Mr. Gary Doer (Leader of the Opposition: Madam Speaker, the Manitoba Union of Municipalities, in presenting their brief to the Legislature in opposition to the Premier breaking his election promise, stated that providing telephone services to rural and northern Manitoba has never been easy or profitable. Rural Manitobans and northern Manitobans benefit from the political will over the years for the subsidization of rural and northern rates through the urban rates. We are very, very worried about the user-pay concept, the cost-recovery concept plus profit that is inherent in the profit-private system that is the vision now of the Filmon government after the election with the bill under privatization.

We have looked at some of the charts, Madam Speaker. The real cost of providing service in Roblin-Russell is over $48 and the actual bill is some $13.55. The real cost of providing service in Neepawa is $47; the customer bill is some $13.75.

Will the Premier now listen to the reality of the fact that rural and northern Manitobans are going to get shafted with his broken promise, and will he now agree to keep his promise and not proceed with the privatization as he promised in the election campaign to rural and northern Manitobans?

Hon. Gary Filmon (Premier): Madam Speaker, the only reality that will prevail with respect to those decisions is that the CRTC will make those judgments. In fact, I can share with the members opposite clippings of Saskatchewan newspapers in which the minister responsible for the Saskatchewan government telephone system is going through exactly the same public debate, is saying that these kinds of judgments made by the CRTC will apply to the Saskatchewan telephone system as it applies to every other telephone system in Canada.

Those decisions and those judgments are made on a nonpartisan basis, on obviously the basis of assessment from expert advisers and from all of the information that is available to CRTC. They are the ones who govern the rate setting in Canada today in all provinces except Saskatchewan who will be very shortly coming under their jurisdiction, which is why the discussion is taking place in Saskatchewan right now.

Those CRTC judgments will be made regardless of whether it is publicly or privately owned on exactly the same economic basis, and I would suggest to you that the availability of the telephone service and indeed even the probability of even better service is there in future whether it is publicly or privately owned.

Mr. Gary Doer (Leader of the Opposition): The next time the Premier brings some clippings into the House, why does he not bring the clippings from the election campaign when he promised not to sell the Manitoba Telephone System, if elected? The last time he brought clippings in from Saskatchewan we found out later that, contrary to what the Premier had stated, there had been a rate freeze in Saskatchewan for the last three years, not the word that the Premier gave us in this Chamber, Madam Speaker.

The Alberta telephone system, which is now the model for Manitoba--according to the brokers on Bay Street who are obviously providing the leadership to this government, sadly speaking, in terms of some of the members opposite--has stated that they are moving more and more to a cost-recovery system. In other words, they are going to look at cost recovery in each community rather than looking at the telephone system in a nonprofit way which looks at the total province as a community, which we believe should be the vision of the future of the Manitoba Telephone System.

How does the Premier justify the actual cost in Flin Flon of $43 when the customer cost is $14; Hamiota, the real cost is $49 on a cost-recovery basis versus $13 in terms of what the customer bill is now?

Why does the Premier, if he is so sure of what he is doing, not put it before the people and the shareholders in a plebiscite so everybody can vote on it, rather than just getting shafted by members opposite?

Hon. Gary Filmon (Premier): Madam Speaker, I repeat for the edification of the members opposite that those rates and those judgments about the balancing of the costs will be made by the CRTC on a nonpartisan basis, on an objective basis, and based on advice from expert people that they will hire in order to do their analysis and it would not matter whether it was publicly or privately owned, the same analysis will be made and the same judgments will be arrived at.

Mr. Doer: The Premier is afraid and does not have the integrity to have a plebiscite of all shareholders in this province. I think that is absolutely shameful in terms of the democracy in this province, and I cannot believe these backbenchers going along with the brokers and the Premier. I cannot believe it.

Mr. Gary Doer (Leader of the Opposition): Madam Speaker, we have tabled the AGT case of $6 this year and $6 next year. We have tabled a vision which talks about rate increases based on a total community, rather than a cost recovery that we will see in rural and northern Manitoba. That is why the UMM is opposed to it. They are opposed to it because they know they are going to get shafted by this government when we move to a private cost-recovery profit system.

I would like to ask the Premier, will he table in the House today any information they have on advance or existing tax rulings on the sale of MTS and its treatment as a private company and any impact on the rates in the future that they have and should have for the people of Manitoba, and what the impact will be on the rates of all the existing shareholders, i.e., the customers here in the province of Manitoba?

Hon. Gary Filmon (Premier): Madam Speaker, I will take that question as notice and bring a response back to the member opposite.

Mr. Steve Ashton (Thompson): Madam Speaker, the Premier not only misled the people of Manitoba when he said he would not sell the Manitoba Telephone System, he has consistently misled the people of Manitoba about the impact. In fact, he stated on May 2 and May 8 that under CRTC regulation, it will not make any difference whether it is privately or publicly owned, and he quoted on May 8, there will be no difference in the rates that are charged, whether they are public or private.

I am wondering if the Premier can explain then to, for example, the Manitoba Society of Seniors who have pointed to the tax liabilities and the borrowing costs being evidence of the higher costs that private companies face and the CRTC official, local director for CRTC who has confirmed that private companies have to pay taxes and the cost is passed on to the consumers--when is the Premier going to tell the people of Manitoba the truth that rates will go up at a faster rate under a privatized company as they have already in Alberta? When will the Premier tell the truth, Madam Speaker?

Hon. Gary Filmon (Premier): Madam Speaker, there is a whole series of variables that will go into the analysis, and many of them will counteract and wash out each other; some may even be to the favour of a private company being able to operate at less cost than a public sector company. For instance, instead of having to pay 7.5 percent or 8 percent interest on their debt, they may instead only have to pay 5 percent or 6 percent return on investment. That would be to the benefit--[interjection]

Well, they would rather pay. This is how ignorant the members opposite are. They think it is less expensive to pay 8 percent on money instead of 5 percent on money. That is unbelievable. That is the ignorance that we are dealing with. That is the level of ignorance that we are dealing with. That is why they accumulated all that debt that we have, that we are paying $600 million of interest, because they do not understand simple mathematics. They do not understand simple business principles.

Some Honourable Members: Oh, oh.

Madam Speaker: Order, please. The honourable First Minister, to complete his response.

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Mr. Filmon: Madam Speaker, I now know why their former Leader said that the New Democrats' problem is that not enough of them understand business, and that is a problem with them. When you are arguing about something that is as complex as this is, they come forward with pure trash as evidence that there is somehow going to be a difference. It is like dealing with a computer: garbage in equals garbage out. On that side all we get is the garbage in, and we do not get any intelligence out.

The fact of the matter is there are many factors. As I have already said, they may well have less cost based on the fact that they would pay less of a return on investment than they would on the same amount of money as debt. They may well have a situation in which their costs of operation are less and therefore that would offset any taxes that they might pay because they would have a lower cost of operation, and so all of this is taken into account by CRTC. Those are the kinds of sophisticated analyses that are done by the CRTC, as opposed to the simplistic and often ignorant figures that are put forward by members opposite.

Madam Speaker: The honourable member for Thompson, with a supplementary question.

Mr. Ashton: Madam Speaker, it is obvious the Premier does not know what he is talking about. I would like to ask him, indeed if he can table any studies on the impact on rates, whether he is aware of the way the CRTC operates, and in fact if he can confirm--[interjection] Well, he says, yes--that in Alberta, the Alberta Government Telephones, AGT, approached the CRTC for a $6 increase because of a tax liability it incurred which would have let it have only a 2 percent rate of--

Madam Speaker: Order, please. Would the honourable member please put his question now.

Mr. Ashton: Madam Speaker, I was attempting to phrase my question. I did not interrupt the Premier on his long answer.

In Alberta, they were only going to get a 2 percent rate of return on equity. They went to the CRTC. They were allowed to get a 10 percent to 12 percent rate on equity. Will he confirm that the Manitoba Telephone System currently makes 6 percent, so automatically under privatization they will be able to go to the CRTC and seek a doubling of the ROE? By the way, those figures are from the investment bankers' report--

Madam Speaker: Order, please.

Mr. Filmon: Madam Speaker, I read the CRTC decision on Alberta, and they awarded a 6.4 percent return on equity, as opposed to currently the Manitoba Telephone System paying 8 percent interest on the debt, so they offset the debt with equity which they are paying a lesser rate for than they were as a debt. That is the reality of the analysis.

Madam Speaker: The honourable member for Thompson, with a final supplementary question.

Mr. Ashton: Since the Premier obviously did not do a single study on the impact on rates, will he confirm that the CRTC allows a rate of return of as high as 12.25 percent, double what the current rate of return was in terms of MTS, and that in fact it will pass through the cost, in this case a tax liability incurred by a private company due to their mistake, directly onto the ratepayers, that in fact, Madam Speaker, the representative of CRTC is right, there will be higher costs under a private phone system than under a public system.

Mr. Filmon: Madam Speaker, returns on investment vary depending on the business climate and the fiscal climate in which people operate. Returns on investment are obviously changed with changing interest rates. If interest rates are 20 percent, then nobody is going to invest in something in which they get a 10 percent return on investment, so returns on investment vary with interest rates over time. Those are things that are calculated. They are calculated, for instance, when people make decisions with respect to rent controls.

You are not going to have anybody invest in anything if they cannot get at least as good a deal or very close to as good a deal as they can get by just simply putting their money in Canada Savings Bonds, so those things vary. There may have been times in the past when CRTC awarded 12 percent. The recent award, for instance, in Alberta was 6.4 percent versus an 8 percent interest rate. That is the kind of decision that is made by the people at CRTC as they make their very broad and comprehensive analysis.

An Honourable Member: You know nothing about regulations of public utilities. You know absolutely nothing.

Madam Speaker: Order, please.

An Honourable Member: You have not done a single study.

An Honourable Member: You are a genius.

Madam Speaker: Order, please.

An Honourable Member: Do a study on it. Table one single study. All you have is the investment bankers. That is it.

An Honourable Member: That is why you cannot get a job in the private sector.

Some Honourable Members: Oh, oh.

Madam Speaker: Order, please.

Mr. Ashton: Madam Speaker, on a point of order, I have no doubt that the Premier will be able to get a job in the private sector, probably the corporate sector after he sells off MTS. I have worked in the private sector, and I am quite proud right now to work for the people of Manitoba, one of the most important jobs in this province.

Madam Speaker: Order, please. The honourable member for Thompson does not have a point of order. It is clearly a dispute over the facts.

Mr. Gary Doer (Leader of the Opposition): Madam Speaker, I asked the Premier whether in fact his government had obtained the tax ruling, an advance tax ruling, or has a tax ruling from Revenue Canada and has the impact study of that on rates. The Premier took that question as notice. Is the Premier telling us today that he has never read a tax ruling or information on the rate impact in the province of Manitoba or he has read it and he has not made it public?

Hon. Gary Filmon (Premier): As part of the process of anticipating what would happen under a private capitalization of the telephone system, we obviously have applied for a tax ruling. I am saying to the member opposite I have not seen the tax ruling, and I have to see the information before I can provide it to him.

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Mr. Gary Doer (Leader of the Opposition): In light of the fact that AGT had an advance tax ruling on a one-time-only depreciation but Ontario Hydro has been denied an advance tax ruling in terms of the treatment of the depreciation, how can the Premier make a decision today? And you know, the Minister of Finance (Mr. Stefanson), who gave us the great retroactive legislation on the Jets, has given advice for the Premier. That should be some comfort to Manitobans.

Can the Premier today table the tax impact on the rates in Manitoba? It is a huge issue, Madam Speaker, and the Premier should know what the answer is and be able to tell Manitobans.

Hon. Gary Filmon (Premier): Clearly we have anticipated scenarios that might involve tax rulings in one way, tax rulings in another way and any variation in between, and based on any and all of those rulings, we are confident that the Manitoba Telephone System can continue to operate efficiently and effectively in public or private ownership within the current rate structure that it does have.

Mr. Doer: This is a $1.2-billion asset. This is a huge decision the people of Manitoba are making and that shareholders and this Legislature are making.

Now Ontario Hydro has been denied--in an advance decision from Revenue Canada which is available to this government--the one-time-only depreciation of AGT. The one-time-only depreciation of AGT has meant that rates have gone up $6 per month per year for the next two years. Ontario Hydro's treatment by Revenue Canada is even more severe.

How can the Premier stand here today and not have an advance tax ruling so the people of Manitoba will know the impact on rates? Are we going by blind ideology in terms of the broken promise, or do we have the facts that the Premier can table today in front of this Legislature?

Mr. Filmon: Madam Speaker, as I said, the Manitoba Telephone System, or at least the analysis that we have undertaken, involves our looking at all of the various options that might occur based on various tax rulings, and based on all of these analyses, we are confident that the Manitoba Telephone System can continue to operate in its current form given the rate structure that it currently has.

The various different types of rulings might result in longer terms without increases in the future. That is part and parcel of what could happen based on the various rulings that could happen. But under the current circumstances the company in private ownership can still operate given its current rate structure and continue to be able to make a return on investment.

So what we are saying is that we are confident that the telephone system--and given the analysis that has been done for us by the various different people who work in this kind of field-- that they can operate with the rate structure that they have.

Mr. Doer: On a new question, AGT had an advance tax ruling before they made the decision, a one-time-only depreciation. Ontario Hydro has just sought and been denied an advance tax ruling from Revenue Canada. Now this government must have an advance tax ruling before this Legislature can deal with this matter a week today. If you do not have it, you cannot pass this bill.

I would ask the Premier to table today the advance tax ruling we have from Revenue Canada and the impact on rates all across this province.

Mr. Filmon: I have said, Madam Speaker, that I will undertake to find out whether or not we have received a ruling from Ottawa at this point, but based on whether we received the ruling or not received the ruling, they will be able to continue to operate the Manitoba Telephone System--[interjection]

Madam Speaker: Order, please.

Mr. Filmon: What I am saying is that the telephone--

Some Honourable Members: Oh, oh.

Madam Speaker: Order, please.

Mr. Filmon: In either case scenario, Madam Speaker, whether the ruling is favourable or not favourable, the telephone system can operate within the rate structure that it currently has. That is the information and the analysis that we have.

Mr. Doer: The Premier has now admitted to this House that he has not done his basic homework and obtained an advance tax ruling. He has scenarios that have been provided to him by Bay Street brokers who are going to get commission from the sale of our asset to private owners.

Is the Premier saying today that if he has a good tax ruling it will make no difference than a bad tax ruling and he should not have an advance tax ruling? Why is this Premier not seeking an advance tax ruling, and why can he not table it today in this House so that all Manitobans will know the impact on the tax ruling from Revenue Canada which he can obtain in an advance way on the rates right across this province? That is a basic right that Manitobans have before we make this decision.

Mr. Filmon: May I just say, so that the member opposite knows and understands this, as clearly as I can possibly put to him: Firstly, we have a scenario in which the telephone system operates today with a certain rate structure. With inflation in costs that rate structure could not possibly remain in place as is forever. Over a period of time as the--[interjection] Madam Speaker--

Madam Speaker: Order, please.

Mr. Filmon: --would you please call the member for Transcona (Mr. Reid) to order. I am trying to fully respond to the question. If he wants to keep hassling from across the way, have him leave, Madam Speaker. I assume that his Leader wants to hear the answer.

Madam Speaker: Order, please.

The honourable First Minister, to complete his response.

Mr. Filmon: Madam Speaker, there is a current existing rate structure for the Manitoba Telephone System that will remain in place even after the telephone system is privatized. If a favourable ruling occurs, it would mean that instead of having to increase rates somewhere down the road with inflation of costs, which would occur whether it was publicly or privately owned, that future rate increase would be forestalled by a favourable tax ruling because they would have that available to them to offset the increasing costs that occurred due to inflation. That is the benefit of a favourable tax ruling and that is the way the analysis has been done.

Mr. Doer: The Premier knows that the existing rate structure is based on the existing corporation that is a nonprofit, publicly owned corporation. When you are proceeding to privatize a publicly owned corporation, you have to have an advance tax ruling from Revenue Canada so you can project the actual rate impact for the people of this province.

I would like to ask the Premier a very specific question: Does he have an advance tax ruling, and will he table it to this Legislature today?

Mr. Filmon: I already responded to that. I said that--

Some Honourable Members: Oh, oh.

Madam Speaker: Order, please. The honourable First Minister, to complete his response.

Mr. Filmon: Madam Speaker, I said that the tax ruling has been applied for and that I will find out whether or not the tax ruling has been received. I will then table it for the members, but I repeat that what we are dealing with is a matter that will not impact the current rate structure for the telephone system, and whether or not the telephone system were publicly or privately owned, in the longer term, with inflation, future increases would have to be applied for. The advantage of a favourable tax ruling would be that it would forestall future rate increases for a longer period of time because that depreciation would therefore be able to be applied in the favour of the corporation, which obviously would not be done in the favour of a publicly owned entity. So that is exactly what will be decided by a tax ruling.

I know it is complicated. I am trying to understand it--trying to explain it so--

Some Honourable Members: Oh, oh.

Madam Speaker: Order, please.

An Honourable Member: Either you have an advance tax ruling or you do not.

Mr. Filmon: Madam Speaker, the Leader of the Opposition says it is yes or no. The fact of the matter is it has been applied for and I will undertake to determine whether or not it has yet been received.

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Mr. Kevin Lamoureux (Inkster): Madam Speaker, a week from today, no matter what happens between now and then--and the Leader of the New Democratic Party points out a major flaw and demonstrates how incompetent this government has been with respect to the dealing and the selling of Manitoba Telephone System, but no matter what happens, thousands of Manitobans have expressed their opposition. A couple of hundred people want to make presentations to the standing committee. What is abundantly clear is that Manitobans want to be heard on this issue, and what I am asking the Premier today is, will the Premier agree to have public hearings on the future of Manitoba Hydro?

Hon. Darren Praznik (Minister charged with the administration of The Manitoba Hydro Act): Madam Speaker, with all due respect to the member for Inkster, this Legislature in committee last week, in consideration of annual reports--in fact, I think at the request of other opposition members and certainly with my full concurrence--wanted to have and is engaging currently, because the committee will sit again in a very thorough discussion about the changing electrical markets, about options as they appear today.

I want to underline the point to the member, and perhaps it makes the argument that the Minister of Telephones (Mr. Findlay) has made: In the area, whether it be electricity or telecommunications, these are rapidly changing industries. We are in the middle, in the case of electricity, of a revolution. I want to make clear to him--and his colleague the member for The Maples (Mr. Kowalski) was in attendance in that meeting--that there is that opportunity. I would invite him to join us at that committee when we reconvene later in November, because that discussion about options and the changing world of electricity is happening as we speak and in this Legislature and the committees on which he can be a member.

Mr. Lamoureux: Madam Speaker, I would then go to the minister, when he makes reference to rapidly changing industry, much similar to MTS, my question to the minister is, does he believe that the privatization of Manitoba Hydro is one of the options that he is making reference to when he says that there are options that are there? Is that being considered by this minister?

Mr. Praznik: Madam Speaker, the member for Inkster gives me far more credit than I would ever give myself that I would be so presumptuous to indicate, whatever options in the future, today that I would know the answer. In fact, I think the comments we made at committee, that were made in the discussions at committee, is that the world is changing rapidly, and as trustees of this utility, we have an obligation, just as my colleague for Manitoba Telephone has an obligation and fulfilled it, in studying the world and ensuring that the best decisions are made, and that is what we were talking about, is studying those issues.

I would table for the interest of the member here today, for the members of the House--I tabled the same newsclipping at committee. It just describes what is happening in the province of Quebec, is their decision to open up their power grid, and it just gives the member a sense of the context in which we are now living in this world. I know his colleague the member for The Maples (Mr. Kowalski) has a copy, but I table it for all members of the House here today.

Mr. Lamoureux: The question to the minister is fairly simple and straightforward in terms of, is the privatization of Manitoba Hydro an option which this government and in particular this minister is actually looking at? Given the response that he has put in his two previous questions, the answer is yes. I would want to hear confirmation, yes or no, is it an option?--fairly straightforward.

Mr. Praznik: The fact that the member for Inkster would ask that question and expect a yes or no answer today indicates to me that he has yet to grasp--and in fairness to him he was not at committee. He is not involved on a day-to-day basis in electrical industry, but he has failed to grasp the complexity of what is happening in the electrical world and the considerations that have to take place, and the reason I say that is, if he had been at committee, if he had read the public remarks that I have made and that others have made, the first issue that Manitoba--the prime issue that Manitoba Hydro has to face today to protect our investment, to protect our quarter of a billion dollars of sales into the U.S. market, to protect our ability to service our debt by having the hedge of U.S. dollars, to protect our future by pursuing opportunities, is to consider how we have to fit into a new regulated world, and to be blunt to the member, that is the first and prime task that this minister has to entertain and this Legislature has to deal with, and that, quite frankly, is the issue that is being addressed.

Hon. James Downey (Minister of Industry, Trade and Tourism): Madam Speaker, I rise today to respond to a question that was brought forward by the member for Elmwood (Mr. Maloway) a few days ago, and again the question demonstrates the inaccuracy and the incompetence of the member opposite in bringing such information to the Chamber.

The question was, earlier this year, the government, through MTS, entered into a contract worth $3 million with a newly formed company called Manglobe Virtual. That is not the case. There is not a $3-million contract entered into between the telephone system and Manglobe. There is a business arrangement between several partners in Manglobe, but it certainly is not anywhere near the magnitude of $3 million, and it is not an untendered contract which the member referred to and put on this record. I would hope that he would get his facts straight before he comes to the House with such inaccurate information.

Mr. Jim Maloway (Elmwood): Madam Speaker, I have a question for the Premier. As the Premier knows, MTS has signed a contract with Clifford M. Watson of Toronto. Will the Premier today table the contract and tell this House what roles Mike Aysan and Dennis McCaffrey play in this untendered contract?

Hon. Gary Filmon (Premier): Madam Speaker, without accepting anything that is brought forward by the member opposite as being factual since time and time and time again these contracts that they bring forward or this knowledge of contracts is absolutely false, I will take it as notice on behalf of the minister and ask him to look into it and bring it back for the member opposite.

Mr. Maloway: For a Premier that supposedly knows a lot about what is going on in this department, he is very selective.

Madam Speaker: Question, please.

Mr. Maloway: His memory is very selective.

I would like to know how this Premier who has previously condemned Mike Aysan, as well as the contracts and bonuses given to Mike Aysan in 1980 by Don Orchard, now can become a business associate with Mr. Aysan. Can the Premier explain the connection with Mr. Aysan?

Mr. Filmon: Madam Speaker, again, I am not sure how I would be expected to know everything that goes on in every department, let alone a Crown corporation. So I will find out. I will take this as notice on behalf of the Minister responsible for the Telephone System (Mr. Findlay) and have him bring back the information, but I would suggest that again I accept none of the preamble and the so-called information brought forward by the member opposite because of the lack of quality and veracity of most of the information they bring forward.

Mr. Maloway: While the Premier is checking, could he also find out who approved Dennis McCaffrey, the director of marketing for MTS, to sit on the board of Cliff Watson's MG Communications when Mr. McCaffrey knows the MTS marketing strategy, its weaknesses and has all the information on MTS customers? Is this not a conflict of interest?

Mr. Filmon: Madam Speaker, I will take that as notice as well on behalf of the minister.

Madam Speaker: Time for Oral Questions has expired.