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Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources

Issue 18, Evidence 

OTTAWA, Tuesday, June 17, 2003

The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 5:10 p.m. to examine and report on emerging issues related to its mandate (implementation of Kyoto); and to consider Bill S-10, concerning personal watercraft in navigable waters.

Senator Tommy Banks (Chairman) in the Chair.


The Chairman: This is a regularly scheduled meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources, which is pursuing its reference from the Senate to examine and report on emerging issues related to its mandate, including the implementation, among other things, of the Kyoto accord.

Our first witness today is Mr. David Poch, a member of the board of directors of the Green Communities Association.

Mr. David Poch, Member, Board of Directors, Green Communities Association: I am an environmental lawyer practicing in energy policy and energy regulation, predominantly in Ontario. I find myself here as a member of the board of the Green Communities Association, which I am honoured to be.

My presentation today will have three parts. First, I will give an introduction to what the Green Communities are — in short, a powerful vehicle for greening Canadian households and the communities in which we all live.

Second, I will focus on residential energy efficiency and overcoming barriers to action, something with which we have had a fair amount of experience, and in which I understand the committee has a fair amount of interest.

Third, I would like to discuss with you how we are trying to develop what we would call a mature partnership with the federal government to take it to the next step in our joint effort to implement the Kyoto accord.

First of all, who are we? I am speaking on behalf of 40 member groups of the Green Communities Association, non- profit organizations that deliver environmental programs and services in their communities. It is a growing national movement. We have new members joining regularly, and the GCA acts as an umbrella serving these organizations and, on occasion, steering programs.

We engage Canadians where they live, in their homes and communities. We deliver a wide range of results-oriented environmental programs. I have provided you with some material. The programs and groups deliver a focus on conserving energy, water and waste, preventing pollution, reducing emissions that cause climate change and smog and protecting green space and ecosystems. The heart of the Green Communities' model is the community-based feature. While we may have national programs, they are delivered at a community level. They are tailored to the particular communities. The community groups select which programs they are going to run with. They are often the initiators of programs — these good ideas spread throughout our network — and sometimes they are recipients of good ideas from others or from the action of the umbrella group itself.

The community-based situation allows for partnerships with the various community partners — municipal governments, local utilities, church groups, you name it. The strength of this is summed up in the phrase, ``community- based social marketing.'' We are able to pitch our ideas to the public in a way that commercial enterprises or government on its own cannot. We are embedded within the community. I am sure all of you, having become senators, have been active in your own communities and understand how community groups have access and a respect within the community that is hard for outsiders or commercial undertakings to achieve. The national organization, the umbrella group that I am here representing, helps the member groups with organizational development and support. It is the site of several joint national programs. One example is the delivery of EnerGuide for Houses, which I will come back to. The GCA handles training of the expert assessors, quality assurance, administration and liaison with the federal government — a partial funder — for the EnerGuide program, which is a home efficiency audit program.

We also have other joint national programs. One that comes to mind is the Well Aware Program. This is a well stewardship program. It includes running forums, doing community outreach and arranging visits for private well owners. This was largely a response to the Walkerton incident in Ontario. The provincial government put out an RFP and gave the Green Communities in Ontario a million-dollar contract to go out and educate people on the safety issues of their own wells.

There is a Pesticide Free Naturally program, which is running nationally. I suppose you could say we are friends of the dandelion.

We grew out of kitchen-table volunteer groups throughout the country in the 1970s and the 1980s. Now these groups, in an interaction with the Green Communities Association, have become incorporated environmental service delivery organizations. They have paid staff and ongoing programs. They remain integrated with their communities and local government and enjoy this central coordination and training via the GCA.

I would like to turn to the second area, which is residential energy efficiency, and how we have been trying to overcome barriers there.

GCA's member groups are Canada's leading delivery agencies for residential efficiency programs for existing housing. We have done approximately 120,000 energy audits in the past decade. We have pioneered the delivery of the Natural Resources Canada program, EnerGuide for Houses, which is an energy advice and rating system. Under that program, we have delivered over 14,000 EnerGuide for Houses audits to date in Ontario, and we have just won a competitive bid to deliver them in British Columbia, Alberta, Nova Scotia and Nunavut.

EnerGuide for Houses has been an excellent tool to let people see how their homes are doing compared to homes of similar vintage, to get expert advice on where the best savings are in terms of improving the energy performance of their homes and to get access to the tools to either do that themselves or through local contractors.

Two key problems have been identified with the program: One is reaching people, getting them to participate in the program. Then when you do get them to participate, you do an audit of their home and give them a list of good ideas. The next challenge is to get them to implement it. There are all kinds of barriers to that, as you can appreciate. People are not familiar with the program because it is new. There are costs and hassles and invasion of privacy in submitting to an audit of one's home. The most significant barrier is the capital cost of the retrofit investments in improving the home's energy performance, but also the time and access to contractors with the appropriate skills and who can be trusted. Those are all things with which the program has tried to help.

We have learned to engage in creative marketing with partners — utilities, municipalities and workplaces. We have learned to tailor the message to people's actual motivations. To most people, energy efficiency is appealing, but it is not a sufficient motivation. The environmental implications that drive these discussions are not really foremost in people's minds. We find that people are coming to the program because in the long run they would like to save money on their bills, but also for other reasons, such as home comfort, draft reduction and protecting their home's value. We have learned how to bring all of these messages forward at the same time and appreciate that people often have more than one motivation.

Despite relative success, we were not satisfied. We are non-profit groups. We are not in this to make money; we are in it to get results. We wanted better results, so we developed a home energy retrofit incentive program. It is an extension of the EnerGuide for Houses model. We do the audit and they are rated on a scale of 0 to 100. Depending on how much they bring themselves up on that scale — it does not matter how much they spend or on what technology — and improve the performance of their house, they are eligible for an incentive, some cost sharing of the capital costs. We designed this program and were able to get some sponsorship from Enbridge, the largest gas utility in Ontario, and the Ontario government. The pilot project was done in Peterborough, and there is an ongoing pilot in Toronto at this time. We found that this was a terrific improvement.

Under EnerGuide for Houses, typical homeowners who participated ended up putting in place measures that reduced their greenhouse gas emissions by about a ton per year per household. With the addition of the incentive feature, that more than tripled. In Peterborough, we found about 3.8 tons of reduction per year, per household. I do not how what the average number of people per home is, but that is the One-Tonne Challenge right there. That was satisfying.

We have been working closely with EnerCan to design a national program on this model. I have been making the rounds of the government. If the press leak this last weekend is correct, it is likely the program will be funded in the first round of announcements that I gather will come this week from the cabinet committee looking at the Kyoto implementation. We are confident that the federal departments are enthused about this. I bring this to you as a success story, a model that I recommend to you and that we would like to see expanded into other areas of activities.

There were 300 homes audited during the Peterborough pilot. Using the federal government's complex mechanism for comparing these things, where they discount the future dollars and the future tons, which is a little unusual, it turns out that the cost is negative $107 per ton, meaning there is a savings, though there is upfront money for the government to pay for the incentives, assuming they do so, of about $15 a ton. Society's ``cost'' is actually a savings, because the fuel savings over the 20 years that a more efficient furnace will operate exceeds the upfront capital cost of the furnace and of running this incentive program.

It is very exciting because this is a cost-effective greenhouse gas reduction, and that will be true of any greenhouse gas emissions reduction approach that involves energy efficiency rather than carbon sequestration, which may have its place, but does not bring with it those savings on future fuel bills. Efficiency programs, where they are feasible, will always be best for the economy.

I know that the local MP, Mr. Adams, was very pleased, because for every dollar in incentives, the homeowner spent an additional $3, and that tends to be spent at local businesses on building supplies.

That is our model. It is a program idea. That brings me to the third area of my presentation, where I would like to leave you with a message that has to do with building a mature partnership between the federal government and community-based organizations. Green Communities and EnerGuide for Houses have been success stories, but we really believe that these community groups are a tremendous resource that can do so much more.

The principle barrier these groups face is that they are caught between that kitchen-table voluntarism and the professionalism and stability that allow them to build programs and maintain a presence in the community. The answer is money. Having said that, I should also say that the various Green Communities are participants in a number of federal programs and they are thankful. That is how these community groups stay afloat. If these various federal programs were pulled tomorrow, half of the community groups in Canada would go under within the month.

I do not want to appear ungrateful on their behalf, but the nature of such programs makes it very difficult for these groups to be the tool we believe they can be in addressing climate change and the federal objectives.

The federal government's funding constraints often mean that the funds are inadequate. You develop a program that costs $100,000 that you need in cash from the government as their contribution. It will be leveraged 10-fold by local efforts and local partners, but the federal government, starved for funds, ends up giving you half that, so you struggle and cannot maintain the program. Funding tends to be short term, which is very destabilizing. It is a constant treadmill. People spend a lot of time preparing funding applications and waiting for an announcement. The announcement comes late in the day and then it is deliverable six months later and they scramble. I am sure you have all experienced this in your constituencies. The good thing about EnerGuide for Houses was it was an ongoing program. It is a businesslike program in which a contract is entered into. It is a three-year option contract, a year at a time. There is quality assurance. There is centralized reporting. It is systematized. It is a very businesslike arrangement and these community groups love it because it allows them to plan, to build, to grow their resources and to branch out. They would like to see more program approaches like EnerGuide for Houses rather than project-specific funding, which is usually the norm in various government departments.

This is an overarching suggestion that in harnessing community groups, this kind of ongoing program approach analogous to the EnerGuide for Houses — and hopefully it is ramped up to an incentive program — has been very successful.

In addition to this issue of the style of funding, I come with one other complementary request. We are asking the federal government to consider, as part of its Kyoto action plan, investing in community organizational infrastructure. This has been styled the Climate Action Communities proposal. There is a one-page report in your bundle from me. The notion is a three-year to five-year commitment to fund climate action coordinators housed at approximately 50 sites throughout the country, and many of those would be Green Communities groups' offices. This program would fund the key people on a three-year to five-year basis and with some support for national coordination. This would build a capability to offer any number of greenhouse gas reduction programs, mesh them together and have outreach and marketing capability for the One-Tonne Challenge. This would enable more communities to be reached. It would increase the effectiveness of all the programs offered. It would give access to many partnerships. One of the interesting features of this is we are quite concerned that the government is about to embark on five years of dancing with their provincial counterparts to try to get the provinces to partner on funding for the Kyoto response. We view that process as unfortunate, both in terms of cost and the inherent delay. We think that if the federal government funds community- based action, the provinces will no choice but to participate — it will happen. It will be in their backyards — and they will do so gratefully, judging from our experience with EnerGuide for Houses. That was something that came from the federal government, at our instigation, but it has been primarily federally funded.

However, once it was up and running, Enbridge, a provincially regulated entity, went to its provincial regulator and said, ``If you want our customers to be efficient, we can tag along on this program and it will be cost effective.'' The Ontario Energy Board has said, ``Fine. We consider that acceptable as part of your portfolio of energy-efficiency measures.'' That is leverage. Just as the federal government likes to see provincial money leverage its dollars, the opposite is true. We have seen that kind of response. We saw the provincial government kick in money for this pilot to see if an incentive program would work — and it did. Our hope is that real action on the street will be a catalyst for getting the various provincial governments to participate.

I think it is a lot more difficult for them to be seen to be agreeing with the federal government than to be engaging in a community energy-efficiency activity. We are hoping that the federal government can provide us with a modicum of financial support for this minimum three-year effort to pay for some key programs spread throughout the country. We believe that if this occurs, there will be payback many times over in solid climate action programming that will engage Canadians where they live. It is also a means by which the federal government can get a window into and access to communities.

The FCM has acted as a mechanism for the federal government to interact directly with municipalities, and this is a parallel to interact directly with community groups. That is the message I would like to leave with you. These are meta recommendations: That the federal government seek to strengthen its relationships with community groups by engaging in ongoing program funding rather than project-by-project funding; and that the government consider supporting the Climate Action Communities initiative of the Green Communities Association to enhance our ability to deliver the goods.

That ends my presentation, and I would be happy to answer any questions.

Senator Cochrane: Mr. Poch, what about the recently announced $1,000 rebate towards renovations?

Mr. Poch: It is not quite announced yet, unless it happened today. My understanding is that it is based on the Peterborough pilot. The typical homeowner spent between $3,000 and $4,000, and the incentive on average was $800. That is the ballpark that number came from. It does not depend on what they spend. One of the strengths of this initiative is that it depends on what they achieve in terms of energy efficiency. The auditor goes out and sees how the home performs. People are encouraged to do it as cost effectively as they can.

Senator Cochrane: What kind of changes will they be making? Will they be putting weatherstripping around their windows and things of that nature?

Mr. Poch: You are not a novice at this. Weatherstripping turns out to be one of the most cost-efficient things to do. It is inexpensive, although it is hard to find people who have the skills to do it properly. That would be one such example. It is very specific to the house. If people will be replacing a furnace, either immediately or in the near future, educating them on the benefits of a more efficient model would be an example. It may be that in some houses you would prematurely retire a furnace that is functioning well but is inefficient because the home is so big it is cost effective for the homeowner to upgrade then.

Senator Cochrane: You were mentioning the retrofit program in Peterborough. That was for furnaces, was it? Tell us about that. What did people do in their homes to effect three-and-a-half tons of carbon reduction?

Mr. Poch: It varied by home. You will recall back in the 1970s the programs where the approach was to say if you increase the insulation in your attic by this much, the federal government will pay so much, and all the headaches that that brought. Well, that may make sense in some homes but not in others. It may not be where the best savings are in a given home. In this program the auditors were trained. To become an assessor you have to have basic skills. There is pre-testing to make sure you have a basic understanding of building science. There is a specific four-day training course on the assessment tools and an examination thereafter; and then there is quality assurance. They are trained to identify the specific opportunities in the particular home. Yes, they might include weatherstripping, improvements to the heating system. Windows are a good example of where it is seldom cost effective to upgrade for the purposes of energy efficiency, but if you are renovating and putting in new windows anyway, it is cost effective to choose the more energy- efficient ones. Getting people to do that when they are putting in new windows would be an example. There are many measures and they vary by home.

Senator Cochrane: In Peterborough, how many people were hired to do this sort of evaluation?

Mr. Poch: I do not have that number at hand. We are talking about a handful of assessors. The pilot ran for the better part of a year.

Senator Cochrane: For 300 homes?

Mr. Poch: Yes. A few assessors were able to accomplish that over that time period.

Senator Cochrane: They were hired at the headquarters, were they?

Mr. Poch: Any Green Community delivering EnerGuide for Housing will have assessors, although the training is done centrally. It is simply for the economy of scale and quality assurance. The contract with Enercan requires quality assurance and an audit of the program. That is all accomplished by doing it centrally.

Senator Cochrane: How many people would that entail?

Mr. Poch: In the Peterborough situation?

Senator Cochrane: Yes.

Mr. Poch: My sense is maybe four or five people are running that program in Peterborough. They are not doing the actual work in the homes; that goes to local contractors and tradespeople.

Senator Milne: The assessors must make two visits per home, before and after?

Mr. Poch: In the EnerGuide for Homes program there are A labels and B labels. The A label refers to the rating when the home is first assessed. They give their list of recommendations and offer to do a second rating for free later in the hope that people will be inspired to act. In the pilot program where we tried using incentives, yes, obviously, that second audit was required to get the incentive because it was based on the difference in performance between the two.

Senator Cochrane: You talked about an ongoing approach whereby this program could continue for three to five years?

Mr. Poch: Yes, EnerGuide for Homes is a contract program. It is renewable, but the assumption is three years.

Senator Cochrane: You would like to have more funding?

Mr. Poch: We would like to see more programs structured in that fashion rather than one-off, project-specific grants.

Senator Cochrane: Do you have a figure in mind?

Mr. Poch: We do not have a figure in mind for that aspect of my recommendations. That is about the approach. A number of government departments give out grants for particular objectives, and we are saying instead of giving out grants to fix this problem here today, structure programs on an ongoing basis to allow groups to build up capability and deliver them on an ongoing basis. I do not have a figure for that.

I do have some numbers for you on the second element, the Climate Action Communities proposal. The idea is to set up 50 community-based climate action coordinators in 25 metropolitan centres and 25 other smaller centres that could act as hubs. We would expect that to cost about $60,000 per year per location, and about $500,000 per year for a central coordinating capability. It is about $3.5 million a year, and we think that would be money well spent.

The Chairman: The amount of money per location would be the same in Toronto as in Weyburn, Saskatchewan?

Mr. Poch: The idea is you are paying for the key people here, and there is incremental overhead. It is more expensive in Toronto than in some other places, and it will be more expensive in the far North if you have to start flying people around for training. It is an approximate number. In any particular implementation of this, the department — presumably the Ministry of the Environment — would want to create a contract that took that into account.

The Chairman: The $3.5 million is about right?

Mr. Poch: We think that is what it would cost to run this nationally on an annual basis.

Senator Milne: I want to follow through on your Peterborough study. If this program was extended to other areas in Canada, you say that the incentive to the homeowners would not be related to the cost of what they had to do, but to the carbon savings?

Mr. Poch: Correct.

Senator Milne: This becomes quite important when you start thinking about the cost of doing things in different communities in Canada. Up North it is very expensive to do this sort of thing. In a small city like Peterborough, you could probably find local contractors who will work for much less than those in downtown Toronto. Have you thought about looking into extra incentives to relate it to the cost of what they are doing?

Mr. Poch: Your point is well taken. Peterborough was chosen because it already had an active Green Community and the town is commonly used for market studies. It is considered the average Canadian town. I do not know how true that is or how helpful it is in getting information when the country is made up of any number of extremes.

It could be more of an incentive in some communities than others, depending on what you can do with it. It will be more effective in reducing carbon in some provinces than others, depending on what fuels are being displaced. In Atlantic Canada, Ontario and Alberta, coal and oil are at the margin for heating homes, either with electricity or directly. In Quebec, hydroelectricity tends to be used. Electric heating is prevalent. They are not going to spill that water. The electricity will be generated and displace coal-generated or gas-generated power, either in Ontario or New England. The climate will be helped. There is an accounting issue in getting credit in Canada for tonnage.

Senator Milne: There is also the cost of adjusting whatever you do with your home according to the climate zone. You need a lot more insulation in the Yukon than you do in my home in Southern Ontario.

Mr. Poch: Some of these things offset each other. For example, in the Yukon it would be more expensive to pay for trade skills or to get technology shipped in if you are in a remote situation. On the other hand, it is that much more cost effective to do because your fuel bills are higher. It is not one size fits all. The incentive is really a motivational factor. If it is sizable enough, you will get incremental participation. If it is too small you will only get the free riders, the people who were going to do something anyway. That is a problem. It has to be large enough to grab people's attention.

We would love to be delivering other programs. This is not the panacea. This is not going to reach every homeowner in Canada. These are capital investments. For low-income people, it does not matter what incentive you give them, unless it is 90 per cent or 100 per cent of the cost, they cannot participate. You need a different program for low- income groups. You need a different program for public housing. The homes on the defence bases are notorious for being in disrepair and in need of renovation, and no less so on the energy front.

The Chairman: Do we also need to tailor this program to accommodate lower income groups?

Mr. Poch: It can be done. It would be possible to design this for low-income people. It would be a different incentive structure. You could use this capability. Once you have created this community-based assessment capability throughout the country, then you would want to use that expertise on the ground in the communities.

The incentive system would have to be different. You would have a parallel program that piggybacked on this that funded totally the capital cost of low-income home renovations and perhaps shared in the benefit of the utility savings over time. That is one way you could structure it so that some of the benefit flows back.

Like any federal spending project, some of it flows back because the money is spent in the community. GST is collected. It is not as expensive as it sounds at first blush.

Senator Milne: You talked about a 40-per-cent return because of the GST?

Mr. Poch: Yes, because you leverage savings by the homeowners themselves, you get the GST on that as well as the incentive money being spent. It turns out that the net cost runs at about 60 per cent of what the incentive appears to be.

Senator Milne: When these inspectors go in to evaluate a home, they recommend things that can be done. Do they base those recommendations on, for example, the fact that electric heating, say in the province of Quebec, is more environmentally friendly because it is generated through hydroelectric power? Perhaps in Quebec you recommend a homeowner convert from gas to electricity, whereas in Southern Ontario I might be told I should convert from radiant electric heating to gas?

Mr. Poch: As much as some of my colleagues might want to play that role, the rules of the game in practice have been to give the homeowner the list of options and explain to them what is in their interests in a narrow sense, that is, economically. They are given the next steps, too. There is a general understanding that the vast majority of people would like to do well by doing good, but they are going to pick the most cost-effective measures. That tends to be the way the presentation is structured. Where is the best savings for the dollar?

The Chairman: When you mentioned coal and oil in Alberta, you were talking about electricity generation, not heating, right?

Mr. Poch: It would be gas heating and coal and oil generation.

Senator Christensen: How do communities become members of the Green Communities Association?

Mr. Poch: There are certain requirements. The association insists that there be an independent board of directors and a salaried executive director. We have associate members who are trying to get on their feet and become full members. We are looking for groups that have reached a certain level of maturity.

Senator Christensen: It would be a group that forms independently as opposed to a municipality itself?

Mr. Poch: That is right. They are not municipalities; they are independent, volunteer-based non-profit community groups.

Senator Christensen: One of the things you are looking at is conservation on energy, water and waste, and water and waste in particular are municipal responsibilities. I am from the Yukon, where older houses are always a problem because they bleed so much water during the cold winter. Five years ago, the city entered into a program whereby special controls were put on to regulate the bleeding according to the temperature. If you had a community organization, they would work with the city?

Mr. Poch: I live in Perth, Ontario, and there is a GCA member group there, ecoPerth, that works closely with the municipal government and has been instrumental in making suggestions and getting community support for various programs. They have convinced the municipality to give a rebate to everybody who puts in a low-water-use toilet, because they explained to the city engineers their capital costs for increasing the treated water supply and treating the sewage. From information obtained from sister groups throughout the country, they demonstrated how cost effective this can be and convinced the municipality. Sometimes the projects are delivered by the organization; some of them help catalyze the efforts of the municipality.

Senator Christensen: You get low-flow toilets and showerheads here, treating the water when it comes in and treating it after it goes out.

Mr. Poch: And pumping it with electricity to get there.

Senator Christensen: You end up flushing the low-flow toilets twice.

Mr. Poch: Not to be too graphic, it depends on the situation.

Senator Christensen: When assessors are doing EnerGuide audits, they have computer programs where they enter in the square footage, the thickness of insulation and the heat sources before they start, and then they can get a printout of where they can make the savings?

Mr. Poch: The federal government developed a few programs — for example, HOT 2000, which is a tool for modelling energy performance. You can do simulations and see what difference something would make by changing the input. The assessors come with laptop in hand and a blower door, which they install in the doorway and depressurize the house to see how fast they can suck air out through the leaks.

Senator Christensen: When an EnerGuide analysis is done, is there a preferred house age?

Mr. Poch: I do not know the answer to that. My understanding is they do not tend to be in demand for brand-new homes, but I do not believe they would make a distinction. They will tend to find more opportunities in older homes.

Senator Christensen: In the audits that you have collected from the different projects, what have you found to be the most economical areas for doing work and getting a good payback?

Mr. Poch: Weather sealing seems to be the best in terms of being inexpensive. It is getting local contractors to do it. It is a small, picky job. Contractors want big contracts. They do not want to go around doing four-hour jobs. An important role these organizations play is giving homeowners a list of suggested contractors who will do this sort of thing. In some areas there are none. In one instance, they spawned a weatherizing operation that just does that, goes in with the caulking guns and does that because you cannot get local contractors. That is in downtown Toronto, where contractors are in demand.

Senator Christensen: Where do wood stoves fit today? Are they being looked at now at all?

Mr. Poch: They are rated in Canada for energy efficiency and for emissions. In my opinion, if you live in the country they are a great option, because presumably you are harvesting wood in equilibrium with it growing back. It is a zero carbon emitter over the long haul. In the city there are more problems with air quality, with particulates, and they are not affordable if you have to start trucking your wood in.

Senator Spivak: Have the codes changed for new buildings? Is that a federal responsibility?

Mr. Poch: It is both. It is predominantly provincial, but there is a mandatory federal building code model that applies in federal situations.

Senator Spivak: Are those codes as strict as they could be?

Mr. Poch: They are not as strict as they could be. They do not uniformly achieve what would be considered cost effective, just in simple dollar terms, for the homeowner in terms of energy savings, because it is hard to adjust codes as the price of gas goes up. You cannot change the code instantaneously to deal with that, nor would you necessarily want to.

Senator Spivak: I am talking about for new buildings. You might not want to use gas.

Mr. Poch: You might not want to, but builders tend to be building that way. The codes are the baseline. They are the minimum requirement. There is no question that efficiency standards for appliances, for cars — as we have seen in the standards that we adopted from the Americans — are far and away the most cost-effective way to save energy and reduce emissions. Quite apart from the dollars, it takes all the hassle out of it for homeowners and consumers. You do not have to educate yourself because an engineer has done the sums.

Senator Spivak: I am looking at cost benefit. Changing the codes might be a very important step?

Mr. Poch: Absolutely.

Senator Spivak: I have a furnace that I now have to replace because the city is telling me I can no longer use it. It is only four years old, but the piping or something has now been discontinued. Nobody told me that.

Mr. Poch: There was a safety issue. This is probably a particular gas appliance.

Senator Spivak: Right. Now I am replacing it with a high-efficiency furnace. I have no choice, and many people had no choice, because the gas company says, ``If you do not do this, we will close down your heat.'' I think people are used to, or at least can tolerate, strict codes.

Mr. Poch: The distinction between a safety-driven code and an energy-efficiency-driven code is a question of political philosophy. I know in provinces like Alberta and Ontario there seems to be more reluctance for government to mandate measures. This is a legitimate political debate. There is public acceptance of codes, since they are there for safety. Historically, the codes have also looked at how much insulation you have to put in a wall.

Senator Spivak: Everybody is becoming educated about the washer and dryer.

You say that with $100 million a year, you could reach 20 per cent of Canadian housing over 10 years. Would it be more of a cost benefit to say, ``Let us allocate $500 million a year and get this all done in five years,'' apart from the codes?

Mr. Poch: There is a staging question. You can only build the infrastructure so fast. If the announcement next week was that ``We will fund EnerGuide for Houses incentives at $1.7 billion,'' the community groups could not do it that fast. The private sector presumably could, but they would not achieve the kind of economy that we can with this approach. There is a pacing whereby you need to ramp it up.

Senator Spivak: If you could do it, how would you rate this in terms of the priorities? In terms of homes and the One-Tonne Challenge, where would you rate this out of 10?

Mr. Poch: Very high, apart from the codes and appliance-rating approach.

Senator Spivak: Are there any appliances sold that are not energy efficient?

Mr. Poch: Yes. There is still a range of them out there. You could still buy a top-loading washer. It was only this year that front loading has become more prevalent. A few years from now, it will be very reasonable for the government to say, ``You can no longer sell top loaders.'' At that point you will have the economy of scale so that the incremental cost to the homeowner is minor.

Senator Spivak: Is it possible to use legislation for that?

Mr. Poch: For some of these issues, there is no question.

Senator Spivak: These are things that you can do and people would accept it because it will save them money.

Mr. Poch: Apart from the direct mandating of particular measures, I think the incentives for retrofitting is top of the list because it is a relatively inexpensive delivery approach. It is about energy efficiency, so in terms of carbon, you are getting the best savings because you are saving the fuel.

Senator Spivak: The price of natural gas is going through the roof. It has maybe doubled. What has happened is ridiculous. The cost to a homeowner to replace the furnace might be paid back in a couple years. I am getting a high- efficiency furnace — I would anyway — but the cost of heating my house is prohibitive. It is rather like the insurance business, in that it is getting beyond all reason. I am not sure how that compares to electrical heating.

Mr. Poch: Gas is still cheaper than electricity except in places like Quebec. In provinces like Ontario, gas is the most cost effective. It has gone up considerably. Even though it has gone up and the payback period for an efficient furnace has come down, you still have a real barrier in the marketplace. People are adverse to capital investment — ``I do not know how long I will be in this house. I am uneasy about this new technology. I do not know how to pick one. I do not know whom to trust.'' That is what these programs are designed to address.

Senator Spivak: The high-efficiency furnaces have improved over the last five or six years. I know that because I could not get one five or six years ago. They were not too happy with it. Now you can get one. Would it be worth launching an education program, because for some people, payback is important? People want to save money.

Mr. Poch: I can tell you from my experience in my day-to-day job, as I represent environmental groups before the Ontario Energy Board, I am predominantly cajoling the gas utilities and now the electrical utilities to adopt conservation programs.

We bring in experts from all over to advise on how best to do this. They all agree that public education is a necessary element but insufficient on its own. You want to increase public awareness; you want to have that education, but in general, it is not highly effective by itself.

Senator Spivak: Maybe you could get the high-efficiency furnace manufacturers to advertise it.

Mr. Poch: Yes, we want to do that and form those partnerships.

I can tell you that there is innovation with these kinds of programs. There are these joint efforts, where you interest the utility in getting an incentive from the regulator to help save customers money. The utility, because it is big and connected, talks to the manufacturers and gets them to improve the average standard of their fleet of water heaters. I can tell you that because it happened in Ontario. It was very cost effective.

Senator Spivak: It is like cars. Someone suggested here switching the rebates to cars that are more fuel-efficient. We have to use our brains because we do not have enough money.

The Chairman: I apologize to you all, but we are running out of time. I will ask everyone to be concise in their questions and answers, because we have two other witnesses.

Senator Buchanan: I would like to spend a few minutes on the situation in Nova Scotia. Many people think that because we seem to have all kinds of natural gas, that we no longer have any problems with energy and with burning oil or coal. The fact is that 80 per cent of our electricity is still produced by coal-fired generators, 10 per cent from oil and a small percentage by other means such as wood and hydro.

Coal is still number one, even though it is not our coal. It comes from South America and the United States.

Using natural gas to generate our electricity is way down the road because most of the generators are in Cape Breton. There are no natural gas pipelines into Cape Breton and there will not be for a while.

Converting from oil or electric heat, which is what we have in Nova Scotia, except in rural areas where wood is burned, to natural gas is not very appealing, because as Senator Spivak said, the cost of natural gas has gone up. It will be too costly for people to convert their furnaces to natural gas. Heritage Gas is finding that out.

We have a problem. We have to stay with the status quo.

Mr. Poch: You have an opportunity as well, especially where people are heating with electricity. As you point out, electricity is produced predominantly from coal. The physics of heating with electricity are that you burn 3 BTUs of coal to produce 1 BTU of heat in the home. It is irrational from a physics and economics perspective to heat with electricity, except that it exists. It is a reality.

That means that energy efficiency or conservation is that much more cost effective. Every BTU you save sealing a crack around your window is 3 BTUs less of coal being burnt back in Cape Breton. If you add in the energy used in extracting and transporting that coal, it is even more. There is a very high leverage. Efficiency is always the best option.

Senator Buchanan: It is difficult to get people to do it.

One other point is that of all the provinces of Canada where there is an opportunity for people who convert to receive a grant, there is a barrel of money in Nova Scotia. There is about $14 million for people to convert from oil or electricity to natural gas. It is not government money, which is interesting. It is money set aside by the natural gas developers and producers offshore over the last six or seven years specifically for people to convert to natural gas.

Fourteen million dollars in a population of about 1 million will not go that far, but at least it is a start.

The Chairman: Fortunately, there is not just one person per house in Nova Scotia, as we all know.

Mr. Poch, we have been very well informed by you. I have a list of questions and I know other senators do as well. We will send them to you. I hope you will respond by sending the answers back.

Mr. Poch: I will either respond myself or have my colleagues attend to that in my absence. I enjoyed being here.

The Chairman: We may impose on you again.

We now have before us Mr. Ted Ferguson from B.C. Hydro — Power Smart. Before you begin, I want to tell you that at a conference in Vancouver that we attended the year before last, we heard what you had done with the Power Smart initiative, and it set everyone back on his or her heels. It was marvellous. People were cheering about it, and I have referred to it often as a model of what utilities ought to do.

Having said that, I welcome you. I would ask you to be as brief as you possibly can while being sure to make your points. I ask senators to do the same.

Mr. Ted Ferguson, Environmental Coordinator and Greenhouse Gas Management, B.C. Hydro — Power Smart: Thank you, it is my pleasure to be here. I heard that you have been meeting since eight o'clock this morning. I will try to liven it up for you.

I will touch on three things. We will follow the information that I had sent around.

I had two options in front of me in deciding what information to share with you. One was how we do the program. The other is how it should be done across Canada under the Kyoto accord. They are slightly different because under Kyoto, you would be dealing with new regulations and policy applied to industry. It is a separate question. I will try to touch on both. We can get into greater detail after my talk.

I want to touch on how we integrate Power Smart into a greenhouse gas management program in our company, because it is a key part of it. It is integrated with other aspects.

Lastly, I will briefly touch on what we expect to see going forward under Kyoto for programs like Power Smart.

Here you have a B.C. Hydro profile. We are a big electricity company, the third largest in Canada, with 1.6 million customers. We are a generator and distributor.

In Alberta you are seeing a separation of electricity companies. You have the generators and then an unrelated distribution company. We are vertically integrated. Hydro Quebec and Manitoba Hydro are the same.

Our power is about 90 to 95 per cent hydro. Some years, 10 per cent is gas. It depends on the water levels. We have significant emissions compared to most hydro companies in Canada — 1 to 3 million tons a year. We are quite interested in how Kyoto policies will shape up.

We have significant annual and inter-daily trade with the U.S. through one of our subsidiaries called Power X. We are interested in how greenhouse gas policies will affect us as a Canadian company in relation to the United States, considering that they have not adopted Kyoto. We are interested in knowing how that will affect electricity prices and our trading regime.

We integrate environmental, social and economic matters into our decision-making. Power Smart finds a balance among those three issues. When you are an electricity company, you have a huge impact on people and the environment. It is good business to take care of what we call the triple bottom line.

The fourth slide refers to our greenhouse gas emission projections. We subtract the effects of Power Smart and show what would have happened if we had not been working on energy efficiency.

Our next resource option for power is natural gas. We have already developed some natural gas plants. We have one on schedule to be introduced on Vancouver Island for which we are seeking approval.

If you assume high-efficiency gas generation had been used instead of Power Smart and our green or clean energy programs, B.C. Hydro emissions would be twice what they are today.

It is a message that we like to convey. What would have happened otherwise? What would have happened if we had not had Power Smart? We would have had to go to more natural gas generation, since more large hydro projects currently a bit of a challenge in our jurisdiction. We quantify the benefits in terms of climate change and greenhouse gas emissions.

The next slide explains the greenhouse gas intensity. It is based on output. How many tons of greenhouse gas do you produce compared to the amount of electricity produced. We are quite low in comparison to other jurisdictions.

How does Power Smart manage both the electricity supply and environmental issues such as greenhouse gas or climate change? You can see that in what we call our ``resource stack.'' How will we supply new electricity demand? There is economic growth in B.C, although perhaps less than historically. There is growth around Whistler, where they have started installing heated driveways now. It is the trend. It is fairly energy intensive.

With increased population, you have greater demand. How will you meet that demand? At the top of our resource stack is conservation, which is Power Smart. Beyond that, it is Resource Smart, which looks at our existing installations to see how we can get more energy out of them. Third, we have a clean energy program where we try to buy ``clean energy,'' as we have defined it, from independent, private-sector power producers.

All three initiatives supply us with new power but also manage our emissions so they do not go up.

I will provide some historical context on Power Smart. It was initiated in 1989. It targets all of our customers, both businesses and homeowners, with information and financial incentives. We provide things that act as catalysts. We provide not only information, but also show how, for example, to arrange funding with the banks. We suggest that they ask banks to find a key account manager who is familiar with energy retrofits. Customers can then deal with that person who understands the economics of energy-efficiency investment.

I will leave several packages with you. On our Web sites, we have lists of people in the banks in B.C., for example, who actually understand the concept of your wanting to invest to increase your energy efficiency and so forth. We try to act as a catalyst in that respect.

Our success has been remarkable, in the sense that there has been a significant reduction in domestic consumption. Using a combined cycle high-efficiency gas generator, which is typically the go-to electricity generation source today, we quantify the greenhouse gas savings.

Power Smart was initiated in the late 1980s and early 1990s and the program was ramped up. Something we may want to discuss is why these programs exist; why has it been successful? It tapered off in the late 1990s. Whether these programs are successful depends on who is in charge and whether they want to see such a program happen. The CEO who was with us in the late 1980s returned in 2000 and helped us revamp the program and re-energize it — no pun intended.

We have a new target and a massive outlay of capital, $600 million over the next 10 years. That is enough for two of the gas plants we are trying to put on Vancouver Island now. By 2010, the technical numbers are 3,500 giga-watt hours. That is about 35 per cent of our growth. Growth between now and a decade further will be about 10,000 giga-watt hours. With that number, we shave 35 per cent off that increase. That is what we consider to be our accomplishment.

Demand would have gone up by 10 per cent, but instead we have these aggressive programs that reduced it by 3.5 per cent. Therefore, demand is going up by 6.5 per cent over 10 years.

Looking across the Canadian horizon, we find it odd that Power Smart is the most aggressive electrical utility energy-efficiency program in Canada. We are proud of it, but we are not entirely sure why it has not been picked up by other jurisdictions, even in a minor way.

We renewed it in 2001, but I think I made the points on that next slide.

This shows how we do it. We have an industrial incentive program. We have an example here from Norske, which is the parent company of a large pulp and paper and lumber company in B.C. Here is an example of how we worked with them to save electricity. It gives some of the details and prices.

Something that is not in here, but is in the documentation I will leave with you, is how we choose a project for Power Smart to share some of the costs with a customer.

Here are the criteria: We consider the price for us to buy new electricity or produce new electricity from a gas-fired generating station to be $55 a megawatt hour. We say about $55 is the going rate for gas-fired electricity.

For our Power Smart program we go to the community, to businesses and industrial customers for anything up to $25 a megawatt hour, so slightly less than half of what we would have to spend for new electricity.

That is our threshold. In this example, it is 7.2 cents per kilowatt-hour. That is $7 per megawatt hour, which is very inexpensive compared to what we would have to spend if we built a gas plant, bought the gas and generated electricity with it.

We go out into the community and do something called a ``conservation potential review.'' We hire expert consultants who look at the situation in the B.C. economy and the potential out there with existing technology. This is not R & D, not something that will be potentially on the market in five years, but technology we can go out and buy now. It is tested and proven. What is the potential?

Those are some of the parameters that we use to decide what can we do and what makes business sense for us as well.

Another example there is Highland Valley Copper, and others that I will not go into.

Another aspect that has been popular this year is the LED traffic light program. It is a different form of light that does not release any heat and is extremely efficient. We have all seen them on electronic devices. This little red light here below the mike is probably an LED. They have been in use for years, but we have not put them into large industrial applications.

We worked with the supplier to get a better price and better access to the product. We have started implementing traffic light programs throughout the municipalities in B.C. These have, as listed here, incredible benefits of all kinds.

We have covered the institutional initiatives — the traffic lights are a municipal issue, so I do not know whether it is institutional, but it is dealing with different levels of government.

Power Smart Residential is where we try to change behaviour within homes — for example, changing light bulbs. Many of those programs are found in stores. We have Power Smart staff. In the summers, we have a Power Smart youth team that goes around Home Depot stores and places like that. They have coupons and all kinds of shows in the store to get people to buy the products.

They go to the schools. Part of the package is a program to try to provoke a different kind of thinking amongst children. They can take it home and perhaps educate their parents.

The next slide there is about a program called e.Points. It is like a rewards or airline points program, but on a much smaller scale. If you are an industrial customer who invests in energy efficiency and has a Power Smart agreement with us, if you go beyond what is stated in the agreement, you get bonus points and products. It is a reward system.

That is a rough sketch of how we implement the program. Prior to that, there was a very rough sketch of the economics of the program. It costs us less than it would to buy or to generate new electricity.

The Chairman: That was the main impetus, because the company found a way to meet the gap between supply and demand while deferring the capital expenditure on additional power generation by convincing its customers to use less electricity?

Mr. Ferguson: We have extremely low electricity rates. As a result, people have not had the incentive from a cost perspective to invest in energy efficiency — many are saying that in the wood products sector, for example. You look at the horizon and ask whether it is easier to run a Power Smart program or dam another river. We have a mandate to supply electricity and that is the reason we exist. What is the easiest way to do it? For us, it is through energy savings.

You may have heard this — ``negawatts''; instead of megawatts, it is ``negawatts.''

I just want to put this in the context — come back to this very briefly and then I will wrap up — of how it fits into the company's energy planning. The next slide shows suppliers' current energy calls. Our first line item on how we supply new electricity is conservation.

The next one is the Resource Smart, but we also have a program whereby we are buying clean energy according to certain criteria — that it does not have greenhouse gas emissions and has other environmental benefits. That is the next way we supply power.

The other way is a program called customer-based generation, or sometimes you might hear the term ``distributed generation.'' You go to your customers, who often have co-generation opportunities — typically large industrial facilities where they have waste heat and so on — and say, ``Do you have an opportunity to generate electricity onsite?'' That also avoids the need for us to build new generation capacity. We go into a cost-sharing arrangement on that.

The next slide is an example of how, when we get bids from power producers, we have now started factoring greenhouse gas emissions into prices. It is an interesting process. When somebody wants to sell us electricity on a contract basis, we now value things like ``greenness.'' How environmentally friendly is it? We have some social criteria as well, concerning consultations in its development and so on.

The next is a typical B.C. Hydro natural resource variability. How dependable is it? Then on the next line you have greenhouse gas. Does your generation emit greenhouse gas? The next is generic — location.

We have started to integrate criteria around greenhouse gas emissions and environmental appropriateness into the decision on what kind of electricity we will buy. Now we are beyond conservation and internal efficiency and are buying from other producers. We put these things into the matrix because we want to avoid future greenhouse gas emissions from the power we are buying from these suppliers.

The last points are about going forward under the Kyoto regime. We are very active with provincial and federal officials in the design of Kyoto policies. We are implicated in this — it is called the ``large industrial emitters'' category. We expect to receive an emissions target under that category and we expect to be a player in the emissions trading scheme. I am sure you have heard of that.

We are advocating quite strongly — and this is connected to what I think you people are trying to figure out — for a system that incorporates some kind of systematic, not so much a reward, but an automatic recognition of conservation, a Power Smart program or renewable energy purchases as a part of the regulation. It is a part of the design of Kyoto implementation. Rather than a one-off government program or subsidy, it should be part of the industrial program. If you have a big Power Smart program — call it demand-side management or conservation, they are all generic terms — that should also have a bearing on what your target is because you are avoiding a lot of emissions. If you have an active and aggressive renewable energy program, that should be taken into consideration.

Those are the dynamics we are looking at in the Kyoto implementation world. Your emissions, your efforts to avoid emissions, to be more efficient, to bring on renewable energy — how are they coordinated? They all need to be coordinated or you get completely mixed signals, between, say, the targets set for your gas plants versus what you are trying to do with your customers. We have the opportunity to design a system that rewards conservation, whether it is in prices — in an emissions trading scheme where emissions are actually priced — or in lower regulatory costs. If you have a good conservation program, you avoid regulatory costs of your greenhouse gas emissions. There is a need for some complementary measures like that, and there are plenty of ideas as to how it can be done. It could be exciting, because the rest of the country could begin to benefit from a Power Smart-type process.

Lastly, green energy and energy efficiency are becoming commoditized around the world. Italy and the U.K. are looking at energy efficiency certificates; different utilities have different targets or goals that they can negotiate and they can trade certificates among themselves, based on whether they meet their targets or not. The same holds for renewable energy. There is a host of innovative, sophisticated and cost-effective means that we can put into place in Canada now that really encourage programs like conservation or our Power Smart idea.

Senator Spivak: Two things: First, how many — I was not listening properly — megawatts, or whatever the term is, of greenhouse gas emissions do you emit a year?

Mr. Ferguson: As a company we measure it in tons, and we typically emit between 1 and 3 million tons a year.

Senator Spivak: You use mostly hydro.

Mr. Ferguson: I know. However, we have several large gas plants that emit significant amounts — not significant compared to a coal plant, but it is still burning natural gas, which is a fossil fuel.

TransAlta in Alberta emits approximately 30 million tons. They use 90 per cent coal. Be careful with the millions of tons. It sounds like a lot — it is a lot — but if you have had any experience with other environmental air issues, such as sulphur dioxide, which produced acid rain, you will know that those emissions are in the thousands of tons. It is just a magnitude of difference. Canada's emission level is 700 million tons. The nature of greenhouse gas means large volumes.

Senator Spivak: I was in California, where a big utility, PG&E, made $2 billion out of their program. They made money; can comment on that?

Also, Manitoba, where I come from, has a Power Smart program. What is it doing? I have not received any information that it is as extensive as this. Could you comment on those two?

Mr. Ferguson: I cannot comment on the California one specifically, in the sense that I do not have a lot of information about it.

Senator Spivak: How are they making so much money?

Mr. Ferguson: They had a charge on their rates that was meant to go to conservation. We have been implicated in the whole California situation, in good ways and bad. They had a surcharge for conservation measures that was meant to go into a fund that they would then invest. From the limited amount I have read about it, its effectiveness was good at first; then, for whatever reasons, it really levelled off.

Senator Spivak: We were just there, and it was in the last year that they made $2 billion.

Mr. Ferguson: Since the energy crisis, they got religion and realized that they can solve a lot of their problems if they save a lot of energy. The trouble is the way they deregulated their market.

Senator Spivak: We were told about the crisis. This is post-crisis. Why would that not be a good idea here?

Mr. Ferguson: Without going into the crisis, one aspect that I think is important to understand — and it is actually highlighted in the California situation, the little bit that I have read about it — there is much about demand-side management and Power Smart conservation that is cultural and psychological. For an electricity company, it means setting up a scenario in which you will produce less product and still make more money. You do not find much of that in business textbooks.

The Chairman: You do now. I have given examples to the committee of gas companies in Texas that have done the same thing.

I have used your company's name because you improved your bottom line by selling less product.

Mr. Ferguson: We have a CEO who is really enthusiastic about it. There is a psychological aspect to this. In California, the way it was explained to me was that the excitement over deregulation took over from the excitement of what kind of energy-efficiency savings they could get. I think that affected its effectiveness.

Senator Spivak: They have since recovered from that, and they also explained the difference between conservation and efficiency. Now Manitoba is launching a huge dam project.

Mr. Ferguson: I would portray their Power Smart program as second to ours in the country, from what I understand, in terms of energy-efficiency savings and accomplishments.

Senator Spivak: It is not as aggressive a program.

Mr. Ferguson: No, it is not, but compared to other utilities, from what I understand, it is the second most aggressive in the country.

Senator Spivak: I think they are looking at exporting. They are not looking at whether they could save the same amount of money as they will spend on the dam. That argument has not been made in Manitoba.

Mr. Ferguson: That is correct. That was my understanding as well.

Senator Buchanan: Did I hear you say that you have coal burners?

Mr. Ferguson: No, just gas. B.C. has a lot of coal, but we do not burn it for electricity. Some industrial facilities do, but we do not.

Senator Buchanan: Your 1 to 3 million tons of greenhouse gases come from your gas plants.

Mr. Ferguson: Yes. We have a very large one in Vancouver called Burrard Thermal. There is one on Vancouver Island and several smaller ones in the north.

Senator Buchanan: Will you be increasing the number of gas plants?

Mr. Ferguson: Yes, by at least one that we are trying to put in on Vancouver Island. We would have had to put in about eight between now and 2010 of the size we are trying to put in Vancouver Island if we had not had Power Smart.

Senator Buchanan: That is excellent. You also said that large hydro plants are a problem in B.C.

Mr. Ferguson: It is a funny situation. Quebec tried to establish a small hydro program, and Hydro-Québec ran into huge opposition. We have a very successful small hydro program. I do not know for sure why in the early 1990s large hydro was taken off the options list in terms of energy going forward in B.C. Climate change and greenhouse gas emissions were less of an issue back then, and large reservoirs were more of an issue. Now you see a balancing of environmental issues between atmospheric and land issues. That will influence our decision about the generating sources when we finally do have to build or purchase from another source.

The Chairman: Have you licensed Power Smart to PG&E?

Mr. Ferguson: No.

Senator Milne: Following through on this demand-side management with which you have been so successful, I do not understand your examples here: Norske debarker, levelized costs, 72 cents per kilowatt hour. What do you mean by ``levelized costs''? Walk me through this. I am starting from ground zero.

Mr. Ferguson: I was, too, several years ago. It is a net present value, discounted rate type of calculation. You take it over the lifetime of the investment. You might pay a lot up front and less towards the future. Typically, if you are putting new technology in, you pay a lot up front, and the benefits come down the road. ``Levelized'' means we just take the length of time and average it out.

The Chairman: It would be amortized, in other words?

Mr. Ferguson: Essentially, it would be.

Senator Milne: This does not tie it in for me with your estimated energy savings of 10 giga-watt hours and the estimated installation costs of $1.3 million. I am trying to grasp what these numbers mean.

Mr. Ferguson: Perhaps they could be described as project costs, the business case for doing that project. You look at how much electricity it will save. How much does the technology, the mechanical piece of equipment that we are talking about, cost?

Senator Milne: You are looking, then, at the cost of the equipment plus the installation cost of $1.3 million, minus the 10 giga-watt hours of energy savings. Is that it?

Mr. Ferguson: In a roundabout way, yes.

Senator Milne: Explain this to me. This does not mean anything to me at all.

Mr. Ferguson: It is a terrible thing to have a slide that does not mean anything.

Senator Milne: That is right. Let me tell you, I used to lecture in physics, and I still do not understand this.

Mr. Ferguson: We would look at a situation where, say, the company came to us with an idea about an energy- efficiency opportunity that they have. We can say that we will pay up to 2.5 cents a kilowatt-hour. Bear with me for one second. I have it written out.

Senator Milne: You need to have the figures that you came up with.

Mr. Ferguson: I will not be able to explain all the figures because I did not work on this example and much of it would be commercially confidential. These are meant to give you the parameters within which the decisions are made.

Senator Milne: Looking at this, I do not know if the levelized cost of 0.72 cents per kilowatt hour is better or worse than the levelized cost of 0.65 cents.

Mr. Ferguson: The cheaper the better, because it means you are getting the electricity cheaper. Industrial customers pay as low as 3.3 cents per kilowatt-hour. For them and for us, they are essentially generating electricity at a fraction of what it costs, because of the savings.

Senator Milne: They are generating electricity. Somehow, they are using excess heat or something to generate electricity, and that brings it down from your average of 3.1 cents to 0.72 cents per kilowatt-hour.

Mr. Ferguson: That could be an example, yes. There are multiple examples, and every situation is slightly different. How much does it cost to do the project? What are the energy savings as a result?

Senator Milne: I do not even know from this what the project was. Was this company buying the debarker, using it and somehow from the heat generated from the operation generating electricity? I am really at sea on these examples.

Mr. Ferguson: I did not mean these examples to confuse. I meant them to be tangible situations.

Senator Milne: Are these tangible examples of using waste heat or wastewater power or whatever for that particular plant to generate some of its own power needs?

Mr. Ferguson: Either generating some of its own power needs or reducing its requirements, reducing the amount of electricity they need from us.

Senator Milne: I will take it on faith. Two of us here are equally confused. I just have an enquiring mind. I want to know how, why, what, where and when.

The Chairman: Perhaps I could suggest that we look at these charts and devise a set of specific questions with which our researcher could help us. We could then send the questions to Mr. Ferguson so that he and his people could provide responses.

Mr. Ferguson: Absolutely. I did not intend these examples to confuse. I expected quite the opposite.

Senator Milne: Are you sure that you understand them yourself?

Mr. Ferguson: Yes. However, in some situations, I do not understand the engineering, since I am not an engineer. When dealing with energy efficiency, the economics and the engineering must both be dealt with. Perhaps this is part of the challenge. You have the business case for making the change, but you also need the technical ability to make the change. In this instance, we went from the old debarker to a new one, as you say, and no, I do not know what a debarker is either.

The Chairman: We know what a debarker is, Mr. Ferguson.

Senator Milne: I just do not know how you generate electricity from it.

Mr. Ferguson: You do not necessarily generate electricity from it but it saves electricity. There are opportunities to install a more efficient debarker. Norske was trying here to decide whether to invest in it, and we will offer them, in this case, some matching funds to help act as a catalyst for that investment to occur.

The Chairman: Let us go back to the debarker. It will cost them $1.3 million to install what they need and you will give them $0.5 million. The result of that, in respect of their wood-room mechanical debarker installation, is they will reduce their energy cost to 0.72 cents because they will save 10 giga-watt hours of electricity. Is that right? The amount of the incentive request is $500,000.

Mr. Ferguson: That is an accurate way of depicting it.

The Chairman: Honourable senators, I propose that we send those questions to Mr. Ferguson. We have to understand that these are industrial undertakings that have nothing to do with generating electricity.

Senator Milne: That was the confusing part —talking about generating electricity.

Mr. Ferguson: I had mentioned the Power Smart program, which seeks energy-efficiency gains. There is also a second program called the customer-based generation. We go to our customers and ask whether there are opportunities onsite to generate their own electricity and we buy that electricity from them.

Senator Spivak: It would be biomass, maybe.

Mr. Ferguson: We have a few biomass projects.

The Chairman: A debarker is a side product that would have been garbage, but you burn it and thereby make electricity.

Senator Spivak: That must be it.

Senator Milne: I would like to ask about demand-side management for a fully integrated utility. I live in Ontario and I strongly suspect that you could generate enough electricity from Sir Adam Beck's body spinning in the grave to meet the shortfall in Ontario now because of the way it has been mismanaged and split up into different sectors. It is no longer an integrated producer-to-consumer company. Would demand-side management work as well in Ontario?

Mr. Ferguson: That is an appropriate question in my opinion, considering some of the decisions we have to make about the Kyoto Protocol over the next year or two. In fact, we were having that discussion in some meetings today. How do you ensure the existence of demand-side management programs in a situation where the generator is separated from the distributor? There are a couple of options. You can do it through the rates by determining how the rates are set. Is there an incentive in the way that those electricity rates are set? Does the distributor, who sells it to your house, have an incentive in the operating guidelines such that it could implement a Power Smart program?

West Kootenay Power, which is now Aquilla Networks in B.C., for a limited time while the assets are for sale, has an arrangement with the regulator, B.C. Utilities Commission, that includes a profit incentive for them based on their energy savings accomplishments. That is built into the rates.

You could go that route. A complicating factor is that electricity in this country is provincially regulated while the federal government is looking to implement Kyoto. They are attempting to cooperate with the provinces to some extent. You have a jurisdictional issue that will cause some transaction costs, depending on how long it takes to reach agreement.

The other approach is under Kyoto. If you give an emission reduction value to those energy savings, the demand- side management program — they envision an emissions trading scheme under Kyoto. I am not an engineer but I am an economist so bear with me — you will have a situation where emission reductions under Kyoto are valuable. All companies will be given targets and we will want to talk to whoever can reduce emissions in the cheapest and fastest way, because in theory, there will be an emissions trading scheme whereby you quantify those reductions, turn them into a commodity and trade them.

The Chairman: That already exists; it is not merely proposed. People are currently trading emissions.

Mr. Ferguson: B.C. Hydro has been in the market as well. To recap, you have the option to take the rates route and try to find some way to get past the psychological barrier of trying to sell less electricity and build a profit mechanism into the distributor's rate structure with their regulator, versus incorporating energy-efficiency gains — savings — into the emissions target that you apply to companies. The complicating factor in this is that distributors do not generate the electricity — hence their name — and so they do not have any emissions. The generator who sold them the electricity has the emissions. You will have to work out a situation that has linkages. That problem would have to be overcome.

That is not to say that you could not envision a scenario in which there are incentives for an emission-reduction value for the energy-efficiency savings your distributor receives through a Power Smart program. That would help to alleviate the Kyoto target applied to TransAlta or to B.C. Hydro, for example. You can have a coordinated approach that will require good policy design.

How do we encourage more conservation and more energy-efficiency programming at the level that we have seen with Power Smart across the country? Now that Kyoto has been ratified and we are looking at how to implement it, those are two key ``buckets'' that we see as ways to ensure that it is systematic and not just a one-year billion-dollar investment that then drops off.

You want something consistent that is there year after year. It is better from an emissions management perspective to avoid those emissions in the first place.

When Canada looked at Kyoto, they looked at this ``business as usual'' that went up. You want to avoid that upward trend in emissions.

That business as usual assumes a large number of generating plants coming on line. If you have a good energy- efficiency program, you can avoid those plants coming on line, as we have. Thus you make reaching your target easier.

Senator Spivak: That psychology has not yet taken hold across the country.

Is not the key money? If people can save money, they will slide into this. Many companies have discovered that they can save money by making certain adjustments. As Mr. Michael Porter has said, to compete you have to be green.

The Chairman: In that case, not only is his company making more money but all his customers have better bottom lines as well.

Mr. Ferguson, we will be sending you some more questions and I hope you will get back to us with some —

Mr. Ferguson: Fulsome responses.

The Chairman: Fulsome means overblown and grossly over done. We would like complete answers that even we can understand. Thank you very much, Mr. Ferguson.

We will now continue by pursuing our study of Bill S-10, concerning personal watercraft in navigable waters.

We will now hear from Mr. Currie. I am grateful for your having come here, Mr. Currie, on such relatively short notice. I am sure that you have some things to say to us. Please be as concise as you can.

Mr. J.A. (Sandy) Currie, Executive Director, Canadian Marine Manufacturers Association: The Canadian Marine Manufacturers Association appreciates the opportunity to present our position against Bill S-10, concerning personal watercraft in navigable waters.

For the record, I am a boater. I work in the recreational boating industry. My wife and I enjoy boating in Muskoka at our cottage and, occasionally, on the waters in the vicinity of our city home in Oakville.

The CMMA sent a detailed submission. I will confine my remarks to a summary. That should allow time for questions once I have concluded.

As an association that represents the interests of manufacturers within our industry, we are aware of and share many of the concerns raised by Senator Spivak and the other groups and individuals who support her efforts. However, we do not agree that Bill S-10 is the right approach, and we are not in favour of it.

Bill S-10 proposes to identify and regulate a very specific group of boats and boaters separately from all others who enjoy boating on the lakes and rivers of Canada. It could cause thousands of consumers to stop using their personal watercraft to go boating and suffer the indignity of discrimination within the boating community. We believe this is not only unfair and unjust but also unnecessary.

We believe that Bill S-10 is unnecessary and based on flawed or incorrect premises. It is unfair and discriminatory. In addition, it does a disservice to good public policy and will be very difficult, if not impossible, to enforce.

Why is the bill unnecessary? We already have a fair and open process to regulate recreational boating in Canada. Under section 562 of the Canada Shipping Act, a fair process has been described for developing what are known as boating restriction regulations. The open process is built on public input and provides for mandatory consultation with all those likely to be affected by a proposed amendment, reviews by local and federal governments and the opportunity for public comments through notice in the Canada Gazette, Part 1.

Personal watercrafts, PWCs, are regulated in the same manner as all other power-driven vessels by way of such provisions as the small vessel regulations, the Contraventions Act and the Criminal Code, to name a few. By the way, on the subject of small vessel regulations, it is important to note that section 43 of the regulations is designed to control the behaviour of boaters who may be operating their craft in an inappropriate fashion. Specifically, it states.

No person shall operate a small vessel in a careless manner, without due care and attention or without reasonable consideration for other persons.

Thus, in our opinion, it is entirely appropriate to state that the current regulations do give the necessary powers to police and other enforcement organizations to regulate not only PWC operators who are inconsiderate, but all other boaters, whether they are powered or non-powered boat operators.

We would like to address the notion that personal watercraft are not environmentally friendly. The personal watercraft for sale in Canada are required to comply with USEPA emission regulations for spark ignition engines, which have been in force for many years. Today's products are considerably more environmentally friendly than those of only a few years ago.

This is illustrated in the graph included under appendix 7 in the binder that we provided. That graph compares the exhaust output of the older personal watercraft built prior to the implementation of CARB regulations — California Air Resources Board. CARB mandates more stringent requirements in the state of California.

The USEPA states PWCs have a lower emission level than outboard engines. In Canada, there are approximately 44,000 personal watercraft in service compared to about 1.6 million outboards. It should also be noted that due to the more rapid retirement of personal watercraft, the units equipped with USEPA-approved engines compose a higher percentage of the in-use fleet than one might expect.

The manufacturers of spark ignition marine engines, meaning outboard motors and personal watercraft, have signed an MOU with Canada. That agreement is in the binder in appendix 4. They have pledged to abide by the strict USEPA rules for marine engines sold in Canada.

Marketplace acceptance of new technology products in Canada is ahead of that of the United States.

The MOU has been in effect since the beginning of the 1999 model year, which means that for all practical purposes, new technology products have been on the market in Canada for more than five years.

There are allegations that PWCs are unduly noisy. In appendix 8 of the binder, there is a series of graphs designed to illustrate the sound-emission levels of personal watercraft operated at different speeds and varying distances from shore. This research was carried out using ISO and EN standard testing procedures by an independent research firm, not by the personal watercraft industry. These graphs show that PWCs have sound-pressure emissions that, at a maximum, are no higher than 78 decibels, and some have in fact been recorded in the low- to mid-60 decibel range.

Let's talk a little about safety. The improper use of personal watercraft, or for that matter any other powered boat, may cause injuries or, unfortunately, even death when involved in a collision. Any fast-moving vehicles carrying passengers can do the same. However, without wishing to minimize the importance of this, some perspective on the matter is important. We believe that personal watercraft are not inherently more dangerous than other powered boats, or for that matter other boats, regardless of their means of propulsion.

To illustrate that point, we provided data from the Ontario Provincial Police in appendix 9. Unfortunately, in Ontario, we have not seen a large overall decrease in boating fatalities from 1999 to 2002. That is the period covered in the OPP report. However, let's not forget that over the same period, we have added at least 94,000 new powered boats, plus unaccounted-for non-powered vessels, to Ontario's waterways. Over that same time, unfortunately, 59 people have died in accidents involving canoes and kayaks, 127 from powerboat incidents not including personal watercraft, and 10 in PWC incidents. In 2002, there were two fatal incidents in Ontario. Clearly, personal watercraft do not represent a disproportionate share of the fatalities and should not be singled out for safety reasons.

This point is also supported by the results of a 1996 study conducted for the Coast Guard by Consulting and Audit Canada, in which they stated:

This risk assessment shows that over the four-year period from 1991 to 1994 in Canada, the drowning rate is 7.63 drowning per 100,000 vessels per year which is about the same as the rate for all other vessel types combined, and lower than the rate for other powered vessels.

We believe that the vast majority act responsibly when using their personal watercraft and that proper training and education will go a long way towards reducing the number and severity of accidents.

The same Consulting and Audit Canada report also stated:

Considerable work is being undertaken by the CCG, boating associations and the PWC industry to promote boating practices in general and safe PWC operation in particular. It is important to be cognizant of these initiatives as they play a significant role in raising awareness among PWC operators as to basic PWC operating practices.

The industry firmly believes that improved operator knowledge and training of all boat operators is essential to enhance safety on the waterways of Canada. In this respect, the final report of the Consulting and Audit Canada group contains a number of recommendations. The report is in the binder. It is fair to say that today, however, many of these recommendations have been implemented and are having the desired impact on operator proficiency and behavioural habits.

In the meantime, the industry continues to work with the Canadian Coast Guard. We are assisting with the implementation of the operator proficiency certification system, under which operators of any powered recreational craft must pass tests to demonstrate competency before they go out on the water. Operating a PWC is also subject to age restrictions. Collectively, these programs are having a positive impact on the behaviour of not only PWC operators but on all boaters across the country. The industry strongly supports these measures, since we recognize that PWC users share their recreational space with others on the water.

The alleged negative impact of personal watercraft on wildlife is a myth that we feel must be refuted. There are authoritative, independent studies that show — one of which was conducted in Canada last year — that PWCs operated in the industry-recommended minimum of two feet of water have little or no impact on sea grasses, marine mammals, fish and other aquatic life because personal watercraft do not use propellers. They use water pumps, which are less intrusive. Other studies show that PWCs have a lower impact on nesting birds than conventional boats or other human activities. Again, there is not a demonstrable problem needing to be fixed by new proposed legislation such as Bill S-10.

Let us now address the unfair and discriminatory nature and some of the other flaws of Bill S-10. We believe that the bill discriminates against the use of PWCs on Canadian waterways. As noted earlier, the Canada Shipping Act defines a personal watercraft as a boat, and its boating restrictions already address all types of boats on our waters. These regulations require that a reasoned investigation be carried out of any proposal for changes to boating restrictions, including a requirement that all affected parties be consulted.

In contrast, Bill S-10 permits a process under which no consultation with the boating community is required. It would allow a group to simply create its own regulation and submit it to the Minister of Fisheries and Oceans. The minister may refuse the proposed restrictions only if he believes that navigation would be restricted, impeded or obstructed. In effect, it allows cottage associations and other non-elected groups to demand and impose a ban or restrictions on personal watercraft operation without any input from the minister responsible for those waterways. Bill S-10 would limit or render useless our democratic process. It would have the effect of legalizing a vigilante-style approach to law making.

We also suggest that Bill S-10 may be unconstitutional. Under the Constitution Act of 1867, legislative authority over navigation is the sole purview of the federal government. Provinces may not enact legislation dealing with navigation. However, Bill S-10 appears to remove ministerial discretion. Federal control of the waterways would be surrendered to these so-called local authorities, groups that have neither the expertise nor the means to enforce regulations.

Every proposed change under Bill S-10 would result in impairing navigation, so, given the proposed lack of power of the minister, federal powers over navigation would be effectively ceded to others. In a recent judgment of the B.C. Court of Appeal, Dean Walter Kupchanko v. Regina, the appeal court agreed that Mr. Kupchanko could not be charged with operating his boat in breach of a provincial statute because the province had no authority to create the statute. The judge quoted precedent, noting that:

provinces are constitutionally incapable of enacting legislation authorizing an interference with navigation, since section 91(10) of the Constitution Act, 1867 gives Parliament exclusive jurisdiction to legislate regarding navigation.

Singling out the operators of PWCs means they would be treated in a discriminatory manner by our justice system. That, to us, is not an acceptable practice. What possible justification could there be to single out one type of boat in this way? It also gives us cause for concern that other types of boats sharing the waterways with personal watercraft and subject to the same boating restriction regulations may be subjected to discriminatory legislation as well. If this bill were allowed to pass, where would such discrimination end?

We believe that improved enforcement would be more effective than a new bill. Inadequate enforcement has been an issue for a number of years, as was noted in the CAC report to the Canadian Coast Guard. We recognize that on-water enforcement of boating regulations is one of the most challenging issues before the enforcement and boating communities today. The boating community as a whole, and the CMMA as a member of that community, praises those dedicated police and other enforcement officers for their relentless efforts to keep our waters safe for all boaters.

Sûreté du Québec has a small number of boats to cover a large area, and unfortunately, has even had to cede part of that responsibility back to some of the municipalities. Having said that, some of those municipalities are in the process of reorganizing and are cash-strapped. They will not be able to carry the ball that the SQ is unable to take care of for the moment.

In contrast, luckily, the OPP has approved a $2-million increase in funding for marine recreational policing. The $2 million will be spent over the next five years. Unfortunately for the OPP, marine policing is not a separate line item in the budgets, as it is in most other jurisdictions. Thus, in the OPP's case, marine policing is funded out of their core service and it is not easy to audit, or determine for the general public, how much money is being spent on marine policing in Ontario and in other provinces.

Under these circumstances, adding a new law will not achieve anything of a constructive nature. Surely the attention of governments should be on ensuring the enforcement of existing satisfactory laws rather than on making unenforceable new laws.

Unless a law is properly enforced, it is in real danger of becoming a mockery, to the detriment of those it is designed to protect, as well as to Parliament and to law-makers. Passing a new piece of legislation in such a case would be a disservice, one that may easily come back to haunt its proponents.

CMMA would like to see an increased enforcement presence on Canadian waterways. We would be pleased to support any efforts that would provide those dedicated to upholding our laws with the tools to do a better job.

Should the boating restriction regulation process be revised? Yes. The current process has served the boating community well over the years. However, since we are entering the boating season again, this may be the right time to capitalize on the debate surrounding Bill S-10 and engage the Minister of Fisheries and Oceans on the merits of making improvements to the boating restriction application process.

CMMA would propose updating the process to streamline and improve the creation of regulations in a more timely, less-confusing and efficient manner. We would like to see the following two changes made:

One, eliminate the use of provincially designated authorities, thus permitting all applications to be sent directly to the regional offices of the Canadian Coast Guard.

Two, permit those municipalities or other duly constituted local authorities to file boating restriction applications on a quarterly basis. This will bring applications forward more frequently than the once-per-year schedule currently being used.

There are other improvements that could be made, and we would like to offer suggestions that we would like to see considered.

We would like to see the vessel licensing system computerized. It is a paper system, which is chaotic, and one can barely call it a system.

The Chairman: Some of us do not take kindly to the computerization of the registration of anything.

Mr. Currie: We understand. All we are talking about is taking the existing data and feeding them into a database. Right now, it is a challenge. We would like to suggest that funds be provided from marine fuel tax revenues directly to enforcement agencies and educational organizations to enhance their efforts.

We would like to see improved funding for local groups, including cottagers associations, to permit the placing of appropriate signage to alert boaters to local boating regulations, speed limits and dangers to navigation.

We would like to create a national fund to be used specifically to promote boating safety and boater awareness on a continuous basis.

We would like to establish a database containing the names, and other essential information, of those who have received the training required to receive the pleasure craft operator competency card. This would ensure that enforcement agencies have the necessary access to the data for verification purposes.

Finally, we would like to propose that funding be secured on a permanent basis to support the Canadian Coast Guard so that it may adequately fund the national and regional offices of the Office of Boating Safety.

To conclude, the CMMA urges this Senate committee to reject this bill on the grounds that it is not necessary. It is, at best, on shaky premises, it is unfair and discriminatory, does a disservice to public policy and most likely would become another law that is not properly enforced.

However, we do not wish to see everyone's hard work wasted. Bill S-10 has created a new community of people from various groups and with various perspectives. Though not all our objectives are the same, there is one common, underlying goal. We all want to improve safety on Canadian waters. That should be the focus as we move forward.

If you are able to recommend that instead of passing Bill S-10, some of the suggestions for improvements we have made could be implemented, we would be more than happy to work with you and with the regulatory agencies to make that happen. Thank you.

The Chairman: I want to set a couple of things straight. You used the word ``discrimination'' as a pejorative. We do discriminate. We discriminate between cars that have catalytic converters and those that do not. We discriminate between motorcycles. An off-road bike is a motorcycle, but you cannot drive it on the highway. That is discrimination. We make all kinds of discriminations. We also say to dog-owners that you can let your dog run loose over here, but not there. We do discriminate. Discrimination is not always a bad thing.

Do your statistics with respect to drowning include people who have drowned as a result of collisions? Do you know any numbers with respect to trauma injuries that have taken place in the water?

Mr. Currie: I do not have the answer with respect to the trauma. I believe the data we received from the OPP list fatalities. They do not list the means by which the people lost their lives. I will take a leap of faith that the sergeant who gave me the data would have included drowning, as well as anybody who died as a result of an incident in the water, whether they fell into the water, came in contact with another vessel or ran into a fixed object like a dock.

The Chairman: We will check that out.

Mr. Currie: I did not have it, so I did not want to quote it, but I believe that the Red Cross drowning report, which I believe my colleague was going to provide to you, may have a better answer on that.

The Chairman: We have statistics and statistics and statistics. We have some American statistics that suggest otherwise.

Mr. Currie: I wanted to present you with the facts that I believe to be true, and I am not saying the others are not true. I wanted to bring forth Canadian information.

The Chairman: I have one other question that I need answered because it is an issue that I know something about. You mentioned the sound-pressure measurement as being 78 decibels with respect to the operation of a personal watercraft. Compared to what?

Mr. Currie: It is not compared to anything.

The Chairman: Seventy-eight decibels is loud.

Mr. Currie: I did not want to bring forward data that put a vacuum cleaner or a chainsaw or some other consumer product on the table, because we do not have any data that were tested in the same way as you would test the boat engines. You would not test those things in the same way. I do not know how you can compare them.

Senator Milne: I am having problems with your statistics. You said in Ontario, there were 10 cases of drowning involving PWCs. You had 59 deaths with canoes or kayaks, 137 with boats, 10 from PWCs. Over what period of time? I did not get that.

Mr. Currie: That is a summary. You will find this at tab 9.

Senator Milne: I do not intend to read every page of that binder, I can tell you.

Mr. Currie: The total number of fatalities is shown from 1997 to 2002 in Ontario. It is a five-year period with six boating seasons. Over six boating seasons in Ontario, there were 59 fatalities in what the OPP categorized as ``canoes and kayaks.'' There were 127 powerboat fatalities; that does not include personal watercraft. There were 10 PWC fatalities; and 74 of that total were alcohol-related.

Senator Milne: I was asking about the time period. So it is a six-season time period.

You also said that, according to the Canadian Coast Guard, from 1991 to 1995, there were 7.6 drownings per 100,000 people per year?

Mr. Currie: That is vessels; I believe that is correct.

Senator Milne: This is with PWCs, but you said there are only 44,000 in Canada.

Mr. Currie: There are only 44,000 PWCs in use now. We have sold approximately 78,000 personal watercraft since 1990.

Senator Milne: The total has decreased by that number since then?

Mr. Currie: That is correct. There is a wear factor or an attrition rate inherent in operating a personal watercraft that is very different from any other sort of powered boat. Frankly, they wear out sooner. We saw sales of personal watercraft crest in 1998. Sales of new personal watercraft have been declining since then. We are in a position now where the older ones are being retired at a very rapid rate. The actual number of vessels in use will drop again this year because we will be into that large block of watercraft that were sold in the mid 1996-97 period.

The Chairman: Do you know why sales are decreasing? I am presuming you must have some marketing people who have tried to explain that to you.

Mr. Currie: The answers are various. The product has matured, just like the Hula Hoop, which eventually became less popular. People have decided going boating is fun, but perhaps they have married or, if they were couples, they may have kids so the personal watercraft is not the right product for them now. They have moved on to something else.

For some people, the personal watercraft was an entry-level boat. Now they have moved on. We believe that is why sales have diminished. They are not inexpensive, but I do not think it is a price issue. It is more of a market-cycle situation.

Senator Milne: Whereas Senator Spivak hopes it is a permanent trend.

Senator Spivak: No, it is up to the people.

Senator Milne: You said that the newer PWCs are much less noisy and less polluting than the older ones. What percentage of these 44,000 vessels out there now would you classify as ``newer''?

Mr. Currie: If you trust me to give you a rough calculation, I would say about 50 per cent. It is probably slightly higher, but I would not go out on a limb further than that. I know how many personal watercraft we have sold since the MOU kicked in until the end of last year. I tracked them on a serial number basis, on a monthly basis. The total sales between 1996-97 and today is almost half of our estimate of 44,000 in use.

Senator Milne: What would be the difference in decibel output between the older ones and the newer ones when you are talking about this range from 65 to 75 decibels?

Mr. Currie: The 65 is a bit of an oddity. It may have been a valid result, but I think that is probably on the low side. The cluster is more around 72 to 76. The earlier units, although they may not have been tested as well as the last batch, probably had a sound level around 80 or 81. I am not a mathematician or an engineer but I do know this: It is not like starting out with a dollar and taking 3 cents off and saying now I have 97 cents. There is an exponential reduction in level. I do not want to try to explain it because I do not really understand it.

Senator Milne: A noise level of two decibels is ten times the noise of one decibel. You are talking about a hyperbolic scale.

Senator Finnerty: I look at personal watercraft like motorcycles compared to cars. You were saying that, in your mind, all watercraft are similar. Did you say something about wildlife; that you do not think wildlife is disturbed?

Mr. Currie: I did not say they are not disturbed. I said, based on the information we have been able to obtain, these craft do not pose any more threat to nesting birds or other waterfowl or wildlife than any other power-driven boat.

Senator Finnerty: Personal watercraft come closer to shore; they come out of the water. They are much more frightening than other types of watercraft.

Mr. Currie: I do not want to debate with you. I am trying to provide you with an answer. The tricky part is that the manufacturers all say ``Do not operate this type of vessel in a location where the water depth is less than two feet.''

Based on my boating experience, the bulrushes, the reed beds and the lily pad areas where most nesting birds such as loons are found, at least around my cottage, are in the shallow-water areas. One ought not to be riding a PWC in those areas. I do not take my own motorboat in those areas. I do go in with my kayak.

Senator Finnerty: Loons tend to stay in the middle of the lake.

Mr. Currie: The issue I brought up relates to the nesting birds. I do not condone this, but I have seen people chasing seagulls and other birds with boats. As far as I am concerned, that is totally inappropriate behaviour, no matter what kind of boat is used.

Senator Finnerty: We do not have enough enforcement officers to look for abuses with watercraft and under-age people tend to use them. Those are some of our concerns.

Mr. Currie: Those are well-founded concerns. There are not enough police officers, boats, FTEs, or dollars to support an adequate enforcement level for any group of boaters. You could be talking about people at False Creek who rent sea kayaks and paddle around the Coast Guard station at Kitsilano Beach, or boaters on my lake or maybe on yours. There are just not enough dollars, people or equipment to go around. It is a sad situation. We have to find a way to solve the problem.

Senator Finnerty: It is a sad situation.

Senator Spivak: I want to make one comment and then I have a question for Mr. Currie. The Canadian Hospitals Injury Reporting and Prevention Program under Health Canada has the kind of research you are talking about. In 2002, they found that despite the fact that personal watercraft represent about 3 per cent of motorized vessels, they account for 21 per cent of injuries. With personal watercraft, it is not so much a drowning problem; rather, they cause mostly traumatic injuries as people fall off or are hit by the boat. Those PWCs cause considerably higher levels of blunt trauma than other motorized vessels.

We have heard different estimates of how many PWCs there actually are.

You are suggesting there are now 44,000. Someone suggested earlier that there were 50,000. Do you have accurate data on how many there are in Canada? There are at least a million in the United States. I think that is the latest figure.

Mr. Currie: I do not know the number in the United States. To be honest with you, the answer is no.

Senator Spivak: You do not have any data?

Mr. Currie: No, that is not the case.

I receive monthly data transmissions from all four of the personal watercraft manufacturers. We have sales information by serial number on all units. The information does not tell us where the boater lives. It simply gives some information about the forward sorting area, which is essentially the postal code, where the warranty is registered. I tallied up the numbers in the report, that is, 77,000-and-change. That is the total number of personal watercraft that had been sold, up to and including the end of December 2002.

There have been some sales since then. I cannot give out that information because it is confidential. I have it, but that is the number.

Senator Spivak: That is helpful.

Mr. Currie: There is no way to give you the actual number of units with any degree of precision. If you read the EPA information, you will find they have calculated that a personal watercraft has a useful life of five years. A large percentage, if not the majority, of PWCs are in use in the warmer climates of the United States. Draw a line across the U.S. where you have warm water, let us say south of the Carolinas, south of San Francisco and all across the Gulf states and some of the other states in the interior. The model there is coming up with five years because there are a lot of PWCs in that area. We are saying, ``Wait a second. We cannot get that amount of use in five years.'' We are asking, ``How many engine hours is that before the craft begins to reach the end of its lifespan?''

We got the engine-hour number and it works out, nominally, to seven years. If I take my 77,000 and go back to square one when we first started counting, which was 1990, and subtract all the units that were sold for seven years and say, ``Those are no longer in service,'' the total that is left is 44,000. That is as accurate as anyone will be able to be.

If we had a computerized small-vessel licensing system, we might be able to push a button and get a better number.

Senator Spivak: I have heard many people talk about discrimination. I want to tackle that issue.

As I understand it, according to the Coast Guard, the vast majority of PWCs do not comply with sections of the construction standard for small vessels, specifically with standards for ventilating the engine and the fuel tank compartment, the installation of fuel tanks and electrical systems. I am reading here from their technical standards. In other words, it has to do with fuel tank compartments, ventilation, fuel-tank installation and ignition protection, because there is a risk of explosion caused by leaking fuel vapours. That is one way in which they are different from small vessels.

There are many different discriminatory provisions under the schedules of the boating regulations. In other words, some lakes do not allow any powerboats. That is discriminatory. Some lakes do not allow water-skiing between the hours of such-and-such and such-and-such. That is discriminatory. Finally, we spoke to the Coast Guard and the minister back in 1994. That is when the Provinces of Quebec, Ontario and British Columbia made proposals to the cabinet, supported by the Coast Guard, about certain prohibitions. Those were gazetted and then never implemented because the industry said education was the answer.

However, in a letter to me, the minister said that any proposal for a new schedule to the regulations to specifically prohibit PWCs would require full consultation with Canadians. Such a move would be considered a major change to current policy, likely affecting many individuals and commercial interests.

What is the alternative when the policy is that there be no schedule concerning PWCs? You suggested we should work together on some sort of compromise; but the point of the bill is to enable local communities, many of whom are elected — they could be municipalities or whatever — to petition the minister to put PWCs in the same category as other boats in terms of asking for whatever it is they decide. Believe me, it is not I who can ban boats. It is only local communities.

What is your comment on the issue of discrimination? Also, what is your comment on taking away the power from the minister? This is not taking away the power of the minister, because the minister is the one who makes the decision as to who these local authorities are. There have to be all kinds of public consultations.

Mr. Currie: I would be happy to do so. I would like to come back to a statement you made at the beginning, when I believe you said that PWCs do not comply with Canadian Coast Guard regulations. With all due respect —

Senator Spivak: I was referring to small vessels.

Mr. Currie: With all due respect, Senator Spivak, I believe you are wrong. If you read the construction standards document, TP1332, a copy of which is in the binder here, you will find that the manufacturers of personal watercraft have two means of complying with the Canadian Coast Guard small-vessel construction standards. One, they can comply with the document, or they can certify that their craft is in compliance with ISO 13590, which is the international standard for the construction of personal watercraft.

All of the PWCs that are sold in Canada are in compliance with ISO 13590 and/or any other section of 1332 that is required. Thus, the designs or, if you will, the technical specifications as mandated in 1332, are all supplied to the Canadian Coast Guard for their review. No product should be put on the market without the Coast Guard signing off on the documents and providing what we loosely call ``conformity plates,'' which are affixed to the sterns of the PWCs.

I am sorry, but they do comply.

Senator Spivak: Are you suggesting, then, that this Coast Guard document I have here is old history and that they now comply with the ISO standards, all of them have been adopted and they are the same as for all small vessels?

Mr. Currie: You are either confusing me or you are confusing the issue.

Senator Spivak: No, I do not think so.

Mr. Currie: PWC manufacturers have a choice, unlike all other boat manufacturers.

Senator Spivak: So they are different?

Mr. Currie: They have the option. There is a dynamic here that is perhaps complex and a little difficult to understand. Prior to 1999, the TP1332 had not been amended for nearly 20 years. Unfortunately, the requirements within 1332 were archaic in a lot of ways. They required manufacturers, for example, to fit cable and pulley steering systems on boats in order to be compliant, when cable and pulley steering systems had gone out of use probably 10 or 12 years before.

Yet, for a variety of reasons, it was very difficult to get 1332 updated. Along the way, personal watercraft appeared on the market; and along the way, an ISO standard for PWC construction evolved. The industry — and I was involved in these discussions at the time — went to the Coast Guard and said, ``We have a craft that is being built to this ISO standard.'' On the other hand, they had an old 1332 document that they were in the process of updating, but which was very inferior to the ISO standard. Because 1332 was not sufficiently modern, the Coast Guard allowed the PWC manufacturers to certify their craft against ISO 13590, which at that time was a brand-new international standard. Canada was the first country in the world to fully adopt the ISO standard for personal watercraft as a means of ensuring quality and conformity in terms of safety and so forth. Since then, Japan, Australia, the European Community and a variety of other jurisdictions have adopted exactly the same process.

We were fortunate, in a strange way, that we had an old set of regulations; we were fortunate that we had a forward- looking group who permitted the use of a brand-new standard when the original Canadian standard was out of date. That is the situation. They all comply; they all have stickers on them.

Senator Spivak: Thank you, Mr. Currie, that is helpful.

Mr. Currie: I do not want to get into a debate about discrimination because I think we could get hung up there. The only comment I would make is that PWCs are boats. They are powerboats like any other powerboat. The BRRs are there.

I believe, Senator Spivak, you were asking, what can local communities do? I think they can do what the rest of us are doing, and say we need more enforcement on the water. Section 43 of the Canada Shipping Act would allow the proper enforcement of rules relating to behaviour. The debate that we are dealing with here has to do with boaters doing the wrong things with a particular type of boat. The laws to correct that behaviour are on the books.

The OPP reported no fatalities on highway 400 during the May 24 weekend; yet there were hundreds of thousands of cars zooming up and down there, getting back and forth to cottage country. They had no fatalities because they enforced the speed limits and made sure that the roads were safe.

If we could find a way to apply that approach to enforcement on the water, where, when and as needed, we would take a huge step forward. That is what we need to do.

The Chairman: You are right about the enforcement. Unfortunately, unlike a highway system, you cannot zip from one lake to another on a boat, which makes enforcement more expensive.

Senator Milne: I wanted to point out, Mr. Chairman, that perhaps Mr. Currie should be aware of how Senate committees work and our narrow mandate. You have come up with suggestions for what should happen in this regulation and that regulation, and Coast Guard regulations and more police on the water.

Senate committees are mandated to look at a specific piece of proposed legislation. We are looking in this particular case at Senator Spivak's bill, and that is all we have a mandate to look at. We cannot go beyond it and say you should change this and that law, no matter how good these initiatives might be. This is what we can do here and now.

I do not want you to go away disappointed because we are ignoring that part of what you have said.

The Chairman: That is correct. Just to be sure — I know Mr. Currie knows this and all senators know this — if we were empowered by the Senate by reference to study the question of private watercraft in general as opposed to a specific piece of proposed legislation, then the situation might be different. However, Senator Milne is quite right. We can study things and consider things but we cannot change regulations.

However, some of us have misgivings and frustrations about regulations and how quickly they will come. In the letter that Senator Spivak was talking about, the Coast Guard is said to have proposed new regulations back in 1994. We are still waiting for them to be adopted. Other witnesses who appeared before us have described boating regulations to us as sometimes difficult to navigate.

I would like to ask you several obstreperous questions. There are lakes is my province, and I suspect in yours, on which, by one means or another, motorboats are not permitted. I believe that is done in accordance with all of the relations that have to take place between the orders of government that determine that. I suspect there is really nothing wrong with that, in your or my view, because we agree that there are some lakes that just should not have motorboats of any kind on them. Would you agree with that?

Mr. Currie: Absolutely. I would go a little further. We understand that. There are areas of lakes — there will be lakes this year, and there will be lakes years in the future — where some form of restriction on boating is in the public interest. We are absolutely in favour of that.

We are as sad, if you will, as others are that in some cases, putting these restrictions in place can take a long time. I do not know whether it will take four years, but as Senator Spivak says, it can take years. That is why we said applications should be submitted on a quarterly basis. Let's not let good work by good people who have a good idea get thrown out because their application missed that annual cut-off date by a week. It is not right.

Do it quarterly and get the process rolling. I do not know if it will bring more restrictions; but it will certainly process the paperwork faster and it should lower what I call the aggravation factor. People will actually see something they have worked on coming to fruition, not just more paper and more paper, and nothing ever happening.

The Chairman: I have one final question, Mr. Currie, which I would ask you to answer because it will come up, and I would like you to have a chance to put your view on the record. If you were convinced by evidence on the balance of probabilities, taking all of those various sources of statistics into account, that PWCs posed a substantially greater risk to their operators and to the general public than other craft, would you agree that they ought to be restricted in some respects?

Mr. Currie: It would be hard to say no to that question. However, I would think it would require, not a great deal of convincing necessarily, but a great deal of knowledge before we would agree with that perspective. We are not unreasonable.

The Chairman: I prefaced it by saying, if you were convinced.

Mr. Currie: We are reasonable people. We want to continue to sell boats. We are trying desperately —

Senator Milne: You do not want to kill off your customers.

Mr. Currie: Exactly. Out of all of the available interesting information about boating, there is one fact you would probably find hard to believe, but it is true. The boating industry is large and employs a lot of people. However, we are not gaining new clients at a comparable rate to other recreational activities. The boating industry is, at best, a straight- line industry. Yes, we are selling new boats every year; but if you look at other recreational activities — golf, tennis, if a recreational activity can be defined as playing video games or surfing the net, owning and operating an RV and various other activities — we are slipping.

The total number of outboard motors that we sell annually has not increased in over 15 years. The number of boats that were licensed in this country has not seen a significant increase over that same period, yet the population has grown.

As an industry we are not growing. We are not exactly declining, but we can demonstrate that we are not growing. We want to move forward.

The Chairman: I promise you that this is the last question. However, I know that this will come up and I would like you to have a chance to have your answer on the record.

I made an analogy earlier between motorcycles and motorboats. There are, as you know, luxurious motorcycles with mufflers on them that make them sound like sewing machines, and there are tricycle motorcycles driven by people who are 67 years old that are quiet.

Any machine can be misused, and any right can be abused. There are nice quiet motorcycles that have tents in the back of them, and there are also off-road dirt bikes. There are restrictions on where you can drive them, the way in which you can drive them and the clothes to be worn when you drive them.

Please tell me whether you think that there is a reasonable analogy between that and the question before us?

Mr. Currie: I do not think so. I think that we have a very small percentage of bad apples spoiling the barrel for a lot of other people.

The Chairman: I was referring specifically to the fact that you can buy an off-road bike that you cannot ride on the road.

Mr. Currie: We are not producing PWCs that are an aquatic equivalent of an off-road bike. We are producing something between a sport bike and a roadster — a big cruising motorcycle with a lot of frills and benefits.

The Chairman: We should drop that metaphor before we go any further. Thank you very much, Mr. Currie. You have been most informative. We appreciate that you came on such short notice.

The committee adjourned.