When I asked last week for people to put forward serious alternatives for NB Power that would keep rates competitive, orderly pay down debt and allow for the phasing out of oil/coal electricity generation, there were no takers. In fact, I haven’t heard any serious options in the wider media either.
So last week I asked three people that I know have had close dealings either with NB Power or energy policy in New Brunswick. All three concluded that the model NB Power was operating was unsustainable if the vision for the utility was as I outlined in the first paragraph. All three said NB Power could remain a stand alone utility for a number of years but rate increases would need to be well above average.
This observation is not a revelation. Electricity costs have gone up in New Brunswick since 2002 at twice the rate of overall inflation and the were projected to rise even faster until the government capped rate increases to 3%. That’s a nice card trick but, like Enbridge, you are just pushing those costs to future rate payers. If costs are increasing at 5% and you cap rate increases at 3%, somewhere down the road someone will have to pay the piper.
So I asked my panel (separately) to give me a serious alternative to the HQ deal.
All three said the likely outcome for NB Power would be a sale to Emera. Not now but in a few years when the situation was more desperate, the NB government would unload the utility to Emera as part of that company’s plan to be a large privately owned power utility in the Maritime Provinces and New England.
But Emera wouldn’t take NB Power’s debt – not all of it. The government would likely have to absorb at least a couple of billion of debt. In addition, there would be no rate freezes for residential or declines for industry.
The reality is that right now NB Power is in a relative position of strength. HQ wants to dramatically increase its U.S. business and could benefit from NB Power’s strategic position – and is willing to pay for it – to the tune of several billion dollars. If this deal is scuttled, NB Power will end up negotiating with potential suitors from a position of weakness and that could cost us billions. The point is that Emera doesn’t really see NB as a strategic channel to ship cheap hydro to the U.S. It has none – so it certainly won’t assign billions worth of value to the province.
I’ll close with this. Two of the three people I talked to said they were surprised that the government went through with the deal (MOU) because the political hit was going to be heavy no matter what. Even if you like the deal, one said, for a resident or business it is a bit like “kissing your sister” – even if you like it you would never admit it. Very few people are going to admit to like selling of NB Power to Hydro-Quebec even if they realize it is the best option out there.