In 1991, Marc Eliesen, then Chairman of Ontario Hydro, later CEO of BC Hydro, spoke to a joint meeting of the Empire Club of Canada and The Canadian Club of Toronto. Years later, Eliasen’s words remain meaningful. Here are extracts where he talks of fundamental directions appropriate for a public utility.
Introduction by John F. Bankes, President, The Empire Club of Canada:
Mark Twain once said: “Few things are harder to put up with than the annoyance of a good example.” Few have demonstrated the power of a good example better than Marc Eliesen, our speaker today.
Mr. Eliesen’s appointment as Chair of Ontario Hydro is the latest in a long line of impressive personal achievements. The chronology of his appointments reads like a Who’s Who in Canadian Government. Mr. Eliesen has had a nation-spanning career of senior positions in the Federal Government and in Ontario, Manitoba and British Columbia…
Legend has it that, when Marc Eliesen was offered the Ontario Hydro job, he was told there was good news and bad news. He would be the CEO of the largest utility in North America and the fourth largest in the world. The bad news? The bad news was that there was no more good news!
…As part of its conservation, or energy management campaign, Ontario Hydro is committing $6 billion over the next eight years to reduce electricity demand.
…Back at the turn of the century — when both The Empire Club and Ontario Hydro were in their infancy — the landscape of the 20th century loomed large and uncluttered.
It was a time for visionaries, and Sir Adam Beck and his fellow supporters of the concept of public power had a clear picture of where they wanted to go. The issue was simple — public versus private ownership of the province’s fledgling electricity industry…
With all due respect, their task now seems enviable in its focus. Once over the political hurdles, the early builders of Ontario Hydro pretty well were confined to the engineering obstacles facing them as they brought the energy-saving power and convenience of electricity to Ontario — to the workplaces, factories, farms and homes.
Now, as we stare the 21st century in the face, we have much more daunting challenges to deal with. I want to tell you about those challenges and the way in which we intend to respond to them. The challenges are considerable: our system is aging, costs are rising, and society expects more of its electrical utilities.
People today want to be part of the energy planning process. And they want us to find alternatives to building new generating stations which may affect the environment.
…I intend Hydro to remain competitive. I also intend that cost increases will not be routinely passed on as higher rates to customers as if there were no alternative. There are alternatives. One is cost control. Another is improved productivity. Let me deal with cost control first.
…I’m insisting that Hydro’s senior management put a renewed emphasis on accountability in our planning and estimating procedures.
But what about the new challenges and demands on Hydro I spoke about earlier? Our society, of course, expects something different from Hydro than it did 10 or even five years ago. Our whole world has changed irrevocably, and Ontario with it.
Hydro, at its best, is a mirror image of that changing society, and therefore we too are changing from a production supply company to a service company — providing energy and energy services, ensuring Ontario is supplied with electricity and giving Ontarians incentives to use it more efficiently — or in some cases, not to use it at all.
These changes are not the product of politics, or of current ideology. They are imbedded in the larger social changes we all face. They are the clear products of the need to reduce financial risk, of limiting environmental impact, and of demand by the public to participate more fully in Hydro’s decision-making.
…Over the past months, Hydro has been re-evaluating the load forecasts and other factors we put forward two years ago in our 25-year plan…
[In 1991, our consumption is] actually lower than in 1989. Accordingly, our long-term forecast for the demand for electricity has been revised downwards.
What this means, from a planning point of view, is that the requirement to build major new facilities is pushed back. So we have more time than we originally thought before we have to commit ourselves to the next major supply project.
Let me emphasize. This is not a new phenomenon applicable to Ontario Hydro. We see this trend taking place in many utilities in Canada and the United States.
Change in our society is so rapid, we now see that any 25-year plan — no matter how robust — is subject to considerable change.
…The changeability of the future suggests to us that megaprojects are becoming less of a credible answer. They are a huge capital drain and carry a great deal of financial risk.
When the future is uncertain, it’s better to count on smaller increments that track growth in electricity demand more precisely, and don’t pose such a rate shock when they come into service. Their environmental impacts should be smaller — or at least more localized…
We also know, better than ever before, that no means of generating electricity is environmentally benign. Hydroelectric dams can flood large areas of land and can impact aboriginal people and their lifestyles. Fossil-fuelled generation creates sulphur dioxide, nitric oxide, carbon dioxide and greenhouse gases that impact global warming and deplete the ozone layer…
One even more significant source of “supply,” in one sense of the word, is demand management or energy conservation — and it has dramatically fewer or nil environmental effects.
Our energy efficiency or conservation programs are all targeted to be less than our avoided cost, so in the long run rates will be lower than if we had to supply those megawatts with new generating stations.
Our demand management target is to reach 5,200 megawatts by the year 2000. That’s 5,200 megawatts of supply we don’t have to build. To obtain that objective, we’re investing $6 billion in energy efficiency and conservation — much of it in programs to help Ontario industries cut energy costs and become more competitive.
Ontario Hydro has a wide variety of programs and incentives in place to encourage all our customers [to improve efficiency]. Darlington will cost ratepayers more than double that $6 billion, and produce only two-thirds as much electricity. So demand management is much more than a good deal for the environment. It’s also a great business deal for Hydro’s customers.
Furthermore, this is not a bridge or a “quick fix” until the next supply stations can be built. In Ontario, demand management — through energy efficiency and conservation — is the primary alternative to any new supply.
The idea of paying people to use less of our product has been a little tough for some people in the electricity business. But actually paying people to switch to what they’ve seen as the competition really makes some traditionalists unhappy.
But it makes sense. The people of Ontario want energy resources used more efficiently…
Society has changed. We need to walk more lightly on the earth.
I can tell you today that Hydro is well on its way to overcoming its edifice complex. We will still need to build, but we will build less, and lighter. We gain through lower financial risk, better matching of supply with demand, and smaller environmental impacts…