Walk down – NB Power’s memory lane

My wife was helping me purge some old boxes just this week and we came across a document I wrote in 1996 just before I left the Department of Economic Development and Tourism called “New Brunswick, Canada: More than a Location…  …A Solution!”  And, yes, the exclamation mark was there.

This document was 97 pages long and had detailed charts and graphs about every possible business cost, labour market issue, quality of life – I have to admit while some of the language is cheesy – I was a pretty young guy to write such stuff.  Anyway, this type of document was given out by the department to make the case for New Brunswick. Some day I’ll upload the whole 97 pages for posterity.

Flipping through this thing I came across the section on electricty – I have scanned these pages for your review.  In 1994, NB Power was promoting industrial power rates (for small users) that were lower than Quebec and Newfoundland.   In the first KPMG comparative cost model in 1994, New Brunswick’s power rates for manufacturing were lower than the vast majority of North American locations in the study.  Now they are in the top quartile.  The chart below the pages from my document shows the most recent electricity costs from the KMPG study in 2008.  I realize that some of the margin between the 1994 and 2008 figures is related to currency conversion but the bottom line was that in the early 1990s your’s truly was out there pitching NB Power as having one of the lowest rate structures in North America and now I have to pick through and compare us to New Hampshire or Prince Edward Island and the few locations that are higher cost.  This should be food for thought folks.

PS – notice the glowing language I wrote around NB Power – even using the “self-sufficient” terminology over a decade before it became a buzzword in NB.

Electricity Costs (USD$) – Sample Metal Fabrication Facility (2008) – KPMG

Manchester, NH

$462

San Jose

372

Halifax

370

Ottawa

370

Moncton

360

London, ONT

359

Dallas, TX

298

Shreveport, LA

260

Saginaw, MI

245

Denver, CO

223

Jackson, MS

219

Youngstown, OH

217

Minneapolis, MN

213

Atlanta, GA

206

Raleigh, NC

201

Wichita, KS

198

Billings, MT

193

Sioux Falls, SD

190

Cedar Rapids, IA

185

Greenville, SC

185

Seattle, WA

182

Spokane, WA

182

St. Louis, MO

182

Lexington, KY

173

Salt Lake City, UT

168

Fargo, ND

166

Charleston, WV

143

Boise, ID

136

Source: http://www.competitivealternatives.com/results/reportmenu.aspx

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15 Responses to Walk down – NB Power’s memory lane

  1. Anonymous says:

    Great stuff David. At least you were trying to find an angle to pitch.

    Are you familar with any companies that located to New Brunswick in the mid to late 1990s because of these low power rates we had?

  2. Here is an accurate table of results for Canadian cities from the KPMG site (I’ve uploaded the image to http://www.downes.ca/images/dnc-7563k000.jpg so people can see for themselves directly):

    Edmonton: $350
    Calgary: $300
    Charlottetown: $270
    Toronto: $255
    Moncton: $245
    Halifax: $240
    Ottawa: $230
    Rimouski: $210
    Montreal: $210
    Quebec City: $210
    Sherbrooke: $190
    Vancouver: $140
    Winnipeg: $125
    Brandon: $125

  3. mikel says:

    Interesting stuff, definitely put the whole 97 pages up.

    The easiest rebuttal to that however is…….and how many manufacturers beat a path to NB”s door? Haven’t you just proven that power rates have almost nothing to do with business investment? Like Bernard Lords extremely lower tax rate on small businesses that somehow resulted in far fewer businesses, this is pretty much the ‘smoking gun’ that proves that low rates DON”T increase competitive position. Thanks for that:)

  4. joe says:

    So, after calling me your regular, names, you now show proof of my comments that NB Power was a great run outfit until the late 80’s !
    So! what happened? Most of us have the Idea, but with your knowledge, you CAN prove it!

  5. Claude B says:

    Two words: fuel prices.

    I was looking for a more current assessment of NB Power’s costs and I stumbled on this DisCo’ filing to the EUB, on April 30, 2009. Read it and weep.

    Bottom line: the production cost for non-hydro, non-nuclear generation in New Brunswick is probably in the neighborhood of 13-14¢/kWh (including capacity charge) as of 2009 and OM&A (operations, maintenance and administration) costs on the distribution side rise at 3 times the rate of inflation (up from $104 M in 2007/08 to $120 M in 2009/10). According to the document, NB Power Distribution expected a $94 M for the current year. But that doesn’t take into account the fact that Lepreau won’t be put back on stream before 2011. It is probably safe to assume more losses due to the delay.

    Who’s responsible? David Hay and Shawn Graham? I don’t think so. They inherited the consequences of 15 years of short-term thinking. Contrary to what was done in New England, where oil was phased out from power generation in the last decade, New Brunswick decided back then that oil and orimulsion were the way of the future. It’s easy to say in hindsight, but New Brunswick is now paying the price of 15 years of gross negligence.

  6. What amazes me is that Downes loves to insinuate that I am lying about this stuff. I said above that NB is in the bottom quartile of NA locations for power rates (based on their model) and in 1994 we were in the top quartile. That is true. As for the serious question about the relative importance of cheap power you are correct in your assumption that electricity is not a deal breaker for most manufacturing. We did lose some projects in the 1990s because of no nat gas. For certain manufacturing natural gas is required. There are only a few industries where high cost power is a dealbreaker. Aluminum smelters, certain mining,paper mills, data centres, petrochemical plants to name a few. We didn’t have much success attracting manufacturing to NB. Most of our manufacturers are home grown.

  7. Claude B says:

    joe :
    So, after calling me your regular, names, you now show proof of my comments that NB Power was a great run outfit until the late 80’s !

    Great run outfit? Nope. They reaped the rewards of the oil counter-shock of the late 80s and early 90s. They sat on their derrières and enjoyed the ride.

  8. Claude B says:

    David, you probably missed this comment I sent at 2:19 p.m. I guess you probably misplaced it somehow :). I’m reposting it, in the hope you’ll find it interesting. Claude

    Two words: fuel prices.

    I was looking for a more current assessment of NB Power’s costs and I stumbled on this DisCo’ filing to the EUB, on April 30, 2009. Read it and weep.

    Bottom line: the production cost for non-hydro, non-nuclear generation in New Brunswick is probably in the neighborhood of 13-14¢/kWh (including capacity charge) as of 2009 and OM&A (operations, maintenance and administration) costs on the distribution side rise at 3 times the rate of inflation (up from $104 M in 2007/08 to $120 M in 2009/10). According to the document, NB Power Distribution expected a $94 M loss for the current year. But that doesn’t take into account the fact that Lepreau won’t be put back on stream before 2011. It is probably safe to assume more losses due to the delay.

    Who’s responsible? David Hay and Shawn Graham? I don’t think so. They inherited the consequences of 15 years of short-term thinking. Contrary to what was done in New England, where oil was phased out from power generation in the last decade, New Brunswick decided back then that oil and orimulsion were the way of the future. It’s easy to say in hindsight, but New Brunswick is now paying the price of 15 years of gross negligence.

  9. mikel says:

    Good points, thermal generation is pricey, not only does it involve generation but externally shipped fuel sources and shipping costs. It’s quite obvious that water is the cheapest way to go. Several tidal power sources are currently active in the north sea and portugal. Micro hydro would be a good add to the mix. The main problem is the political initiative and the lack of political accountability. The only thing they talk about is rates.

    I did talk to a reliable source about a small dam in a rural area. NB Power got a proposal from an ‘entrepreneur’ who want to refit the dam to get power from it, unfortunately the entrepreneur had no money and was just doing the ‘leg work’-NB Power was supposed to supply the cash.

    There was really no oil counter shock in the east during that time, in 1995 Lepreau was operational and in those pre green times nobody gave a second thought about pollution from thermal generation. The dams were in good shape so there were really no big investments needed. NOW, its a different story.

  10. joe says:

    Why is now a different story? Simple questions.

    1- How much power does NB need? Now and projected.

    2- How much does NB export and how much does it make off exports?

    3- How much does it cost for actual export only.

    4- And how fast will the FERC change market-based rates to cost-based rates for power from NB?

    Without a doubt, NB Power troubles started with emphasis on export. Whose cuts have spiraled out of control. The controls needed to stop this would end the Party that does the right thing, for years, and also create lawsuits from the legally entitled, according to the constitutional mckenna amendment!!
    Ok I will post the fact!

    6. How much savings can the marketing desk generate for New Brunswickers?

    Each year, the marketing desk can bring in anywhere from $100 to $200 million

    So 100 to 200 million a year wouldn’t pay the bonuses!!!

  11. joe says:

    On further checking, never mind, no one could figure it out anyhow. As is meant to be, like a casino, or lottery commission, or a democracy. How the fittest stay the fittest.

  12. richard says:

    ” It’s easy to say in hindsight, but New Brunswick is now paying the price of 15 years of gross negligence.”

    Its certainly true that Hay and Graham are not to blame for the mess NB Power now finds itself in. However, they have been the ones delivering the ‘what, me worry?’ lines to NBers over the past couple of years when asked about NB Power. Part of the reason for the reaction to the proposed sale is the complete (and dishonest) switch in messages. A few weeks ago, everthing was fines; today there is a crisis. Now we apparently have a utility that has little of no hope of paying down debt, that will lack the funds to re-invest in new power sources, and will cripple us with massive power rate increases if nothing is done immediately. NB Power failed to invest for the long-term; instead it has been used as a construction manager by the province to solve political problems.

    The NB Power story is just another example of the deceptions that our political leaders have dispensed over the past few decades. We don’t need tolls, broad-based tax cuts are the key to prosperity, NB Power is doing great, etc etc. Thanks to the unwillingness to be straight with people, and the media’s compliance with the BS, NBers do not realize where we are headed fiscally.

  13. Anonymous says:

    We are victims of poor government, including the oppoition.

    Politics drove NB Power off the rails; from prominent political Chairman appointments to vote-buying job creation projects like Belledune, the bad decisions that NB Power made have government hand writing all over them.

    Rather than personal attacks, blindly taking the opposing view, and advocating such vote-crazy initiatives like the tolls and auto insurance rates, we need(ed) to be addressing more significant issues like energy policy. No political lines here, each party is guilty of not delivering.

    With adversity on the horizon, we have inexperienced leaders who are desperate. The NB Power sale looks like an easy escape route and it is for the short term. However, we will live to regret the decision. We would be far better off removing the politics from NB Power and allowing them to take the corrective actions we are allowing Hydro Quebec to make. While there are no quick fixes, allowing time for correction would retain this valuable ED asset. There are few building blocks left.

  14. Levi Hargrove says:

    Can you please devote a column in the TJ to this mysterious ‘replacement power’ that we keep hearing about. If a second nuclear reactor was built before the refurbishment happened and there was no need to buy replacement power (the power for the second unit would have been more than enough to replace the power with lepreau) could we have had two nuclear stations for the price of 1?

  15. TOM HICKIE says:

    you are correct that people should stick to the facts unfortuneately the liberals do not seem to be doing that. I have two main problems with this deal. How much liability will remain with the province to decommission structures and energy security. Hydro depends on the wather and Manitoba just had a big loss due to lack of water, also the power lines coming from the north are not secure. Quebec has had major power disruptions due to ice and solar storms. These issues need to be addressed. The other major problem is that the fools who messed up the lepreau contract are the same ones proposing this one. tom hickie fredericton

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