Electricity and economic development

I guess I am just a hopeless (helpless?) romantic when it comes to this stuff but I have long hoped that New Brunswick would get back to the day when it saw electricity as an economic development driver and a key public policy tool to attract and grow industry. In the list of performance indicators for NB Power leadership released yesterday there was this one of interest:

Building a strong economy is important to all New Brunswickers. Management will
take an active role, working with business, labour and governments to foster
economic opportunities in the Province.

This is definitely Francis McGuire’s influence on the board but I was hoping for much more (naively). Quebec Hydro has clear economic development mandate and actually talks about its role in supporting and growing industrial activity in the province using low power rates. Imagine if NB Power committed to that. Many (most) U.S. electricity utilities have an economic development office and many have a Vice President in charge of economic development. Imagine that in New Brunswick. In fact, many electricity utilities have performance indicators based on their ability to attract new industry to the jurisdictions. Imagine that. I think sometimes that NB Power would like to see less industry in New Brunswick, not more.

It will be very interesting to see what ‘active role’ to foster economic opportunities will be. One thing is for sure, there is lots of rhetoric to go around these days but I don’t see a whole lot being done to address the structural challenges facing the province. And then there is that annoying unemployment rate which has crept back up to almost 10%.

I would like the province to carve off a chunk of its electricity capacity production (now and in the future) and set it aside at lower rates to attract and grow industry. In many jurisdictions this is done. It’s all fine and dandy to roll all rate payers in as the same and even say that NB Power should put it to the industrial users but where do the jobs come from? We have had several major mill closures in New Brunswick and all stated high electricity costs were a key factor.

Finally, the problem with NB Power is us – residential users with electric heating. Let’s face it. NB Power’s hydro and nuclear power production (clean with almost no marginal cost of production) is enough to cover almost all of the base need of the province – residential and industry. In other words, if you take our summer need for power – both residential and industrial – it is almost completely covered by clean and cheap production. But in the winter, demand (for about five months), demand spikes up to double the summer levels and that is when NB Power is forced to purchase fuel and run its carbon emitting plants – at very high cost of production. Over 60% of NB homes are electrical heating and I heard recently that 80% of all new homes constructed are using baseboard heating. Why not? It’s easy and cheap because we have structured our power rates to blend NB Power’s cost of production at peak and baseload.

Don’t blame industry for increasing power rates. It’s demand is virtually consistent throughout the year. Without the huge peak for our heating needs, NB Power would be clean and cheap in its power production.

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0 Responses to Electricity and economic development

  1. Anonymous says:

    Spot on. NB Power is another example of a sparse ED advantage for NB being used for politics (keeping rates low to shelter home heaters from fluctuating alternatives) rather than utilizing it for ED.

    And shame on the nonexistent opposition for encouraging political rhetoric by criticizing the salary and bonus structure and the disconnect policy rather than the bigger issues.

    NB continues to be retarded by minority interests (toll highways, insurance rates) rather than significant policy issues. We have to be smarter.

  2. Anonymous says:

    As you imply, we should view NB Power as our former NB Tel. NB Tel’s progressive management led to an industry in NB.

    NB Tel has been destroyed. Let’s not waste an oportunity with NB Power.

    I have no trouble with exec incentives if they acheive results like NB tel did.

  3. Censurer General says:

    “hoped that New Brunswick would get back to the day when it saw electricity as an economic development driver”

    When the PPP pirates colluded to sell this people’s asset out, they wrote just the opening chapters of disaster capitalism in our fair province.

    Tell us David, would it be worth it to you for the Mactaquac dam to break if it meant more construction opportunity during the clean up?

    Profiting on the misery of others is not my idea of an economic development driver.

  4. Anonymous says:

    The rational for the salary increases and bonuses at NBPower – and the indefensible rationale behind them – reminds me of the old joke of the guy that murders his parents then wants the sympathy of the courts because he is an orphan! I wish I had a job where I could loose nearly a billion dollars (orimulsion/ retroft of coleson cove debacle) and then get a raise to an income that would be one of the highest within “government” there is. Apparently the Graham Crackers have adopted the Reganite “trickle down “ economic theory. Make the rich richer and they will spend/invest thus making the poor less poor. Except here it is make the bureacrats richer or in this case the pseudo-government worker richer , and the great unwashed (those fools stuck in the real private sector) poorer thru ever increasing and less competitive power rates. As to loosing “expertise” if salaries are not competitive – what a bunch of HS. Firstly, if they cut the salaries 10% I guarantee that they wouldn’t loose 2% of their employees (where is the real competition for these people – not where they can be the big fish in the small pond like they can here). Secondly I would love to see some of our NBPower senior people leave – could their replacements screw it up any more that the current crowd!!

  5. David Campbell says:

    Tell us David, would it be worth it to you for the Mactaquac dam to break if it meant more construction opportunity during the clean up?

    Does that kind of silly comment add value to our discussion? Even with a name like Censurer General, it might be nice if you would actually add some alternatives and content with meat.

  6. Censurer General says:

    Anyone who knows the state of that dam would not find the question so silly.

    I’d rather we pump money into a new dam (regardless of which PPP pirates get to profit) than beg for reconstruction money after the flood.

    This wait and see attitude on important issues, while the provincial government rams through reams of unnecessary and (in my opinion anti-democratic) legislation is unforgivable.

    P.S. – what’s your answer?

  7. David Campbell says:

    If the dam is in such a state, it needs to be addressed – it’s just that this is the first time I have ever heard of it. My broader point is that I am trying to foster an interchange of ideas – even if those ideas come with sarcasm, etc. Just criticizing an idea is not an idea.

  8. Anonymous says:

    A couple points.

    NBers quickly forget it is social services who help the poor not crown corps like NBP. That is why most miss the ED potential.

    Regarding the objectives, whynot benchmark against other provincial power corps?

  9. Dan F says:

    http://www.cbc.ca/news/story/2000/12/11/nb_tsdam001211.html

    http://www.cs.unb.ca/~ulieru/Publications/MIOC-ISCRAMCHINA2008.pdf (see figure 4)

    http://findarticles.com/p/articles/mi_qa5310/is_200709/ai_n21295417

    “Indeed, AAR expansion can result in: 1) opening of the vertical joints downstream and closure of the vertical joints upstream in an arch dam; 2) possible movement of the different buttresses of a gravity dam along the joints; and 3) sliding of the dam subjected to a compressive state of stress on the foundation joint.”

    ——–
    These people don’t seem to think it’s a big deal, but they live in Ontario:
    http://www.hatchenergy.com/Company/Expertise/ExpHydroAAR/TechPapers/HydroVision_Mactaquac_2001.pdf

    (and, it seems – they were paid to try and fix it)

    http://www.hatchenergy.com/Company/Expertise/ExpHydroAAR/Mactaquac.html

  10. mikel says:

    First though, that’s VERY inaccurate to state that nuclear is ‘clean’. That’s not even close. Much of the debt is residuals from the Lepreau. Just for comparison, Kurt Adams, head of the Maine Public Utilities commission has stated that nuclear is NOT recommended for the states power needs (although they are quite excited that New Brunswick wants to partner up and will take all the risks).

    I read about the dam problems in mactaquac when researching flood information, its true that that is not really part of the issue, but it’s virtually never discussed, it may be off topic but its one of those things its good for people to know.

    I’d have to disagree that energy policy is NOT being set by industry-again,its simply the WRONG industries and done badly. That Irving is not playing a part in energy policy is almost simply crazy. In Maine 20% of their energy production comes from biomass. Irving and the other licensee’s have a vested interest since biomass mostly comes from waste wood, and softwood pulp leaves very little left over. It’s the ‘value added’ hardwood production that leaves waste wood.

    The gas terminal deal of course says it all, and I’ve mentioned numerous times that Irvings synthetic wallboard factory gets waste product from Coleson Cove. There’s a reason why in NB there has only been one deal with an alberta company, meanwhile in Maine as soon as they opened the wind market they got massive investment in wind farms, and there are five at the production stage. And maine is largely private investment run. In New Brunswick, power, like ED, doesn’t seem to be able to attract private investment. Even though all it would take is a quick search to find the maine investors and give them a call and say “hey, we’ve got LOTS of wind potential, we’re hooked to your power grid, and don’t have those pesky referenda to deal with”.

    OR, you can look at who the big industry players and realize THEY have different ideas. The only caveat there is that Graham’s dad is on the board of AECL, but sort of like Doug Young’s ‘interest’ in the toll highway, or Al Lacey’s RAR properties, it becomes a moot point as to whether their motivations are ‘corporate’ or ‘political’. Nuclear may be ‘driven’ politically, but its a private consortium, so its industry lobbying that is pushing it.

    For ED, thats a tricky topic. We don’t know for SURE why UPM bailed, it COULD be power rates but I suspect they knew of NB’s rubber backbone and figured getting permission to ship logs out from the province would be pretty easy. I haven’t seen comparisons between the areas, but I doubt they are THAT much cheaper. And guys like Irving know all they have to do is balance off their power payments with ‘yeah, we’re thinking of leaving if you don’t cut us a cheque’.

    Other previously mentioned sectors, like animation and financial backoffices, don’t really rely that heavily on cheap power.

    But as for policy, all I can say about industry is that all the big players indicated they were quite happy with the provinces ‘co generation’ ideas. From an outside perspective, what a business wants to see is lots of production, which New Brunswick is certainly at the top of. Two nuclear plants, coleson cove, a natural gas pipeline, hydro (with or without mactaquac:) and ‘talk’ about all the green initiatives-for a province with less than a million people.

    As a crown corporation EVERY decision comes back to the government-even if the problem is they won’t take responsibility. It’s true that energy policy in canada has ALWAYS been set up by industry, NB Power came about because all the mills wanted cheap power and you to pay for it. Like I’ve said, a minimal charge on a new home could have it running almost power free. The difference is YOU are paying the debt that the big industry players owe-virtually the ONLY power increases have come from industry.

    As for bonuses, what I found most interesting was looking at two sites-the first a site on how the government is pushing ‘pay equity’, the second was at the CBC comments section from a civil servant who said he was looking through the public records and noted that employee’s who worked at NBPower were earning as much as 35 grand more than other departments, where the workers generally do similar jobs. WHich means the ‘comparisons’ NBpower is doing don’t even apply to WITHIN New Brunswick.

    It was also interesting to note that last year NB Power hired, I think it was, 61 new people. And they received over 6000 resume’s. It really brings the bilingualism issue home when you go read the ‘perks’ that the company offers as one of the ‘best 100 places to work’. I don’t like to be judgemental, but I’d have to side with the guy talking about orimulsion (or weathermen)-if you can get paid that kind of money for being wrong 60% of the time, you’ve got it pretty sweet.

  11. Anonymous says:

    Wow. I question if NB will get anywhere after reading these posts.

    Regarding NBP, it is not perfect but far better than NSPower who has huge debt and archaic assets. Or Ontario, operating North America’s largest single polluter (Nanticoke) due to multiple life extensions granted in response to ill-informed protests causing the mothballing of their nuclear plants.

    If the major reasons to have NBP as a crown corp are to subsidize heating costs with below market rate electricity, have liberal policies for people who do not pay their bills or to grant permission for public debate of the CEO salary and bonus then we should sell it so our efforts can go to more constructive uses.

    Are we not capable of applying our negative energy for constructive innitiatives? We could give million dollar bonuses to NBP and it would have little impact on our daily lives. However, if we focused on ED it could improve the lives of many for years to come.

  12. mikel says:

    Criticizing a crown corporation has little to do with its benefits. It’s ironic that only the post criticizing other posts brought up privatization. There is very little support for such a policy, and New Brunswickers know full well from their grandparents what a privatized system of energy produces.

    You certainly can’t defend massive bonuses or the fact that, say, even IT workers at NBPower will make much more than workers at other government departments. Scaling those salaries may not ‘affect people at home’, but if those funds had gone into covering one poor guys bills last winter then he wouldn’t have died. The death of a canadian because he couldn’t afford hydro (even if he were a deadbeat who was spending all his money on booze) definitely affects people at home. It affects how a person feels about their society, which is a big part-perhaps ALL parts, of who a person is.

    But the payscales are more symbolic than anything else. ‘Constructive’ doesn’t simply mean ‘subsidizing ED’. Like I said, go read the history of NB Power, it was set up to run mines and pulp mills. How well did that turn out? Lots of debt and the mills are all closing and the rest resort to blackmail whenever they aren’t profitable. The province even helped those companies build their own power generators (then just recently ‘bought’ them back when the companies bailed).

    And again, because consumers and taxpayers never get thanks from those they are subsidizing-YOU pay the debt that kept those mills going. From the seventies the general public’s use of power has plummeted by over 400%. Industry has grown over 500%. And in that time the number of jobs has been DECREASING-and so has the percentage of the provincial budget they have paid.

    In other words, the only benefit for subsidizing-jobs and taxes, haven’t grown, they’ve actually been almost wiped out. Starting to sound a bit like the third world?

    But it comes down to numbers. Energy has to come from somewhere, thats basic physics, however, in the last ten years there have been dozens of proposals for energy, yet the province remains stuck on its few. By the way, per capita New Brunswick pollutes FAR more than Ontario. And at last ontario has said it is phasing out coal (unfortunately with nuclear but thats another issue).

    What companies want is constant power prices. The only way to do that is by public ownership. That’s what a public utility is supposed to be-but certainly isn’t any more. Like health care, nobody is complaining and saying NB Power ‘shouldn’t exist’-that doesn’t mean you don’t criticize it. It also doesnt’ mean people aren’t justified in complaining that the sole or even chief function of a power utility should be subsidizing companies that are paying relatively little in tax and provide few jobs.