The Janice Harvey Magic Show

What amazes me is that smart people such as Janice Harvey would quote something like this in her column this morning.  She is talking about that unbiased Maine consultant hired by AIMS (who states right in his report about the risk to Maine – some unbias):

Weil writes, “The claim is made that the deal will be worth $10 billion to New Brunswick… based on the combination of a cash payment and lower rates. The cash payment portion of the deal will remain uncertain for some time [due to the Lepreau wild card: “The risk for New Brunswick is that Lepreau does not again enter into service”]. As for the rate relief portion, estimated to provide more than half the value, the benefits would only be derived over a period well in excess of 30 years and then only if certain assumptions work as forecast.”

Harvey knows as well as I do that the “Lepreau wild card” exists whether NB Power is sold or not!  It is a weird slight of hand to pretend that there is some great risk associated with Lepreau if NB Power is sold and not if it is not sold.  The risk stands both ways.

As for the rate benefit – it is obvious that the benefits after five years can only be forecasted based on certain assumptions.  Weil’s point is rhetorical and Harvey makes it the basis of her criticism of the deal.  Hmmm.

The truth of the matter is this.  I have talked now with six different Tories in the past week and the new plan seems to be fight the deal, breath a sigh of relief when it passes in March, get elected because you opposed it and take the benefits over the next five years at least.  There hasn’t been a government since Robichaud that hasn’t been plagued by NB Power – Hatfield’s original Lepreau project was three times over budget.  McKenna nearly crippled NB Power with Belledune.  NB Coal has been kept alive costing the province millions to prop up a few jobs.  Orimulsion was an enormous fiasco. 

David Alward could stand to be the Premier of the only province where industrial electricity rates were cut 28% and residential rates were frozen for five years.  He will take all the benefit and none of the populist fallout.  Genius.  It takes NB Power out of the spotlight.

Of course, the Lepreau refurb is only scheduled to finish early in the next term……  A slight hiccup to my analysis.

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16 Responses to The Janice Harvey Magic Show

  1. richard says:

    Perhaps poor Janice is just working twice as hard to prove that she is still an upstanding member of the NB chattering class. After all, she first, like her hubby, came out in favor of the sale, then reversed her position. Both she and her hubby now must work overtime to get the egg of their faces. This column is part of her penance.

  2. Samonymous says:

    David Alward could stand to be the Premier of the only province where industrial electricity rates were cut 28% and residential rates were frozen for five years. He will take all the benefit and none of the populist fallout. Genius. It takes NB Power out of the spotlight.

    I’d rather be the Premier of the province where some of the lowest taxes, both personal and corporate, set the ball in motions for a huge government overhaul of how we do business. Let’s see? Maybe start by cutting inept bureaucrats (@ BNB) and inefficient business consultants (@ Enterpise NB) that have never created a job in the private sector in their life.

  3. mikel says:

    This isn’t up to your usual standards. At first when the NERA report came out it was all ‘listen to the experts’. Now some experts are saying something different and you are ‘amazed’ that they are quoted? Every group or person has a bias-especially including consultants hired by the government which is pushing the deal.

    For Point Lepreau, the point is that IF Lepreau doesn’t go into service then the cash value of the deal changes radically-that is a separate issue from its cost to NB.

    Not sure why exactly the forecast argument from Weil is ‘rhetorical’, he simply points out that if the assumptions change then the benefits change. That seems fairly straight forward and since one of the top five reasons the government is pushing the deal is the supposed rate savings, its not just a point that should be mentioned, but it should be up to the liberals to justify it. What are the savings in ten years? In fifteen? And again, after five years the transmission and distribution rates will be set according to ‘a fair and reasonable return on investment for the owners’. I never even saw that MENTIONED in the NERA report. How much profit HQ wants to suck out of New Brunswick seems to me to be a pretty big mozza ball hanging out there.

    Third, who exactly are these tories you spoke to who are planning electoral strategy? Or did you just talk to six people who say they are ‘by nature’ tories? Or were they card carrying tories? You seem to assume that tories WANT the deal, and there really is no evidence of that, none have said so publicly, and several have joined the ‘say no’ group on facebook and post there fairly often.

    As for NB Power, McKenna was hardly ‘plagued’ by it, he even states that it wasn’t even on his radar. Even with cost overruns Lepreau made cost effective power, and forget Premiers, even with the griping about high rates, the reality is still that New Brunswickers have a lot cheaper power rates than any other atlantic province or even northeastern state. I don’t think ANYBODY has said that its run as it COULD, but most of that has been the FAULT of most of those Premiers. Lord hired Hay in part to get to the bottom of what happened in the orimulsion deal, heads were going to roll and big changes made-all that changed was the executives got even bigger bonuses-and that certainly wasn’t a choice NBers or even the legislature made.

  4. Samonymous says:

    Lord hired Hay in part to get to the bottom of what happened in the orimulsion deal, heads were going to roll and big changes made-all that changed was the executives got even bigger bonuses-and that certainly wasn’t a choice NBers or even the legislature made.

    Mikel makes a good point. Much like the situation Bush created when he hired Joe Allbaugh at FEMA, the political partisans hired by both premiers had little experience in their ability to rework a fledgling business into a more efficient outfit. Again, when you are a partisan (or as some like to call them on here, cronies), then you sometimes favour bad decisions that in the name of keeping friends employed (who you shouldn’t be/or you can’t afford) instead of making the unpopular decision to cut production costs and fire expensive and incapable employees.

  5. Anonymous says:

    David’s post illustrates how political intervention in a power utility can result in bad business decisions.

    At least those bad business decisions, if nothing else, created a few jobs at NB Coal and at Belledune.

    There have been erroneous suggestions and comparisons that the sale of NB Power to Hydro Quebec is privatization. It is not. It is transferring ownership to another government’s crown corporation; key decisions and strategy will now be directed by the Quebec government in effort to keep Quebec taxpayers happy. So, we can expect the same political influences, only they will be conducted with the goal to pacify Quebec voters and political interests.

    If we were trying to negotiate a deal with the current owner’s interests at heart (Nb taxpayers), perhaps we would be demanding seats/representation on the HQ board. I have not seen this in the MOU or government propaganda; is anyone aware of such a requirement?

  6. Paul Peterson says:

    I thought you were going to back away from this debate?

    Since you have decided to stay in it – some balance on the posts would be nice. The report from Maine was a very good analysis of the risks associated with this deal. Trying to marginalize is not up to the stuff that we have all come to expect from your blog. It was anything but rhetorical. It was not a boogeyman assessment. It was factual based and clearly outlined what these risks are. They merit discussion.

    I think most people who visit this site are a political and want an objective discussion on the overall merits and pitfalls of this deal.

    Throwing it out there that you talked to six tories and got an election strategy overview is like someone else posting that they talked to six liberals and there are rumours that there is a place coup about to take place over this deal. A lot of senior folks in the party are very nervous about this and what it may/will do long term to the party. I heard that from a few prominenet liberals. There you go – political rumours are afoot all over on this one.

    You have not once acknowledgeed the significant risks and massive assumptions with this deal. Why not spend a little time both acknowledging them and putting it out there to discuss in an objective manner. Perhaps we can all learn more aobut what is good and potentially bad about this deal.

  7. I’m not going to be goaded into spending time restating what I have said over and over again. I have said many times over – from the first post I ever did on this deal – that there are risks – risks with the Heritage Pool, risks with some of the vaguely worded sections of the MOU, etc. Some people don’t read – they just drop by and leave a smug little comment and then exit. At least some people take the time to read the threads. I am for this deal subject to clarification on several key points. However, I think the risks are far greater under the current NB Power model. It is the most debt laden electricity utility in Canada – and much of that debt is against aged assets that will need to be refurbished soon. If/when Israel or the US invades Iran, do you want to be in the jursidiction in Canada with the highest exposure to oil-based generation? When we get around in the next 3-5 years to putting a cap and trade system in place that will add between $10 and $20/MW to each MW of power produced – do do you want to be in the jursidiction in Canada with the highest exposure to oil-based generation? You can disagree with me, fine. Let’s talk about but please let’s be civil. People have taken more personal shots at me over this issue than any other in my career. It’s getting boring.

  8. seen3 says:

    “and much of that debt is against aged assets that will need to be refurbished soon”

    Did Hugh John Flemming not tell you that, when acquiring anything, you need to prepare for aging costs?

    You seem to continually add stupidity upon stupidity.

    Gary Mason
    How is postsecondary education better abroad? It has standards

    Why does New Brunswick leaders have to prove it?

  9. Anonymous says:

    Personal attacks are not acceptable but debating this issue is worthwhile There was no prior discussion on the NBP issue and in fact a policy that it would not be sold.The sudden declaration that NB Power was unsustainable and selling it to another province is the only option because we have no other options is unsettling. If we took this approach to all our problems, we’d be selling northern NB. The reason people are emotional about this is they feel thay are being bullied. It very well may be the sale to HQ is good but the entire issue was very poorly handled and it has ticked people off. Of course there are no other options, up until this deal the government declared no problems and were happy enough with NBP to renew the CEO’s contract for 3 years. If the right people were empowered to work on an alternate solution for 9 months, we may have alternatives to compare.

  10. Samonymous says:

    It is the most debt laden electricity utility in Canada – and much of that debt is against aged assets that will need to be refurbished soon.

    Very true. But we are also the proud owners of the second largest government bureaucracy per capita in Canada. So we could use a few good examples of assets, companies and utilities functioning outside the rhelm of government ownership instead of packing it in so quickly and taking the easy way out by transferring ownership to another gov’t.

    The people and ideas that got us into this three to four decade mess are not the people and ideas to get us out of it. We need a new wave. Simple.

  11. mikel says:

    The poster is right though, I have no problem with your support, with YOUR ‘assumptions’ it makes perfect sense, but THIS blog post was bordering on the uncivil. YOU attacked Janice Harvey and made it personal, and we were just pointing that out. There was nothing wrong with her analysis, and nothing wrong with the Maine analysis, they were all excellent criticisms of the deal.

    As you can see, all those potshots did was instigate a couple of comments that had nothing to do with the issue and were just addons to the insults. I’ve got news for Richard, he’s posted here enough that he should realize that WE are the ‘chattering classes’ as much as anybody else (particularly David since he has a column, but I suppose when its stuff a person likes then its just ‘educating people’ but when they don’t like it it is just useless ‘chattering’. ). David USUALLY has good analysis, and has even posted data that marginalizes his views, but this particular one is a no brainer. I suspect its an off the cuff reaction because it was prominently placed in the media.

    That the guy in maine has a bias is true, that the Lepreau problem exists in both scenario’s is also true. Even the point about the rates has a foundation, although not a very convincing one. So there ARE ways to criticize that article, but this just wasn’t it.

    As for the tories, at CBC they feature a story that Lord invited the HQ CEO fishing, so its all abuzz what exactly the tories were planning. However, as we’ve seen with Graham, public policy now seems VERY centralized in the Premier’s office, which means a different Premier will have different notions from even a former party leader, and as I’ve said, Alward has been only riding the rejection train on this, so it wouldn’t surprise me that they have no real plan. Even the people at facebook are having trouble getting beyond the ‘lets have a petition’ strategies.

    That said, the above about the liberals seems more promising than the tory gossip. It’s one thing to abide by the guy who signs your nomination papers, but this looks like it could pull a McKenna type surprise on their party. Unlike other local issues or specific issues, this has people PO’d in every part of the province, in every riding. IF this goes through in March, you can look at people becoming VERY organized for the upcoming election in October.

  12. richard says:

    “So there ARE ways to criticize that article, but this just wasn’t it. ”

    You basically repeat David’s points, then say they are not convincing. Make up your mind. Harvey is being a hypocrite; she has slagged NB Power for years, celebrated the sale in her first op-ed on the subject, then reverses position when the chattering class objects. Your sympathy is misplaced.

  13. mikel says:

    They AREN”T ‘convincing, if they WERE then there would be no objections to the sale. My point is that David was slinging the mud-NOT Harvey, who legitimately quotes a reliable source. As for ‘chattering’, thats just silliness. What could be more useless than a giant consulting report that ‘projects’ savings past 40 years in the future. Forty years ago computers weren’t even dreamt of. You don’t get any more ‘chattering’ than that.

    However, this is about critically evaluating the deal. Both ‘sides’ make points, because both sides have different ‘assumptions. What Harvey might have said in the past is irrelevant-good for her for changing her mind when seeing more information. That’s not ‘sympathy’, just critical analysis.

  14. Anonymous says:

    I hope we have not followed typical Maritime mentality, where we are ready to accept whatever we are offered and flattered someone is interested (think Federal hockey rink funding). Before anyone can determine if this is a “good deal” we need to see some professional analysis on the value of:

    1) Eliminating one of the few competitors HQ had for the New England market and one with intentions to grow exports

    2) The value of 330,000 customers locked in to pay nearly twice the rates of HQ’s current residential clients

    3) The value of the generation and transmission assets that HQ is acquiring.

    There would be some assumptions involved but a range could be determined and then we could compare that range with what we are being offered. Ideally this was previously done by the NB negotiators but from their answers and actions, I sense that we did not negotiate from this perspective;if we did not, it is unlikely we negotiated the best deal we could have.

  15. The facts says:

    http://www.irpp.org/po/archive/apr08/belanger.pdf

    Quebec’s aluminium industry uses 50 terrawatt hours of electricity per year; that is,
    25 percent of the total consumed in the province. The industry was established here
    because of the low price of this energy source. However, the costs of new power
    plants are rising. And the price at which electricity is sold is below the costs of these
    new power stations. In this article, Gérard Bélanger and Jean-Thomas Bernard assess
    the profitability of new industrial projects that need large quantities of electricity.
    They look at the cases of two new aluminium plants, and conclude that they are very
    expensive for the province. According to the authors’ estimates, the cost of each
    permanent job created ranges from $255,357 to $729,653 per year.

  16. The facts says:

    So this is obviously self serving not fact?

    André Duchesne, a former president and CEO of Quebec’s forest industry association is blunt in his assessment of the factors that have been the industry’s undoing: “The cost of wood is higher. The cost of labour is higher. The taxes are higher. The environmental protection targets are not higher, but the regulations make them so costly to achieve, that those costs are higher, too.”

    As devastating as New Brunswick’s high electricity prices have been for companies and communities, mills in this province have responded to cost inflation by investing in process improvements, shifting to more marketable product lines that provide greater price stability, and working with labour unions to keep anchor industries open. Quebec’s forest industry has not undergone a comparable transformation, and its reliance on declining commodities has doomed many mills to failure.

    If mills in New Brunswick could purchase power at Quebec rates, this province’s forest industry would have the third-lowest costs in Canada. If the proposed sale of NB Power’s assets does not go through, the industry’s costs will remain the second highest, putting thousands of jobs at risk.

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