all wireless. That'll show you what the standard of the industry was at the time when we did the procurement process.

Basically, we work with the individual on those things. We'll continue to do so, as I described earlier, as we come through the finish of this thing. Then we'll go back and work with the customers and see if we can find solutions for those once we've done the first installation of the 1.8 million.

J. Horgan: Have there been problems with radio frequency interference with smart meters? As you know, in many instances homes and businesses are inundated with radio waves from baby monitors, cell phones, computers, and so on. Have there been any problems identified, and if so, what steps is the corporation taking to remediate?

[1605]

Hon. R. Coleman: No, we don't have any problem with that.

J. Horgan: At the Union of B.C. Municipalities last year some several dozen municipalities supported a moratorium on the imposition of smart meters until such time as the Utilities Commission and other experts could review the efficacy of the program. At the time, Minister, you said that there was no plan to move to time-of-use pricing or time-of-day pricing at B.C. Hydro. My understanding of the value of this technology is just that.

I've heard the minister say, and I agree to a certain extent, about a smart grid giving linemen and line crews a better understanding of where outages are. But in my community of Juan de Fuca what happens, since there's only one road, is that the wind blows, a tree falls on the line, and the linemen go out until they see the tree. The smart meter may well tell them what block in a vast tract of land there's an outage, but ultimately, they've got to go and see what's happened.

Having technology pinpoint that on a map with GPS is all well and good, but ultimately, when the power's out, usually the wind's blowing and the rain is coming down in sheets, and you just have to go out and fix it.

Can the minister perhaps comment on the time-of-use pricing question and also whether it's really legitimate to say that linemen are somehow in better positions to get to outages? In my community I don't believe there's going to be any net benefit. If the power's out, someone phones and says: "Hey, you gotta get my stereo working again."

Hon. R. Coleman: First of all, I'll reiterate there's no plan to go to time of use. To the member opposite, there's also the opportunity with in-house monitoring to learn a number of things about your power that we think would be of benefit in people even learning about their consumption. We think that is a value of this.

If there was, even in your riding, a power outage at night down one road, we would still need to know where to go. This tells us where it is, the size of line, what pieces of equipment are needed that we would take there. More importantly, in many areas of British Columbia, if it's the middle of the night and there's a power outage, we don't know until someone phones us, because we do not know when the lines go down. We will know when this smart grid is complete exactly where, when and how.

In remote areas of B.C., areas where there are hundreds of miles of transmission lines, where people have to find the location, they'll know at what mile to go onto a particular road relative to where the power is to fix the problem, because we'll have that information.

J. Horgan: I can appreciate that with the smart grid, but how is it that my neighbours on a little cul-de-sac in Langford all having a meter is going to somehow assist a lineman going out the West Coast Road to Jordan River to fix a transmission line? How is having a meter on my house going to help linemen get to outages in remote areas?

Hon. R. Coleman: Well, it wouldn't, necessarily. It would tell us that you have an outage where you are. But part of the integrated system, which the smart meter is part of, will tell us the rest of that as we go forward.

[1610]

J. Horgan: Well, maybe we could go back to first principles. Why do residential customers all need a smart meter to assist with the rapid deployment of resources when there's a power outage that usually involves transmission lines or distribution nodes?

Hon. R. Coleman: They don't, but we need a meter to measure their consumption, so we went to a wireless system of smart meters for the residential consumption. But if the power goes down in residential areas, we'll know where and how many homes, because each one's got a meter, and it'll tell us. It doesn't help us, necessarily, in the rural piece, because that's a different piece of integrating the grid with the smart meter program.

It's all part of one integrated program at the end of the day. It integrates the system.

J. Horgan: If you take away the advantages of being able to determine time of use and manage your high-
[ Page 12490 ]
demand periods…. If you're not going to use the technology for that, you're going to use it to find theft, and you're going to use it for rapid deployment when there's an outage. Are there any other benefits to the $1 billion expenditure beyond those two?

Hon. R. Coleman: In addition to that, people can actually monitor their own energy use. They can get an in-home display. They'll be able to go to their home computer and check what their own consumption is at any time, which will also educate people with regards to how they can save power, which is important. We can measure a number of things in our system for efficiencies as a result of it.

You can't manage a smart grid without smart meters. You have to have an integrated system.

J. Horgan: Again, on this file we're going to have to agree to disagree. I asked the minister back in 2007, when the Premier came back from his vacation and said this was going to be a good idea, to put me on the pilot project, to make me part of the solution. There were some comments about Stalin and communism, and we never added me onto the system. It was all very unfortunate. It may well have changed my view on the matter.

As it is now, I believe that a $1 billion expenditure for technology that we're not going to use for its true purpose, which is to measure and bill, is misguided. I think that if we wanted to assist at conservation and Power Smart, it would be better done with education.

Not everybody likes to have gadgets on their walls. Not everyone can afford to have gadgets on their walls. I understand there's going to be a rebate program of some kind to assist people to become more aware of their energy consumption. In principle, I support that, but $1 billion is a heck of a lot of money if you're not going to use it to full advantage.

We're running out of time. I have my colleague from Vancouver-Hastings here, who is going to touch on his issues.

Just to close on smart meters, I'll say this, Minister. I'm being as sincere and genuine as I possibly can be. As critic on this file, I've tried to be as objective as possible. I've met with Hydro officials, and I've toured the lab. I know the passion with which the engineers hold this program, and I know that the corporation is committed to it.

But there are thousands and thousands of citizens in British Columbia who are profoundly uncomfortable with the program and believe it's an intrusion on their home. For many people, the last vestige of comfort is their home, and they genuinely believe that the state is taking an undue intervention into their lives. They feel this genuinely. We can debate whether that's an appropriate sentiment for them to have, but it is genuine.

[1615]

I know talking to field staff at Hydro, certainly here on Vancouver Island, that they are inundated with calls and e-mails. The interventions and the interactions between Corix employees and ratepayers on both sides….

Corix employees, I know, are feeling threatened. Homeowners are feeling threatened. It's a disastrous situation in many respects. Although the percentage numbers appear low, it's 41,000 people. That's the size of many, many towns in British Columbia. When you look at it in those terms, I think it's a challenge, for the corporation going forward, to make citizens comfortable with the program.

I genuinely believe that a visit to the Utilities Commission, not always the most accessible and populist place on the planet…. I say that with not too much of a grin on my face. I think that if there had been an opportunity for a third party to demonstrate that this was in the public interest, we would have been far better off than we are today.

I want to thank all of the staff who came over for this very brief series of questions. I'm going to give the floor to a colleague who wants to ask some questions on ministry activity. I've given a note to Steve to follow up the right note. Then my colleague from Vancouver-Hastings will pick up on the other elements in your ministry.

Just on a personal note, Minister, I want to thank you for your time and your attempt to answer any question I put forward.

To all the staff: as always, thanks for making the binders. I'd love to have one anytime you want to leave it with me. I'll give you mine, and you can give me yours.

The Chair: We'll take a five-minute recess.

The committee recessed from 4:17 p.m. to 4:25 p.m.

[J. Thornthwaite in the chair.]

The Chair: We are dealing with committee estimates for the Ministry of Energy and Mines.

M. Sather: I wanted to ask the minister a few questions about the LiveSmart B.C. program. They're saying: "Due to the reintroduction of the federal ecoEnergy retrofit homes program this summer" — I guess that was probably last summer — "the LiveSmart program has experienced significant delays in receiving customer data from the federal program." I wonder if the minister could just explain a little more what the cause of those delays is.

Hon. R. Coleman: Isn't technology grand? What we did, when we made the change, is we designed our software to piggyback on the federal software. We had some difficulties with that. The reason we did that was because they have the certified auditors, and they have the database of customers that would be eligible.

Then we had trouble with our own software. We're go-
[ Page 12491 ]
ing to now have to redesign that. That's why it came into these problems. We've had people working over weekends for the last few weeks, and I'm told our cheques will start going out next week.

M. Sather: Well, the delays have been longstanding, as the minister knows, at least from last January. Is it really taking that long to fix this software problem that was, I guess, in effect last January?

Hon. R. Coleman: Actually, yeah, it really is.

M. Sather: Apparently also, as we understand, working alongside the federal ecoEnergy program has saved administrative costs by allowing the federal processing to occur first. How exactly does that save administrative costs for us in B.C.?

Hon. R. Coleman: It's because we don't have to hire and certify the auditors. They have the certified auditors, so that means we just use theirs and their system. Therefore, it avoids the duplication and saves us the money.

M. Sather: Now, I understand that some cheques have gone out. Can the minister tell us what percentage of the LiveSmart cheques that are to go out have gone out so far, approximately?

Hon. R. Coleman: We don't have that number right at our fingertips, but we'll get it for the member.

M. Sather: Thank you. I'll wait for that at a later time.

Now, the program itself is being discontinued, as I understand, on March 31, 2013. This is a green program that helps people to reduce their carbon footprint. Certainly, it was popular with Gordon Campbell when he was Premier.

[1630]

I'm wondering. Given all the need to combat climate change — this is one of the ways to do it, and Hydro wants to have energy savings as well — why is the program being discontinued?

Hon. R. Coleman: This particular program expires March 31, 2013, and will be replaced with another program which is pursuing an energy efficiency–financing model to help homeowners and businesses save money on their energy bills while reducing greenhouse gas emissions.

[J. McIntyre in the chair.]

It's called pay-as-you-save. Basically, it allows participants to help finance energy retrofits from the estimated energy statements for improvements. What they do is rather than have to get a bank loan or whatever, they can actually leave their power bill or utility bill at the same level, even though it has savings. That saving is applied to the cost of the retrofit in an agreement with the utility.

M. Sather: Well, that was a complicated answer. I'll try to ask kind of a different question, but related.

There's going to be a new program. That's encouraging. It costs homeowners money to buy these systems. Will the financial benefit be as great as it is now, or greater or substantially less? Where are we going to be at in terms of the financial benefit of the new program versus the program we have now?

Hon. R. Coleman: It'll be similar. It'll depend, of course, on what retrofit they decide to do and what savings they want to accomplish on an individual basis.

We think this is a pretty good program. Basically, we are out doing some consultations on the regulations now in the utility program design. We will be ready to go. There are some pilots this year, and then it will go into operation in the new year.

This is made available to B.C. Hydro and other utilities, like FortisBC and what have you, which felt that this would be a much better program than just the LiveSmart, because the uptake was piecemeal on LiveSmart. It might do one thing, but it may not be the best thing for the payment or the savings and the energy efficiencies.

You get an energy-efficient furnace. It comes in and replaces an old, inefficient furnace. There are much more savings than there are, let's say, if you've only got so much money and you do a couple of windows versus this or that.

Everybody that we consulted with when we were doing this work on the legislation back last year felt very strongly that this was the better solution in the long term with regards to retrofits.

M. Sather: I think it's my last question. So LiveSmart, then, is under the energy efficiency branch of the Ministry of Energy and Mines. Will that branch continue, and will they be handling the new program?

Hon. R. Coleman: They'll continue to handle the oversight of the program, but the utilities will manage the program on the customer base.

J. Brar: I also have a couple of questions on the same issue related to LiveSmart B.C.

I have a constituent. His name is Roger Oura. He has done energy efficiency upgrades to his home. He went through the process with the energy audits and passed his last energy audit. The company that did the energy audit did all the paperwork for both the federal and provincial rebate programs.

[1635]

Roger received his federal payment of $1,900 in January 2012 but hasn't received anything from the province yet. I would like to ask the minister when he can expect the payment from the province on this rebate program.

Hon. R. Coleman: I answered this same question a few minutes ago, but maybe the member wasn't here. Basically, we've had some software issues with regards to the piggybacking of the federal system. That software — it was some of our difficulties and some of theirs. We have been working the last month or so to try and fix that problem so that we could get it out. We have issued some cheques. We will be in a position to deal with all of them very shortly — starting next week, actually.

It was just strictly a problem with the piggybacking of the systems. When we took LiveSmart and combined it with the federal system last year, we ran into some difficulties. Those are being fixed.

J. Brar: Thanks to the minister for the response.

I am told that Roger Oura is not the only one waiting for the rebate payment. There are many other people who have met all the audit requirements but did not receive funding from the province.

I am also told that in April 2011 the federal government changed the software of the rebate program, and now the provincial government can no longer read the information that they get from the federal government as a result of that change.

It has been now almost seven or eight months of that situation. I would like to ask the minister why it took so long to identify this problem and then start working on fixing this problem. I also want to finish my question by asking if the minister can tell us how many people actually are waiting for the payment under this program.

Hon. R. Coleman: It's the same answer. We ran into an issue with the software at the federal level — the piggybacking with us. We were piggybacking on them, and then we ran into difficulty with our own software.

Yeah, it has taken a number of months. Is it frustrating? You bet it is. I don't write software, unfortunately, and nobody would let me near their computer to do any form of programming, to be honest with you.

We are very confident that next week we'll be starting to issue the cheques and get caught up and take care of the backlog.

Chair, can I have two minutes…?

The Chair: We'll have a very brief recess.

The committee recessed from 4:38 p.m. to 4:41 p.m.

[J. McIntyre in the chair.]

S. Simpson: Thanks to the minister and the staff.

Just so the minister knows, we've got this little bit of time today and then tomorrow afternoon — I think through to the dinner hour. We'll be dealing with liquor policy today, and we'll see how far we get; we'll then do gaming and then finish on housing, so the minister and staff have an idea of the schedule.

I'd like to start with a question about income and how liquor income is calculated. When I look at the LDB records, it shows, for example, in the forecast for '11-12 about $2.878 billion in total sales, and then it shows other income of $7.3 million in total.

Could the minister tell me, maybe first of all, what the other income of $7.3 million is? Then we'll dig down on the bigger number.

Hon. R. Coleman: That would be non-recurring income. Basically, what happens is we audit breweries and wineries. Product that wouldn't have been accounted for before the audit is where we recover our markup — from those products, because we find them during the audit.

S. Simpson: When I look at the total sales number that's in the books — for this year, just under $2.9 billion…. I know that's revenue. It's not net income. I'm trying to determine here how money gets broken out there.

I understand that the vast majority of that is the markup decision of government — to mark up the cost of liquor with what is our share. But what share of that revenue relates to the question of distribution? For example, I have a discussion with a brewer, who tells me that he pays 78 cents to move a case of beer in British Columbia. That's what it costs him when he moves a case of beer here. Presumably, that 78 cents is part of that revenue stream in some way.

So could the minister first…? Those dollars fall into the revenue stream. Are they broken out so we know what share of the revenue comes from the distribution fees that are paid by brewers, distillers and others?

[1645]

Hon. R. Coleman: We will try and get you the number and the distribution, but it's all integrated into the model, because we have the 200 stores, and they perform some of the functions and what have you.

But the breakdown I can give you is that the sales are $2,889,869,000. The commissions and discounts are $187 million. The cost of sales, which is what we pay the suppliers for the liquor that we buy, is $1.510 billion. Then we have the gross profit, which is $1.191 billion. The operating expenses are $291 million. Then we have the other income that comes into the system, and then we get into our net income. That's for this fiscal year.

S. Simpson: I appreciate that the minister says that he'll try to break that number out.
[ Page 12493 ]

Just so I can understand, then — and this question will relate to something that we'll discuss a little bit later on — is the minister saying the model that's used to calculate income right now doesn't allow or creates a problem with being able to break those distribution numbers out? Or you just don't have them at the moment, and we'll get them later?

Hon. R. Coleman: I may have misspoke. We don't have them.

S. Simpson: We'll look at those costs, and I'll appreciate those numbers when they are available.

On the expense side, just so I can understand that a little bit. Then I'm going to ask some questions about pricing. Right now, if I'm correct, labour costs make up almost 55 percent of the cost of the LDB operation. That's all linked into a collective agreement and management contracts and those things. Then, presumably, the other 45 percent is the place where there may be efficiencies found.

Would it be accurate that it's about 45 percent of the costs of operation that there's some room for efficiencies on, if we assume labour — and, largely, the collective agreement, presumably — is absorbing about 55 percent of overall expenses?

Hon. R. Coleman: The number of approximately 50 percent is right. That includes labour in the stores, labour in the warehouse and labour in the corporate offices.

S. Simpson: I'm bouncing a little bit here, but when I think about…. I'm just looking forward now to the RFP around distribution. Is it essentially…?

I understand that these numbers will adjust with any bidder and they'll have to make their own decisions, based on their own corporate decisions. But any successful bidder is going to essentially have to absorb the collective agreement and the staff, to some degree — probably all of them, initially, and then time will tell after that.

[1650]

Is the expectation, then, of course, that the efficiencies that they're going to able to find are going to have to come in those other areas? Is that what the expectation is that you're going to see in an RFP?

Hon. R. Coleman: Yeah. It's a bit more complex than that, actually. Liquor in British Columbia doesn't sit always in the warehouse at the Liquor Distribution Branch. It's actually warehoused in a number of other bonded warehouses. There are efficiencies about how many times you touch and move the product.

Right now it'll come from one warehouse to our warehouse and go out the other side. A truck could essentially deliver on one side and pick up on the other, versus, let's say, distributing directly, where you would have savings and efficiencies with regards to the cost of moving that particular product.

At the same time, this is not a young workforce, so there would be some retirements over time and those sorts of things that would take place. Each proponent is going to have to look at all of those particular things to have a look at.

There have definitely got to be some efficiencies when you handle the product too many times. Is there a more efficient way? The objective is to see if there's a private sector operator that can do it more efficiently and get us savings within the warehousing and distribution side.

S. Simpson: I know I'm going to bounce a little bit here. Maybe that raises a question. The minister talked about bonded warehouses, folks like…. ContainerWorld, I know, is an operator that has contractual agreements with the LDB as one of those bonded warehouses. I assume that there are others that also would fall into that category.

When the RFP around distribution goes forward…. Once that plays itself out next year, in March, is that going to change the relationship with those warehouses?

Does that mean that those contractual agreements with those warehouses will end at that time because it will then be up to the distributor, the new private monopoly, to make its own decisions about how it does that distribution? They may or may not choose to work with those bonded warehouses that currently have contractual agreements with the government.

Hon. R. Coleman: The contracts with any of these other warehouses aren't with us. They're with their own customers. Those would become subject to renegotiation or whatever time that they would expire. Our intent is to get to one stocking and supply warehouse system in B.C.

S. Simpson: Let's get this question out of the way. Then in terms of the RFP that's out now, the obligation that's being taken on by the proponents who may come forward and seek this…. Is the obligation around the collective agreement and the successorship agreement and the MOU on that? They have that obligation, which I believe is initially for a two-year period, but obviously, they have to respect the collective agreement and deal with the union in the future accordingly.

It's that agreement, but other than that, are there any other contractual agreements that the LDB has that relate to distribution matters that the proponent is going to be expected to absorb as part of their bid?

[1655]

Hon. R. Coleman: Not really, I'm told. Basically, this is to negotiate RFPs. The proponents will come forward with their proposals, and then for the ones that are select-
[ Page 12494 ]
ed to negotiate with, we would sit down and negotiate all of those things. There aren't any contracts that would be affected, as I understand it — like trucking contracts and whatnot — given the time frame that this is being held.

S. Simpson: When the announcement was made and the RFP came out, one of the areas that was discussed was this whole issue of a change in the pricing structure to a single wholesale pricing structure.

I know the minister has said in the House in the last couple of days that as this process goes forward, the government will make a determination based on the proposals that come forward and make a decision based on whether it's the government's belief that this is a better thing, a more efficient way to go, or not and then will decide whether to move forward based on that.

The wholesale pricing, the change in pricing structure — is that related to the RFP? Is it the thinking of the minister and of government to go to that pricing structure or some form of this single wholesale price, regardless of what decision the government makes moving forward on the RFP, as he starts to see proposals?

Hon. R. Coleman: They're totally separate. The LDB will continue in the pricing structure. At this point it's anticipated that the way we're pricing alcohol will probably stay the same.

There have been varying discussions over the years about different pricing models, but when you get into this, it gets very, very complicated. There's always work being done with regards to the pricing structure of alcohol, depending on whether suppliers are asking for a different floor price because of product and changes in inflation or whatever the case may be, whether there's one product that wants to come in with a different price for a specific reason.

It's actually an ongoing regular discussion with the LDB, and we have different structures. We have ad valorem and we have flat taxes, depending on what product line is in the system. So it's a pretty complicated thing. Any work that's done on that is completely separate and is not affected by the NRFP.

S. Simpson: That was what I thought. I want to pursue that a little bit based on comments that I know the minister has spoken. I've heard the minister in media interviews talk about wanting to level the playing field in terms of pricing.

We know at this point, for example — I believe in terms of the discounts that are made available to different sectors of the industry — that bars and restaurants don't get a discount. Rural stores get 10 percent; private stores, 16 percent. VQA and independent wine stores, I think, are about 30 percent. Of course, they only sell wine. So they all get some different kind of discount based on the formula.

When the minister talks about levelling the playing field here, it's my understanding that we're talking about looking at a single price across there that, presumably, the private stores and the government stores would all be paying. Regardless of who they were, everybody would be in the same boat.

Is the minister contemplating that kind of change that would remove or dramatically change the discount structures that are in place today?

Hon. R. Coleman: Well, the work is always, as I say, ongoing. It is very, very complicated. The levelling of the playing field probably refers to, and the comments of "could we get to a wholesale price…?" Is the price that a government liquor store pays for a bottle of whisky from us the same as the price that a private liquor store pays for a bottle of whisky?

[1700]

There are even challenges in and around that type of pricing. That's not changing your pricing model as much as it is saying: "What is the actual price?" We think the 16 percent discount is pretty close to the wholesale price. So either way. We're doing some modelling around that to see what it is and see whether there are some decisions we need to make with regards to that.

It does not, however, just so you're clear…. On the wine side it's a totally different discussion. We're not anticipating any change on the wine side at this point in time.

S. Simpson: Just so I'm accurate here, what the minister is saying is that this is a live discussion. Nothing's been landed on. There are some efforts to look at rebalancing, but as the minister says, it's a complicated process and it's a discussion that will be ongoing for a while.

There's nothing imminent in terms of a change that the minister and the government see today as something that will necessarily come into play in the next number of months. Or is that a possibility?

Hon. R. Coleman: The general manager said he's been the general manager since 1997, and it's been an ongoing discussion since 1997.

I know that over the last 12 years…. I think I've had the liquor file for about — I'm guessing — eight years of that 12. I know that it's an ongoing discussion all the time.

You have the breweries on one side who have the BDL. The big breweries actually control that for their customers. We actually warehouse and distribute the beer for other breweries through the LDB. We have wine that has direct-delivery options with regards to 100 percent grape wine that can go out without any markup. That's a different form of distribution to private liquor stores, restaurants and bars.

There's always this live discussion that takes place every year I'm aware of as we go through the fiscal plan
[ Page 12495 ]
— always with the thought that we're not wanting to raise prices — with regards to: is our pricing model efficient enough for how we actually manage and administer the pricing of liquor in B.C.? It's sort of like the challenge we face on a regular basis as different products come on line and different thoughts come into the system.

If you had the liquor file, you'd understand. It's complicated, and it continues to evolve. It gets more complicated, and it continues to evolve. There's always, I guess you would call it, a certain healthy friction between the suppliers and the distribution and the pricing and the sales.

What we do is try to manage that as best we can, which I think we do a pretty good job of. But we do look at our package from time to time. We are doing work again this year on that, just like we have in any other year.

S. Simpson: As the minister says, this is a discussion that I'm sure is of keen interest to everybody in the industry — how government decides to price the product and that. I can't think of a lot of things that are probably of more interest than how government decides to price the product. There may be some, but this one's pretty high on the list.

How does the LDB or the minister…? How does the consultation or the conversation go on with all those different players? It may be that when you make nobody happy, you know that you've done the right thing. Who knows?

At some point there must be a conversation going on, particularly as different of those players come forward and say: "Hey, we should be getting the discount that they're getting" or "We should be getting something more." I don't doubt that those conversations are ongoing and frequent, whenever anybody gets the sense that this debate is back on the table in some fashion.

How will that consultation…? How does it happen? How will it happen if this conversation is to continue to move forward over the next number of months?

Hon. R. Coleman: I'm trying to figure out a comparable to give you an answer to understand our challenge.

[1705]

Most of it's all done with the LDB. It's not done by the minister. They will get representation.

For instance, I'll give you an example. Let's say Spirits Canada, the spirits people, come and say: "We have in our stores…." We don't change the discount. We want our piece of this pie all the time. We want to protect our revenue all the time. But they may come and say, "We would like the floor price of spirits to be raised by, let's say, 75 cents," which brings the lower-priced product up by 75 cents if the floor price goes up. That then, across the band, might bring down the price of something else, but the revenue isn't going to change for us. We're going to make sure that, at the end of the day, we get ours.

I did try and describe liquor to somebody recently, and the pricing is probably a good example of it. There's a game at the PNE called Wac a Mole, where you hit the one little mole and another one pops up. That's pretty much a description of liquor. If there's not one issue here, there's an issue there. Pricing is not as bad for that. Pricing is actually very much controlled by the LDB, by the pricing structure they run. And there will be representations from time to time with regards to different products and that sort of thing.

They get it all the time, and they're working on it all the time, but it's not as much as some of the other issues that are out there with regards to, let's say, caterers or this group or that group that have an issue to come through with regards to licensing or something like that.

Really, on the pricing side of liquor, we have a pretty good pricing model. We just want to make sure, going forward, that it continues to be a good pricing model to do two things. One is to give the opportunity for the stores to be successful. Obviously, you want to have markup. You want to be able to have the supplier that sells liquor into British Columbia be able to get a price for their product that, when they import it here or they ship it here, they will get their piece — that the stores will get their piece, the retailer, and that the price going into the hospitality side is based on a pricing system that's fair.

In the middle of that, the challenge that the minister gives the Liquor Distribution Branch and, particularly, the general manager every year is: "This is how much revenue we expect. You need to achieve these revenue targets." That drives the price as well.

S. Simpson: I think I understand that. When the government is setting that price for that, it sets the price and then it determines those additional costs. Whether it sets that price through tax policy or through the price — whatever you call it, the government's share…. As the minister says: "This is what we expect to see in general revenue at the end of the day, and you make it as effective and efficient as you can in how you get there, but this is the dollar figure we expect to come and pay for health care and education and other things."

How does that get calculated in terms of those additional costs? When you put on a distribution cost like, as I referenced before, 78 cents for a case of beer, or whatever, that somebody in one of the craft breweries might pay, is that essentially at cost? Is that the cost, and you're saying: "We're taking our piece out of the price on liquor. This is simply cost recovery, and it's not a way to mark up additional dollars for us through a second fee over and above the markup that we decide on the wholesale price"?

[1710]

Hon. R. Coleman: I told you it was complicated.

Basically, what happens is that we don't actually price the retail price of the product. What we do is say to the supplier: "Here's the markup formula." They then deter-
[ Page 12496 ]
mine, within that markup formula, what it would sell for in the stores, and that's the price it sells for in the stores.

The markup formula is where we're getting our profit. We're getting it as it goes out the door and it goes into every store, every restaurant in B.C., etc.

On top of that markup formula in the stores, we also have another profit centre, which is our stores. We have 197, I think it is, government liquor stores. They then mark up, and they make a profit on those stores — some better than others, depending on volumes and what have you.

So there are two places we make our revenue. The markup formula is right across the whole broad band, and then the chain itself also has a revenue implication for the fiscal claim.

S. Simpson: Just in terms of the government stores and their revenue streams. We know that they're like everything else. Some of the stores do better than others.

Currently, in terms of the P and Ls for those stores, are they done collectively? Is it sort of an overall P and L for the LDB, saying: "Here's what it is for the GLSs, the government liquor stores, overall"? Or are they all looked at individually, in terms of their profit and loss and how those stores function and operate, to try to make a decision about what's going on?

Hon. R. Coleman: Our stores report monthly, and then they obviously…. It's year to date, year to date, year to date and then an annual store by store.

S. Simpson: I think I'm going to move on, just in the interest of time. I have a few questions that relate more specifically to the RFP. I know the minister has referenced this in comments around the fairness commissioner and the role that the fairness commissioner will play in the RFP around privatization.

Could the minister tell us…? I've read what is the fairness in the RFP itself and the three points that are made here. It's brief, but it kind of lays that out. Are there more complete terms of reference for the fairness commissioner?

[1715]

Hon. R. Coleman: The fairness monitor in this particular case is George Macauley. He's an independent consultant who performed a variety of fairness roles for government on a number of conflicts procurements. He was awarded a fairness monitor contract through a competitive process. The value of this contract is $74,900. The last government project George Macauley was involved in was the strategic telecommunications service procurement, where he performed a role as a fairness adviser.

We believe there should be a schedule A to his contract. We are going to find out. We don't have it here. I don't see any reason why it wouldn't be public. If it is, we'll make it available to the member.

S. Simpson: I appreciate that, and I'll look forward to that if it's available there.

Could the minister tell me what the authority of the commissioner is? I know the commissioner…. From what I see in the RFP, there's a monitoring process, obviously a review of the documents so that they fully understand the process, and then a monitoring role on the procurement process, potentially participation in proponent meetings, site visits if necessary and oversight of the evaluation of submissions. So there's a monitoring process there.

Does the fairness commissioner or the fairness monitor…? Maybe I should be calling them a monitor. Maybe they're not a commissioner; they're a monitor. That might be a more accurate term — the fairness monitor.

Do they have any other authority to be able to direct the RFP process in any way if they have a concern during the process that they think…? You know, maybe it isn't anything major, but they have a concern, and they want to recommend or direct an adjustment in the process to keep it more balanced based on their view. Do they have authority or an ability to do that, and if so, how?

Hon. R. Coleman: Through the process, he has the ability to raise concerns, keep the balance, make recommendations — all of those things as the fairness monitor with regards to the process, if he has concerns.

S. Simpson: Who would he make those recommendations to? Would he make them to Mr. Chambers? Would he make them to the minister? Where would those recommendations go? Would they be expected to be of a private nature, or would it be of a more public nature?

[1720]

Hon. R. Coleman: It's probably the project team or the two deputies that are responsible, which is probably the same thing. However, it's probably in the schedule, so we'll get that information for the member.

S. Simpson: Another question I have, and this may be in the schedule too, and that's fine. Point (c) under 3.3 in the RFP, which talks about fairness in the process, says that this monitor will "prepare a fairness summary based on observations made during delivery of the procurement process. This report will be made publicly available."

It seems to me that there are a number of steps here. We know, for example, that the bid process will close. I think June 29 is the closing date. The selection of somewhere between, I think it says, one to three potential proponents — July 20, I believe, is the trigger for that. Then presumably, there's some kind of negotiation into October when a selection will be made of a final choice, who then will be implementing by March 31 of next year.
[ Page 12497 ]
That's the schedule, as I see it, of the key steps here.

Is the expectation that the fairness monitor will continue through that process? How far do they go in that process, and will they be reporting on the process up to July 20 and the selection? Do they sign off on that with a public report? And then something by October when the award is made — do they sign off on that in a process?

What are the steps here for the monitor to be able to report in a public way?

Hon. R. Coleman: My understanding is that he's there right through the process until the final selection, and then he issues his report.

S. Simpson: So the expectation is that there won't be a report on the selection of the one to three — whatever that number is. The July 20 trigger — that seems to be a period when, presumably, the project team is going to make a selection of somewhere between one to three proponents who will come forward and do additional work as they negotiate to see if they're the successful bidder. Then there's the next trigger: who actually wins the bid in October.

There seems to be two keys points here. Is the expectation that the fairness monitor will report out on both, because they're both fairly distinct decisions? They are different in terms of their importance.

Hon. R. Coleman: I would think not. He would be there through that evaluation for the bid process. He would be evaluating that all the way through. It would be included in his final report as he went through the section of the short list and then through to the final. When the final is done, he would have a report basically on the whole process.

S. Simpson: This may be part of the negotiation with the short list, but I know that in other government contracts there are conditions put in place. For example, I know that with the employment contracts that have been recently negotiated through the Ministry of Social Development, they had very clear requirements that said: "You will put your key staff and people…." They listed key staff, key players in these partnerships, who the partners were.

I believe that under the terms of some of those contracts, if that changed significantly without…. It could only change with the approval of the government — those key components — because it was upon that basis that the approvals were made or the contracts were let.

[1725]

I know in the case of some of the health care contracts with some of the health privatization…. I think these were done through the authorities, but it was at government direction. When those contracts were let, there were some limits. The ability of those companies who were the successful bidders to then divest themselves after they had the contract, to be sold as a company to somebody else, could only occur with government sign-off — that the government would be satisfied with the ultimate owner as part of that, as a term for the contract.

If the government wasn't happy with whoever company A that got the contract was and then a year later said, "Well, we're now going to be sold to company B," the government had the ability to say, "Well, we're not quite as satisfied with company B as we were with company A," and this has an impact on the terms of the agreement. Is there any notion here that the government will have some say on who holds those contracts if a company is the successful bidder and then a year into a ten-year agreement is being sold off to somebody else that the government may or may not be quite as happy with?

Hon. R. Coleman: Yeah, there would be a clause that would be there. It's pretty much standard. Basically, what they're doing is they're bidding to be a service provider. Whether we're buying the service, should they change companies…. Usually there's something that says it can't be unreasonably withheld. Usually in a contract like this, whenever I've had in my business career…. There would always be that opportunity, if it was going to be unsatisfactory, that you could say: "No, we're not going to assign the contract." That ability would exist.

Bidders must disclose, even when they're bidding, who they are. They can't be bidding for somebody else. If they're bidding for somebody else, then they would be basically eliminated from being able to get it.

S. Simpson: In the process — I've certainly read the RFP, and I understand that — what was the minister's thinking? I believe it was the minister who said that it was his expectation that one to three proponents may come out of that process in July as potential successful bidders for this.

Did the minister just kind of pick those numbers, saying: "If we got eight or nine bidders, I expect somewhere between one and three will be there"? And maybe could the minister give me a little bit more detail on what that criteria looks like. I've seen the criteria in the RFP, but just a little bit more of an insight on how we get to those one to three.

Hon. R. Coleman: The language came from the project team, and in the RFP process they felt that there could be one to three that would come through to being in the negotiated RFP process.

S. Simpson: I know that when I read through the stage 2 evaluation and the criteria table, it talks about the financing model and pricing submission. It would make up about 25 percent of the consideration when the team is looking at these different proposals and that.
[ Page 12498 ]

[1730]

Then the expectation is that at this stage the team in the LDB will be getting some pretty clear pricing information from the potential proponents. To what degree is the expectation — as we get to one to three and past that, and people are selected based on what they put in that they offered up here…? How closely are folks going to be held to the pricing that they put in here when they get into more significant negotiations?

Hon. R. Coleman: Basically, their offer on pricing is what they're going to offer on pricing. Whatever they offer us….

The pricing of the services, though…. They may have a different way of doing services, or we may want additional services that they haven't put in. When we get into negotiations, it would affect that discussion. I think that's what we're referring to.

Of course, when you're mentioning pricing, it's got nothing to do with the price of alcohol — right? It's about whether the service pricing is there, whether it's beneficial to the consumer, the efficiency is there as well and those sort of things.

Basically, the reason we call it a negotiated RFP is because there will be different ways to look at this business depending on what assets a particular company may own in British Columbia. Somebody may own a warehouse already that they can handle all of this within. So their pricing model may be completely different. Their offer could be different, or somebody could be doing a different longer-term thing.

What it comes down to for us is if you're going to offer us…. The first thing is if you're going to make it priced at 25 percent, for instance…. If the price is X to bid, that's the price. You're not going to get to play with that, but there could be other things in the other 75 percent of the discussion that is going to have to be negotiated.

My expectation is that they don't get to come in with a price and then go in the next week and change to a different price. That's not the way this thing is going to work. That would be unfair to all the bidders because it has to be on somewhat of a level playing field. So we wouldn't let that happen.

S. Simpson: Well, when I look at the assets that rest with the LDB on this right now, the assets that are apparent to me…. I'd be happy to know if there are others. Obviously, there's the inventory, which is going to be sold anyways in some way, shape or form — whatever the inventory is sitting in government warehouses at the time that the deal is culminated and comes to a close. Whatever that asset is, somebody's going to buy that inventory, and it's going to move through.

Then, of course, there're the warehouses, which I know have been taken out of the RFP and will be dealt with in a separate way by the government, I guess, which will make the decision about whether to sell those properties through another process that's not related to this.

Are there assets other than those two that sit with the distribution system that will be being purchased? If so, what are they?

[1735]

Hon. R. Coleman: During the transition phase the inventory will just turn over. Our inventory turns over very fast. So nobody is buying the inventory. It'll just be turning over. It doesn't stay in the system very long. It goes right back out to the stores or restaurants or bars or whatever the case.

The only other assets would be if there are some system management systems that somebody wants to buy. They don't have to. Equipment, some vehicles, forklifts, racking — those sort of things. But they have the option in their proposal to decide whether they're interested in that or not interested in that.

S. Simpson: I know you don't speak for the companies, and they have their own idea about how they generate the revenue streams. But when I look at this…. I know the minister has seen these reports, too, of this Exel memo from 2009 where they talked about a revenue stream.

From what I've seen, and I've had a chance to look at the memo, they ramp up the potential business operations, but they see a revenue stream — not a profit stream but a revenue stream — of somewhere between $55 million to $95 million a year as their revenue stream. It increases, obviously, as they do a number of other things possibly here — not just there.

Would it be reasonable to expect that that revenue stream from the distribution is largely driven by whatever the distribution and warehousing fees are that they're charging to the distillers or the vintners or the brewers who are using their service? Is that where they're deriving that revenue stream from in large part, whatever the fee is that they charge?

Hon. R. Coleman: I'm aware of the memo, but it wasn't anywhere near what we've decided to do here when I think they were even talking about it. This is a company, I think, that was connected back to Connect Logistics, which did the one in Alberta many, many years ago. Alberta at that time sold the liquor stores, so it was a total different package. I don't know where they got their numbers from, and I've never actually decided to try and quantify them in any way.

Basically, where you make your money in warehousing and distribution is the shipping, the costs, because it's all charged for shipping. You can warehouse product for people, for customers.

For instance, you mentioned one warehouse over on Annacis Island, one of the companies there. They actually get paid by the suppliers to warehouse that. They
[ Page 12499 ]
can make money on the rental of the space where that is warehoused. We don't pay until it actually comes into our warehouse in this particular case or when it leaves to go to the stores.

They do pay a fee for that to be warehoused in the private sector, and there are some charges to that. That's where their cash flow, for lack of a better description, would come from and how they can build their efficiencies around that. They could integrate it into other shipments of other products, for instance, where they would find that sending out a half-full truck versus a full truck is a lot more efficient. Therefore, it can have a better opportunity for the efficiencies there — those sort of things.

I find, when I talk to people about warehousing and distribution, it's actually a very complex business in its own right, and it's very, very sophisticated today. Most big retailers today are actually working with companies that specialize in this, so they can bundle product and keep the efficiencies and costs so they can make sense.

Those are the opportunities, and that would be part of the proposal they would make to us — how they think that they would be able to handle this if indeed we did go this way. Like I said, we'll go through the NRFP process to find out, and it'll be interesting to see what innovation different companies would bring to this file.

[1740]

S. Simpson: When I look at this and when I read the RFP, what it tells me clearly is that, as the minister has said on a number of occasions, it will be exclusively the government's prerogative to decide what the markup is on liquor and how that all works. But when I read this, what I see is that the successful proponent, if this goes forward, will set those distribution-warehousing fees as a business, and then every two years there's some kind of review process, presumably with the LDB, where there's a review anticipated in here. But the decision to set those prices as a private business on what they charge for warehousing and distribution is their business. Then presumably, since they are essentially a private monopoly dealing with a piece of business that has a relationship to government…. I'm assuming that every two years, whether it's through the LDB or whoever the entity is that does this, they'll have some review over what that pricing is, since it is a monopoly. Is that the expectation?

Hon. R. Coleman: The whole RFP is built around the fact that we get to see if there is a private sector company that is able to distribute liquor in a more efficient, cost-effective manner so we can have savings for the consumer and for the suppliers. Then, obviously, that pricing — the way this is anticipated now — would be reviewed every two years, or if they decided they wanted an increase, they would have to come and get it approved.

In addition, just to go back to the fairness commissioner for a second, because I've got the answer to one of the member's questions, the fairness auditor can make recommendations directly to the project team at any point during the process.

S. Simpson: I'll just bounce back to that, since the minister had a chance to get a bit more information on that question. If the fairness commissioner makes a recommendation to the team, and presumably those recommendations are then made, the team makes a decision about whether to accept the recommendation, reject the recommendation or amend the recommendation. That's their decision and their prerogative as the team to do that. They are not obliged to accept the recommendations of the fairness auditor?

Hon. R. Coleman: I think the member is correct in how he says it, but really what it is, is that the fairness commissioner is the monitor that's watching the process. My expectation would be that if they made a recommendation, that recommendation would obviously be complied with.

We have two deputy ministers that are leading this file. I have a lot of respect and trust in both of them, as far as their independence as well. I know they will work closely with the fairness commissioner to make sure this process is totally transparent. If there's an issue that the fairness commissioner comes across, it will be dealt with.

[1745]

S. Simpson: That leads to a question. As it always is with these things, one question leads to the next.

If the fairness commissioner was to make a recommendation on some aspect of this — and I don't know what it would be, some aspect of the RFP process — where somewhere through the exercise they were observing this and made a determination that maybe there was an issue, and they made some specific recommendations that led to an adjustment or that would require an adjustment in the RFP process, does the authority…? If the team says, "Okay, that seems like a good recommendation from the auditor," does the team have the authority, with the deputies and that, to adjust the RFP process in response to a recommendation? Or does that ultimately come back to the minister, and does the minister make that decision?

Hon. R. Coleman: It does not come back to the minister. This is totally arm's length from the minister — won't be making any of the decisions with regards to the RFP, won't make any recommendations with regards to any of the proposals that come in. It'll be completely handled by the two deputies in the process, with the fairness auditor watching it as it goes through the process.

If there is a change that has to be recommended, they will have the ability to inform all the parties that there's a change to the process and the reasons for it. Because it's a negotiated RFP, it has that flexibility in it. But even
[ Page 12500 ]
in the RFP process, if the commissioner felt there was some wording or changes that needed to be done, they could be done and they would go out to the proponents.

S. Simpson: Would the ability to make those changes — and I appreciate the minister's comments — include the ability, if the deputy saw fit, based on keeping the integrity of the process at the highest level and just making sure that it all went properly…? Would that include an adjustment of the timeline if the deputies felt that was warranted?

Hon. R. Coleman: We think the timelines came from Treasury Board, and they're making the Treasury Board minute that would have set this up. So they would go back to Treasury Board to change any timelines. But they would go back and make that request to Treasury Board — probably directly through the Deputy Minister of Finance, probably to the Minister of Finance.

I don't know that it would actually have to go to a full board. It would just be an adjustment of timelines, which could be amended in a minute.

S. Simpson: Just so I'm clear, I'll ask this and then move to my next question. The minister can kind of nod if I'm right here.

So because that's part of Treasury Board and is a decision made at that level of authority, the deputies would have to come back with a recommendation to the chair — the Finance Minister, presumably, is the chair of Treasury Board — through the Treasury Board, and they would have to make that determination as to whether or not to accept that recommendation around any adjustments on the timeline.

I'll sort of tie my next question into that. We've had this back-and-forth a little bit. Maybe we'll try to pursue it a little bit here.

Over the period of time from the 20th of July, and maybe even before that, through to the decision of the team about awarding the contract — presumably sometime in October — is there any formal expectation of conversation with the beverage industry itself around what their expectations might be about aspects of this that are important to them as an industry, which the team that is weighing and evaluating the proposals will look at?

Is there a way for the industry to say: "Well, here's our list of half a dozen things we think are very important if you're going to have a private monopoly take on this aspect of business, which affects us directly." Do they have a route here, a more formal one, other than trying to make a phone call to whoever, to actually sit down and say: "Well, here are the things that are important to us in this sector of industry, and we hope these will be considerations if you're negotiating with the shortlist after the 20th"?

[1750]

Hon. R. Coleman: I may be wrong on that. I think they can make the decision within this band as to whether they need to extend dates as the team. I don't think they need to go back to Treasury Board. The only date that is mandated by Treasury Board is March 2013 to have the whole thing finished and the decision made and that sort of thing.

On the other side of it, there won't be any other consultation during the RFP process. It's a process that has to be dealt with just like a bid. Same thing with the negotiation of the RFP. Industry wants to know that they're going to get their product on time at a fair price so that they can make the profit on it. That's all part of our direction on this thing as it is. The service that they're getting from the LDB today is either better and more reasonable or we don't do it.

S. Simpson: The minister will know, because I'm sure he's heard from folks the same as I have, that there are a number of significant players in the industry out there who are not comfortable with the way this is unfolding and don't fully understand how it got to where it is. I think they would all like a deal that was a better deal for them if they saw that herein, and it may or may not occur. We'll see.

Does the minister see that there needs to be some way for those groups to be able to have a conversation so that they can better understand what the thinking here is and be able to get at information? I believe it was on May 9 that there was a meeting where the industry folks had the opportunity to sit down with Mr. Chambers and others and ask some questions and get some answers.

I know after that they felt that some of the answers…. They would have looked for answers that maybe were a little more full. But there were questions, and I think it's just fair that maybe there weren't answers to be had there at the moment.

The expectation is that there's not going to be any other process for those groups to be able to talk to the LDB or whatever about this before the decision gets made so they know where this thing is going or they have a better sense of it than they seem to today.

[1755]

Hon. R. Coleman: When the industry meeting took place, all the people from industry — who are obviously not bidders, because they can't be — were told that if they had any other concerns or questions, they could submit them to the general manager of the Liquor Distribution Branch, and they would be formed into the process with the project team. We have not received any submissions subsequent to that meeting. So that's one case.

On the other thing, I am advised that the auditor's contract has recently been requested in an FOI process. It will be posted publicly as part of that process shortly. We are getting a copy for the member.
[ Page 12501 ]

S. Simpson: The minister just spoke of this, and I wondered if the minister could explain. I understand that these are distinct and different, but maybe I'll just put both of them on the table, and then the minister can explain.

The RFP process excluded anybody in the beverage industry from participating — manufacturers, distributors, folks who are in the industry themselves — or from being able to put together a bid and move that forward.

The other thing — and it's in section 1.11 — also basically excluded joint ventures from being able to bid and said that it has to be a single proponent. Not that that means they can't have subsidiaries who are working with them, but it has to be a single proponent who actually advances the bid and has legal responsibility versus a joint venture.

Can the minister tell us why those two sectors were excluded from the ability to make a bid?

Hon. R. Coleman: We're going to get you the answer on the joint venture piece, but on the other one, it's really about an advantage, perceived or otherwise, with regards to the industry.

Let's say somebody had an integrated business — let's say wine and beer, or they had a brewery or whatever — and they became the supplier. The big thing would be: how are you going to make sure they don't have an advantage on what product goes out, how efficient it is and all the rest of those things, to a particular store? We felt it was very important not to have any of that in this. You could just imagine that if a particular, let's say, set of liquor stores was receiving a particular brand of beer or wine because it happened to be owned by the same people that were doing the distribution, then the other wine wasn't getting in there.

There's also proprietary information here. If you're the distributor, you would know what wine is selling in a certain area or what price points are working in a certain area because you'd be sending that out to those particular retailers. You would have an advantage if you had the product yourself. You could play sort of that price point game or product mix or whatever. We did not want that to even be perceived in any way whatsoever. That's why they were eliminated.

S. Simpson: I've asked this question in other places. I'll ask it once, and we'll get it out of the way. Is there any form of business case that was developed by the LDB or through government which motivated the decision to go out and not explore the issue, but advance an RFP to actually make the change? Was there such a business case? Does it exist? If so, why is the government not prepared to make it available?

[1800]

Hon. R. Coleman: First of all, it wouldn't have been developed by the LDB. This came through the budget process and the budget speech. Then after the budget speech and the process, they said: "We're going to go out and look at an RFP for privatization." The direction is then passed through to the ministry or minister who's responsible.

I'm not sure at what point I actually got the liquor file back related to the budget proposal. But the work that was done at Finance was to look at one of the things we thought we could do with regards to selling of assets that would help the fiscal plan going forward. One of them was obviously the warehousing and distribution. The other piece was the real estate attached to this.

They did some work to come to the conclusion that this would be one thing that should be pursued. Then the direction comes to the ministry to do the RFP. So we prepare the RFP to go out to the marketplace.

The business case is actually a bit reversed on some of this stuff when you do it. If the RFP comes back with savings for the consumer, has more efficiency for the government and if it save us money and actually provides some money to us for the fiscal plan, then that is the business case. Until we actually get the bids, we won't know what the total case is.

It's really a case of Finance, in their budget process, going through a very extensive process every year to look at assets and opportunities. They put that into their budget process. The budget speech is basically sometimes…. Taxation in particular you only hear about on the budget day because that's confidential, only held by Finance.

They come through some processes in committees to make that decision. That decision is made, and then it's basically directed to the specific ministry that's responsible. In this particular case, it's this ministry and the Ministry of Labour and Citizens' Services deputy. Those are the two ministries that are handling this file.

S. Simpson: I know there's some work being done on the joint venture question. We'll get to that when we do.

I'm going to switch gears here a little bit and move away from the RFP. I just have a small number of questions. I know we maybe have about 15 minutes left here. These are questions that are unrelated to the RFP.

The first question…. I know there's been some discussion around the issue of dual licensing that has gone on. I've heard this from people in the industry, of course — the question of you're a restaurant till nine o'clock, and then you have a licence that triggers you to be a pub from nine o'clock till one o'clock, or whatever.

I know there's been some conversation. Could the minister tell us whether it is a consideration to in fact put those kinds of licences in place and invite people to make application for them?

Hon. R. Coleman: Just back to the one about…. We always contract with one legal entity. We don't do the
[ Page 12502 ]
joint venture thing in government. That's basically why that's the case.

No, there's no work being done on dual licensing.

S. Simpson: A couple of questions. These were raised to me by the craft beer industry. I have three craft breweries in my constituency. They took me on a tour and then suggested all kinds of questions. Somewhere in here I might have even got a beer. I'm not sure. They relate to a couple of matters.

First of all, and I've written to the minister about this, is the question…. I know this doesn't require a change. It's more of an enforcement issue. It is serving size lists. We know it's often done in wine, but the notion that the glasses…. We know glasses can be of mighty different sizes that you're serving beer in, in any given establishment. Should people know if it's a real pint? Is it 12 ounces, or what is it? The need for the establishment to display a sign that says, "When you get a mug of beer here, this is the size that you're buying," and you'll pay accordingly.

There's some concern that while there are some rules around it, it doesn't appear to be enforced in the way that I know there is some enforcement on other matters around disclosure now. Is there any thought on the part of the LDB to push that a little harder?

One of the reasons the craft brewers talked to me about this is they're now producing beers that are quite different. Some of them have a very high alcohol content in relation to, say, more conventional beers — your Molson's, your others. Some of these are 8 or 9 percent in some of these craft beers.

[1805]

They raise it almost as a safety issue, to say: "There's a difference here, if you're having a couple of these versus a couple of Coors Lights, in terms of making a decision about your conduct, particularly if you're going to go out and get in a car." Is there any thinking about enforcing that more rigorously or encouraging that enforcement through your inspectors?

Hon. R. Coleman: They're required already to post a price list and serving sizes, and that is to be posted. In our next branch newsletter, they're being reminded of that.

It is not an enforcement priority, though, to be honest with the member opposite. We have four enforcement priorities in liquor. As we're trying to modernize this and put some responsibility…. There has to be some responsibility on the part of the licensee and responsibility on the part of the consumer. I don't know that we can actually legislate people's behaviour.

But we do have four things that we concentrate on. One is service to minors. It is just a non-starter for us with regards to our enforcement activities. Over-service, which is serving somebody that's intoxicated and not even….

There are four things, basically. The third thing is overcrowding. Overcrowding can be very dangerous with regards to activities — fighting and that sort of thing when people are overcrowded into an establishment.

The last one is the sale of illegal liquor, which is liquor that isn't bought through us, which is being sold — or through a proper distribution channel like a winery with direct delivery or something like that — where the taxpayer is not getting their share or a product is being imported here that we don't have the numbers or the right labelling on or something like that.

Those are the four priorities. They are required to do the serving sizes and post the price list, and we will continue to remind them through the newsletter. The odd time we might get a complaint that we would actually spend some time on, but for the most part that's the expectation.

S. Simpson: I wouldn't expect it to be the highest priority for enforcement. I'm just saying it's something, maybe, that inspectors could simply encourage and remind. The newsletter might do that. I think that's probably what we're thinking about here, not putting any undue amount of time or attention into it.

One of the other issues…. This was raised to me by a new brewery that has just opened in my constituency, Parallel 49, which is going to produce at least two or three beers. They've got a significant investment here, but they also own a restaurant in the constituency called St. Augustine's, which is well known in the craft beer industry. They sell 40 different brands of beer there, all of them craft beers.

The challenge here is that they are now going to produce two or three beers of their own. They will not be able to sell those beers in their own establishment because of the issue around tied stores. I know there was some consultation done around that. Tied houses and trade practices was done back in 2011, I believe — 2010.

In my discussion with this company, the owner, the proprietor says: "Look, I understand that I shouldn't be able to advertise my product over others. I shouldn't be able to use that advantage, but if I've got 40 beers here and I want to have two taps that sell my beer out of 40, is there some reason why I shouldn't be able to do that?"

It seemed like a reasonable question. If he wanted to have two-thirds of the beers his product and nobody else's…. We know there's been some of that go on in the past with the big operators. Is there a reason why we're not doing that?

[1810]

Hon. R. Coleman: When we consulted on this, we actually didn't get very much consensus on this particular issue. I can't tell you when something might come forward. We are working on some changes that might be able to address the issue that the member has brought to my attention. I can just tell you we have some work going
[ Page 12503 ]
on. Because it would probably be regulatory in nature, I can't tell you much more than that.

S. Simpson: I know we're closing in on time, but I have a question here, and this was motivated a little bit because I know there is a discussion going on now around corkage and the BYOB notion, and people being able to bring their own wine to restaurants. Whatever the corkage is, it will be, and that will be another discussion — but changing policy to allow people to bring their own beverage, their own bottle of wine, when they go to a restaurant.

Has there been any consideration…? The craft folks have come back to me to say that some people like to bring their own particular type of beer, and they'll bring two or three or four beers. Is there any thought about allowing that to occur and creating some kind of corkage situation where somebody brings their exotic bottles of beer, and they want to be able to have that with their dinner? Is that at all a consideration?

Hon. R. Coleman: No. We actually have not even had any overtures from restaurants or bars in B.C. with regards to that. We have had some discussions with regards to wine, and we do have some work going on, on that particular piece.

Noting the hour, I move the committee rise, report progress and seek leave to sit again.

Motion approved.

The committee rose at 6:12 p.m.

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