Transcript: David McFadden: Electricity's Smart Future | May 01, 2013

Steve sits in the studio. He's slim, clean-shaven, in his fifties, with short curly brown hair. He's wearing a gray suit, white shirt, and spotted red tie. Behind him, a wall screen reads “The Agenda, with Steve Paikin.”

Steve says CONSUMERS DESERVE A
SUCCESSFUL TRANSFORMATION OF
THEIR ELECTRICITY DISTRIBUTION
SECTOR. WORDS FROM A RECENT
REPORT THAT FINDS ONTARIANS
COULD SAVE 1.2 BILLION dollars IN THE
NEXT 10 YEARS WITH PRUDENT
CHANGES TO THE PROVINCE'S
ELECTRICITY DELIVERY SYSTEM.
JOINING US NOW TO TELL US MORE
ABOUT THE REPORTS FINDINGS,
DAVID MCFADDEN, HE'S CO-AUTHOR
OF THE REPORT, “RENEWING
ONTARIO'S ELECTRICITY
DISTRIBUTION SECTOR,” HE'S A
PARTNER AT THE LAW FIRM
“GALLINGS.”

David is in his sixties, clean-shaven, with short side-parted gray hair. He’s wearing a gray suit, blue shirt, and checked blue tie.

Steve continues AND DAVID MCFADDEN
ALWAYS GOOD TO HAVE YOU HERE AT TVO,
THANKS FOR COMING BACK FOR A
VISIT.

David says GOOD TO BE HERE STEVE.

Steve says I'M NOT GOING TO
ASSUME EVERYBODY KNOWS HOW THE
SYSTEM WORKS.
HOW DO WE DISTRIBUTE ELECTRICITY
AROUND ONTARIO TODAY?

A caption appears on screen. It reads "David J. McFadden. Gowlings."
Then, it changes to “Electricity’s smart future. Power change.”

David says IN EFFECT, WHAT WE HAVE IS 77
RATE REGULATED UTILITIES.
WE USED TO HAVE 350.
WE'RE DOWN TO 77.
ALL, MOST EVERY ONE OF THEM ARE
OWNED BY OTHER MUNICIPAL
GOVERNMENTS OR THE PROVINCE.
THERE ARE A COUPLE, THREE NOT
RATE REGULATED.
CORNWALL HYDRO.
CAT COMMUNITY, FIRST NATIONS
COMMUNITY HAS AN UNREGULATED
UTILITY.
WE HAVE 77.
THEY ARE THE ONES THAT TAKE THE
POWER FROM THE TRANSMISSION
SYSTEM.
HYDRO ONE, AND DISTRIBUTE THE
POWER TO THE HOMES AND
BUSINESSES THROUGHOUT ONTARIO.

Steve says IS THAT DIFFERENT FROM
THE WAY OTHER JURISDICTIONS DO IT?

David says WE HAVE MORE LDCs THEY CALL
THEM, LOCAL DISTRIBUTION
COMPANIES IN ONTARIO THAN ALL OF
CANADA COMBINED.

Steve says MORE IN ONTARIO THAN
EVERYONE ELSE COMBINED.
WHY IS THAT?

David says IT'S HISTORIC.
WHAT HAPPENED WAS THE
DISTRIBUTION SYSTEM DEVELOPED AT
A MUNICIPAL LEVEL AND BUILT OUT
FROM THERE.
OTHER QUEBEC HYDRO, B.C. HYDRO,
BUT IN ONTARIO, WE FOLLOWED A
DIFFERENT PATTERN.
A LOT OF LOCAL INVOLVEMENT AND
OWNERSHIP.
LOCAL OPERATION.

Steve says HERE'S HYDRO BY THE NUMBERS.

A slate appears on screen, with the title “By the numbers.”
It shows that in 1923 there were 393 different utilities supplying electricity in Ontario.
In 1996, following the Macdonald report, the number drops to 89.
In 2012 a new report recommends a total of 8 to 12 Ontario utilities.

Steve says THAT'S YOU GUYS.
WHAT'S THE ADVANTAGE OF BRINGING
IT DOWN FROM 393 TO 8 TO 12?

David says BASICALLY WHEN WE LOOKED AT
THIS, WE REACHED THE CONCLUSION
THAT WE HAD TO LOOK AT THIS FROM
THE CONSUMERS' POINT OF VIEW.
AFTER ALL, IF YOU THINK ABOUT
ELECTRICITY, NOBODY WEARS
ELECTRICITY.
YOU DON'T HANG IT ON YOUR WALL.
YOU DON'T ADMIRE IT.
IT'S AN ENABLER.
IT ALLOWS SOMETHING TO HAPPENS.
ALLOWS YOU TO COOK YOUR DINNER
AT NIGHT OR WATCH TELEVISION.
IT ALLOWS MANUFACTURING PLANTS
TO OPERATE OR STORES TO STAY OPEN.
BASICALLY ELECTRICITY IS AN ENABLER.
OUR FEELING WAS WHAT WE NEEDED
TO DO WAS LOOK AT THE MOST
EFFECTIVE AND COST EFFECTIVE WAY
AND MOST EFFICIENT WAY TO GET
POWER TO ENABLE OUR SOCIETY TO
OPERATE IN THE MOST EFFICIENT WAY.

Steve says FEWER IS BETTER.

David says WE REACHED THAT CONCLUSION.
I'LL GIVE YOU AN EXAMPLE.
WHEN WE UNDERTOOK RESEARCH AS
PART OF OUR PANEL RESEARCH WORK
INTO WHAT TO RECOMMEND, ONE OF
THE LEADING ENERGY RESEARCH
COMPANIES IN THE WORLD DID A
REVIEW FOR US OF ALL OF THE OEB
RECORDS AND STATISTICS.

Steve says ONTARIO ENERGY BOARD.

David says YES, THERE'S AN ALPHABET SOUP
OF OPERATIONS IN OUR INDUSTRY.
WHAT WE FOUND WAS THAT FOR THE
SMALLER UTILITIES, THE
OPERATION, MAINTENANCE,
ADMINISTRATIVE COSTS ARE 75 percent
HIGHER THAN THEY ARE FOR LARGE
UTILITIES.
S.O.B. IS PAYING FOR THAT.
IT'S THE CONSUMER IS PAYING
SOMETHING EXTRA.

Steve says PRESUMABLY IT WOULDN'T
BE THAT CONTROVERSIAL TO TAKE
THE DOZENS AND DOZENS WE HAVE
NOW AND SHRINK THEM DOWN TO 8 TO 12.
EXCEPT EVERYTHING I HEAR SAYS
THIS IS A MASSIVE POLITICAL
HEADACHE.
ANYBODY WHO TRIES TO DO THIS IS
GOING TO GET BURNED.
WHAT'S THE PROBLEM?

David says THE ISSUE IS WHO OWNS WHAT.
ESSENTIALLY RIGHT NOW THE 77
LEFT, MAJORITY OF THEM ARE QUITE SMALL.
AND THEY'RE MUNICIPALLY OWNED.
THERE'S A FEELING THAT IF YOU
CHANGE THE OWNERSHIP.
YOU CONSOLIDATE WITH YOUR
NEIGHBOUR.
OR PENSION FUND MIGHT COME INTO
INVEST.
LOCAL CONTROL WOULD BE LOST.

Steve says IS THAT TRUE?

David says NOT REALLY.
THAT IS HEAVILY REGULATED INDUSTRY.
THERE IS NO INDUSTRY MORE
REGULATED THAN THIS INDUSTRY
WILL YOU THE ONTARIO ENERGY
BOARD AND ONTARIO SAFETY
AUTHORITY.
UTILITIES DO THAN PROBABLY
ALMOST ANY OTHER INDUSTRY.
SO IT'S TIGHTLY REGULATED AND
LICENCED NO MATTER WHO OWNS IT.
IN FACT, CONTROL, IF YOU WANT,
THERE'S MUCH CONTROL, THE
ONTARIO ENERGY BOARD, THE BOARDS
OF THESE VARIOUS UTILITIES.
I'M NOT SAYING THAT WE WANT TO
CREATE ONE BIG UTILITY FOR ALL
OF ONTARIO.
THAT WOULD BE A BAD THING TO DO.
BUT WHAT WE THINK IS THE IDEA OF
REGIONAL UTILITIES WHERE YOU
WOULD HAVE LOCAL, LOCAL PRESENCE
IS WORTHWHILE.
NOW, THERE ARE OTHER WAYS YOU
COULD DO IT BESIDES REGIONAL
SHOULDER-TO-SHOULDER UTILITIES.
CONSOLIDATE AND ACHIEVE
EFFICIENCIES.
THAT'S ANOTHER APPROACH.
DEALING WITH PRICE PRESSURES.

Steve says THEY'RE NOT GOING TO
SOMEONE IS GOING TO HAVE TO COME
IN AND SAY DO THIS NOW?

David says OR THERE WILL BE EXTERNAL
PRESSURE.
ONE OF THE THINGS THE WHOLE
SECTOR IS FACING IS A MASSIVE
REQUIREMENT FOR CAPITAL
INVESTMENT.
THE CONFERENCE BOARD OF CANADA
LOOKED AT THE ELECTRICITY
DISTRIBUTION SECTOR IN ONTARIO.
INDEPENDENTLY LOOKED AT IT AND
SAID OVER THE NEXT 20 YEARS,
HAVE TO SPEND 21 BILLION dollars TO
DEAL WITH NEW CUSTOMERS.
TO DEAL WITH THE DISTRIBUTION
SYSTEM THAT'S 50, 100 YEARS OLD
AND NEEDS REPLACING.
BUT ALSO TO BRING IN NEW
TECHNOLOGY.
SMART GRID AND OTHER THINGS.

Steve says PICK UP ON THAT.
WHAT IS A SMART GRID?

David says WELL, IT BASICALLY WHAT IT
IS, UPGRADE OF MODERNIZATION.
IT'S NOT SOMETHING A UNIVERSITY
PROFESSOR THOUGHT OF.
THE FACT IS WORLDWIDE.
WHAT THE SMART GRID EFFECTIVELY
DOES IS UPGRADE THE SYSTEM IN
SUCH A WAY THAT IT'S MORE
RELIABLE.
AND WHERE THE CONSUMER ACTUALLY
HAS EVEN MORE CONTROL.
GIVE YOU AN EXAMPLE.
TODAY IF YOU HAVE AN OUTAGE ON
YOUR STREET IN MOST PLACES IN
ONTARIO.
IF YOUR LIGHTS GO OUT.
IF YOU DON'T PHONE YOUR LOCAL
UTILITY AND SAY THE LIGHTS ARE
OUT, THEY DON'T KNOW THE LIGHTS
ARE OUT.

Steve says AND CAN'T FIX IT.

David says THEY DON'T KNOW IT'S THERE THE.
BE SENSORS.
IF THE LIGHTS - IF THERE'S A
POWER OUTAGE, THEY'LL SEND OUT A
TRUCK RIGHT AWAY OR HAVE A
SYSTEM SELF HEALING.
SWITCH OPENS.
YOU'RE GOING TO HAVE TO SEND
SOMEBODY IN TO GO UP A POLE TO
CLOSE IT.
SELF HEALING, IT WOULD
AUTOMATICALLY CLOSE, BECAUSE THE
CONTROL ROOM CAN PICK IT UP.
THAT'S WHY - THOSE ARE THE
RELIABILITY POINTS THAT THE
SMART GRID PERMITS.
AS WELL, THE OTHER ASPECT IS
DEMAND MANAGEMENT CONSERVATION,
HOMEOWNERS WILL HAVE MORE
ADAPTABILITY NOW BECAUSE THEY
CAN CONTROL THEIR HOME.
THEIR AMOUNT OF POWER THEY'RE
CONSUMING AT THE CERTAIN TIMES
OF DAY.
THEY CAN CONTROL IT REMOTELY
USING TELECOM.

Steve says LET ME PICK UP ON
THAT.
AGO WE DID SOMETHING CALLED THE
EX-WHENEQUINOX SUMMIT.
SMART GRIDS WERE TALKED ABOUT.
I'LL PLAY THIS AND THEN WE'LL TALK.

A clip plays on screen with the caption "Bill Roseheart. Perimeter Institute, Waterloo, June 8, 2011."
In the clip, a man in his thirties addresses an audience in an auditorium. A presentation pops up on a screen behind him that shows a picture of an electric car and the title “Why smart grids. Enabler.”

The man says IF EVERYBODY WENT OUT AND
BOUGHT AN ELECTRIC VEHICLE AND
PLUGGED IT IN AT 6:00 P.M. WE'RE
IN TROUBLE.
ALL RIGHT.
IF WE ALL WANT TO DRIVE ELECTRIC
VEHICLES.
THIS IS MY PICTURE OF MYSELF IN
A TESLA.
A FUN CAR TO DRIVE.
THAT WAS A GREAT OPPORTUNITY.
WE NEED TO HAVE SMART GRIDS.
BELIEVE ME, JUST FOR THE FUN OF
DRIVING THAT CAR, YOU WANT SMART GRIDS.

The clip ends.

Steve chuckles and says IS HE RIGHT WITHOUT
SMART GRIDS WE CAN'T DRIVE
AROUND IN OUR ELECTRIC VEHICLES?

The caption changes to "Need to be smart to be green."

David says WE HAVE A REAL PROBLEM.
IF YOU LOOK AT CAR.
PARK IT IN YOUR DRIVEWAY, YOU
WANT TO CHARM IT.
THE AMOUNT OF POWER THAT CAR
WILL USE IS LIKE HAVING ANOTHER
HOUSE IN YOUR DRIVEWAY.

Steve says WHAT?

David says THAT'S HOW MUCH POWER YOU CAR.
IT'S COMPARABLE TO WHAT YOUR
HOUSE WOULD USE.
IT'S LIKE ADDING A HOUSE TO YOUR LOT.
NOW, CAN YOU IMAGINE WHAT THAT
WOULD DO TO THE SYSTEM IF
EVERYBODY - YOU'RE NEVER GOING
TO HAVE THAT HEAVY A TAKEUP NOT
IN THE SHORT RUN.
BUT IF EVERYBODY CHARGED AT THE
SAME TIME YOU WOULD FRY THE
SYSTEM.

Steve says I HAVE A VOLT.
I PLUG IN EVERY NIGHT.
BUT I DO IT OVERNIGHT.
IT'S A BUCK A NIGHT.

David says YOU REALIZE WHAT WE'RE GOING
TO HAVE TO DO.
UPGRADE THE SYSTEM SO IT CAN
COPE WITH THESE SURGES.
THE OTHER THING FOR THE FIRST TIME.
THERE'S NO EXAMPLE WHERE IN
ONTARIO AT LEAST WHERE WE HAVE
TOLD PEOPLE DON'T USE POWER
BETWEEN CERTAIN HOURS.
WE MAY GET INTO A SITUATION
UNTIL WE UPGRADE THE SYSTEM THAT
CAN COPE WITH THIS.
WE'RE GOING TO HAVE TO4S
PEOPLE YOU CANNOT CHARGE YOUR
CAR BETWEEN CERTAIN HOURS
BECAUSE OUR SYSTEM CAN'T TAKE IT.

Steve says OR WE CHARGE THEM MORE
TO DO IT AND GIVE THEM A BREAK
IF THEY WANT TO DO IT OVERNIGHT.

David says A LOT OF PEOPLE SAY WHO CARES?
I'M GOING TO DO IT ANYWAY.
YOU COULD HAVE A BLACKOUT.
THAT'S WHY IT'S - THE CLIP IS
ABSOLUTELY RIGHT.
TO INTRODUCE ELECTRICITY CARS IN
A MASSIVE WAY REQUIRES A SMART
GRID TECHNOLOGY.
THERE'S SO MANY THINGS YOU CAN
DO WITH IT FROM CHARGING
FACILITIES TO A SITUATION WHERE
YOU COULD TAKE A CAR, PARK IT
DOWNTOWN AND PLUG IN AND
ACTUALLY PROVIDE POWER TO THE SYSTEM.
DRIVE HOME, POWER UP AT HOME AND
THEN DO IT THE NEXT DAY.

Steve says THAT'S COOL.
THAT SEEMS FUTURISTIC.
HOW CLOSE ARE WE TO HAVING THAT
BE A POSSIBILITY?

David says THAT TECHNOLOGY IS AVAILABLE.
THE QUESTION IS THE COST OF
INSTALLING IT.
WHETHER THAT WILL BE IN FIVE,
TEN, 15 YEARS, WHO KNOWS?
IN TIMES - SYSTEMS ARE DESIGNED
THAT COULD DO IT.

Steve says I WANT TO COVER TWO
MORE THINGS QUICKLY IF I CAN.
HOW QUICKLY DO YOU THINK WE CAN
MOVE FROM THE 77 ELECTRICITY
DISTRIBUTION OUTFITS TO THE 8 TO
12 YOU RECOMMENDED?

The caption changes to "Getting there from here."

David says I SHOULD TELL YOU PERSONALLY
IT SHOULD BE DONE VOLUNTARILY.
IF AT ALL POSSIBLE.
I WOULD HOPE THE COUNTIES COULD
WORK THAT THROUGH.
VOLUNTARY SITUATION PROBABLY
TAKE SEVERAL YEARS.
IT MAY NEVER HAPPEN.
IF IT NEVER HAPPENS,
VOLUNTARILY, THE PROBLEM IS THE
COST OF RUNNING THE SYSTEM, THE
DISPARITY BETWEEN ONE UTILITY
AND ANOTHER.
THE NEED FOR CAPITAL WILL DRIVE
CHANGE.
I WOULD HOPE ONTARIO WOULDN'T
WAIT UNTIL WE'RE HEADING TO A
CAPITAL SHORTAGE AND CRISIS.
I WOULD HOPE THE COMPANIES AND
UTILITIES, THE MUNICIPALITIES,
THE PROVINCE COULD COME TO AN
ARRANGEMENT.

Steve says LET'S FIND OUT IF
THAT'S HAPPENING.
YOU RELEASE THIS REPORT LAST
DECEMBER.
WE'RE IN MAY.
HOW MUCH HAS HAPPENED?

David says NOT MUCH.
THERE IS A LOT OF TALK.
THERE'S TWO THINGS THAT HAVE
HAPPENED.
A LOT OF TALK.
TOGETHER IN A WAY THEY WEREN'T
BEFORE.
THAT'S NUMBER ONE.
SECONDLY, I THINK IT'S PROVOKED
PEOPLE TO START REALLY THINKING
ABOUT WHAT'S NEEDED.
I THINK ONE OF THE REASONS WHY
THINGS ARE PROBABLY STALLED OUT.
ONE OF THEM, IS WE HAVE A
MINORITY GOVERNMENT AT QUEEN'S PARK.
AND IF THE GOVERNMENT WERE TO
BRING IN LEGISLATIVE FORMAT OR
TRY TO PUSH THIS ALONG, THEY
WOULD BE AFRAID OF THE POLITICS
OF IT.
HARD FOR THE GOVERNMENT TO DO
ANYTHING OTHER THAN SAY LET'S
STICK WITH VOLUNTARY.

Steve says POLITICS AND POWER,
THE ETERNAL STORY IN THE
PROVINCE OF ONTARIO.
DAVID McFADEN, THANK YOU FOR
COMING INTO TVO AND HELPING US
UNDERSTAND BETTER.

David says IT'S GOOD TO BE HERE,
THANK YOU.

Watch: David McFadden: Electricity's Smart Future