New NB Power deal

I’ve been asked at least a dozen times in the past 24 hours if I like the new NB Power/HQ deal.   Remember back to my reasoning for supporting the initial proposal:

It resets NB Power’s cost structure to a much lower foundation.  In other words, the cost of generating and distributing electricity drops over night taking advantage of HQ’s lower cost of generation.   Assuming a reasonable rate escalation methodology and the right regulatory structure, this will almost certainly lead to lower and more stable rates for industry, small biz and residents for the future.  And as I have pointed out many times – nothing in the old deal would have precluded the government from taking steps in wildly unlikely case of massive increases in rates.

It reduces or eliminates the huge environmental risk associated with having 63% of our generation from burning fossil fuel – the highest level in the country.  Cap and trade system is likely to add something like $20 per MW to the cost of power coming from fossil fuel burning plants. No one knows for sure the amount but it could be substantial. Over a reasonable period of time 10-15 years, we will seen an orderly phasing out of these dirty plants.

It’s reduces our debt exposure – current and future.  We have the second highest debt load per residential customer in the country and a pile of older and mostly fossil fuel burning plants (and the hydro will need refurbishing as well). 

The new deal seems to meet these three objective – based on what we read in the media so I continue to support it.  I never said it was perfect – nothing ever is.  Cateris paribus, I would have no problem with NB Power being a crown corporation but not with the risks outlined above.

Some say that energy policy moves to Quebec.  That is nuts.  Nova Scotia has the most aggressive renewable energy strategy in Canada right now and its generation and distribution system is owned by a publicly-traded, private company called Emera.    NS Power, the Emera subsidiary, follows the energy policy set by the government.   That doesn’t mean there will be good energy policy but that risk exists either way.

A couple of people told me this would make the deal acceptable to NBers.  Who knows?  Even with Danny Williams’ supports of the deal, it likely won’t matter.  I heard on the radio yesterday a journalist already shifting the argument to keeping NB Power a ‘manufacturer of electricity’.   No mention there of Hugo Chavez, 63% dirty production, nada.  But at least he is consistent.

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11 Responses to New NB Power deal

  1. Tom Rivington says:

    Do you think the governing Liberals had this “float the scenario that people will reject first then follow-up with a revised one” scheme from the start? I find it interesting that HQ says they aren’t opening up the deal and less than a week after a supposed caucus revolt a new deal is created. Don’t leaders usually can/demote Ministers when they publicly announce that they are not supporting a Leader’s initiative? Maybe I am giving them much more credit and intellect than is warranted. And in this new deal are we left with the NBP dinosaur that still needs reforming? I’d rather they just sell the whole damn thing, lock, stock and barrell.

  2. I waited for someone else to raise but that is an interesting theory that I considered as well but why put themselves through the political hell of the initial scenario?

  3. mikel says:

    Again-there is still debt-HQ plans on borrowing the money for the purchase, so that debt is still ‘there’, it just changes hands and will have to be paid of. Again, thats right in the MOU-2/3 of rate increases depend partly on “a reasonable return on investment for the asset holders”. PQ’s ‘profit’ is over and above those debt payments. Interesting that you don’t point out that the province with the MOST debt per capita is QUEBEC.

    NBPower can ALREADY buy power from Quebec-it does so when it is CHEAPER than the alternatives. Take out the alternatives and ‘saving money’ obviously makes no sense.

    It DOES reduce NBers exposure to debt, by taking away a resource. You could probably also get clear of ALL your debt by selling all your hospitals and schools and letting private industry charge for those services.

    The fossil fuel plants are being closed (or open) regardless of the deal. NB isn’t even on the list of dirtiest coal plants-that’s Alberta. With a low population it would be relatively easy with conservation measures and natural gas lines to shut down the coal plants, it could have been done years ago.

    Energy policy DOES ‘move to quebec’, again, it says so right in the MOU-“the regulatory system will be altered to adapt to that currently in effect in Quebec”. What part of that is unclear? And you talk about the critics being emotional and not just talking facts?

    Nova Scotia’s private company is pretty much a monopoly but more importantly it is also one of the most highly regulated in the country. The risk of ‘bad policy’ is much higher in a place where private interests have a vested interest in that public policy-you in New Brunswick should know that better than most.

    For many people, certainly for me, it is not the deal at all, it is the way the deal is being rammed through with no public accountability. Shawn Graham has no RIGHT to sell what belongs to New Brunswickers. That’s what referendum laws were drafted to address, they are very clear, and easily used. There is extra rhetoric and vitriol because there HAS to be, SOME of that would be present during a referendum, but research shows its not nearly as bad as people think (and it depends where). IF this were a new deal people were ‘voting on’ then people would take the time to read it and evaluate it, etc., but they are fighting against policy, so from that regard it is POINTLESS to read the deal. People are perfectly justified in wanting to keep NBPower even as it is, even if its a huge mistake (and if HQ wants it, then obviously we know its ‘worth’ at least 3.2 billion).

    So its ironic that those protesting against it are always painted as being emotional, anti quebec, refusing to look at facts. The reality is that BOTH sides are guilty of that. If you want to BELIEVE the above, that’s your business and again, I support that and don’t think people should be getting nasty. However, some of that nastiness is being subtly returned in the last two paragraphs above.

  4. Frank says:

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  5. richard says:

    We will see what happens now. Perhaps the revised deal will divide the opposition, separating those with legitimate questions from the ‘birthers’. Either way, the uproar within the Liberal caucus has shown the resiliency of parliamentary democracy. If Graham can hold his caucus together he has the power he needs to proceed, although its unlikely he will be re-elected.

    “-”the regulatory system will be altered to adapt to that currently in effect in Quebec”. What part of that is unclear?”

    What is unclear about the word ‘current’? I don’t see anything that prevents NB from changing the regulatory structure down the road.

  6. Samonymous says:

    You guys still don’t get this particular case. It’s not about what deal, or different deal, can be cooked up behind closed doors and then force fed to the general public. People don’t appreciate big government (and pro-government consultants) telling them what is good or not good for them. Period.

    If anything, this retreat by Premier Graham doesn’t show that he is willing to listen to NBers. All it shows is that he and a small group inside the Premier’s office are still willing to shove this thing down peoples throats, while all the while, maintaining a broken promise to keep the utility intact.

    You think politicians would know better by now, especially after what went down with Meech (and what happened last night in Massachusetts).

    People don’t like guys in suits (behind closed doors) telling them what’s best for them.

  7. mikel says:

    We’ve been through that Richard, if you think the regulatory framework will first be changed to that of Quebec but then Quebec will let them change it back, that’s your business, it seems a little silly though.

    I don’t think its shown any ‘resiliency’ at all. I doubt Graham expected this much uproar, there were facebook groups complaining about NBPower and people regularly criticized it. Politically we have no idea what went on behind closed doors, but don’t talk about caucus til the caucus votes. I know a LOT of liberals, not profile ones, but presidents and past presidents of liberal ridings, and many of them are livid. This DID look like the end of the liberal party, and if a “Wildrose ALliance” sprung up in NB, then I think they’d find more support than in Alberta.

    I think it shows the failure of ‘parliamentary democracy’, although the term democracy is too strong a word to use. Without the pressure of Graham and senior liberals I don’t think any liberal MLA would vote for this with a ten foot pole.

    As for the comments, thats simply policy. Haven’t you ever walked into a deal where the first thing they say is “this deal is final”. Thats RARELY the case, and its never the case in politics. As for the ‘theories’ I think its more interesting that the day they announce this the CBC has a story about Irving wanting to set up a regional power grid.

  8. Sanonymous,

    I was deleting posts from my stalker(s) and accidentially deleted your other post here. I will respond briefly to say that I don’t spend much time thinking about conspiracies. To me this is far more simple. Emera took a look and the numbers didn’t work. They looked at other options such as privatization and that didn’t work. The only model that would lead to rate reductions, debt relief and environmental risk reduction was a Hydro-Quebec partnership. I further suspect that if Bernard Lord were in power right now he would be making the same type of deal. The majority of posters here just outright ignore the risks associated with keeping NB Power in the same operationg model. If you want to have a serious discussion about policy you need to limit the political discussion and provide some options on the policy side.

  9. mikel says:

    That’s not fair because Sam is exactly right about the protests. This has nothing to do with ‘big government’ (most people LIKE big government, it does a fairly good job with education and a decent job with health, and would do both a lot better if it were even BIGGER). I don’t know what happened in Massachusetts but again, there is no point in talking about policy when you aren’t being asked to DECIDE policy.

    This is what the government says its doing, which means ‘discussion’ is off the table, and to stop it all that is left is activism.

    And in activism if you give an inch you give a mile. However, in case you missed it, there are roundtables and talks and meetings going on all over the province. At STU the poli sci set up a big meeting discussing energy policy.

    Don’t let a few (or one) extremist fool you into conclusions about the public, there’s a lot of policy talk going on out there. But first things first.

    I’ve read most of the comments at this blog and don’t think its fair to say the majority ‘ignore’ the risks, most NBers know VERY WELL the risks.

    I found it interesting looking back at articles from 2002 when the accountants at NBPower were saying that it was ‘too expensive’ to change Coleson Cove to run on natural gas because Venezuela was giving them a “20 year deal” that was ‘too good to be true’, and as most people know, thats a good indication.

    However, even at that point Irving was floating its LNG terminal around, and many have pointed out another theory, that Hydro Quebec is going to sell off Coleson Cove to Irving and Irving is going to refit it to run on natural gas. Gee, look how neat that is.

    But I agree with David that its doubtful that Bernard Lord would act any differently. But do we KNOW that Emera looked at the numbers and it didn’t work? Emera has a fair bit of debt itself, in fact it would be just as likely that NB Power purchase Emera.

  10. Anonymous says:

    Quebec Hydro has far more power than they can sell and desperately need new customers. Why would we ever sign up to a deal that has us locked in to pay nearly double the rates they are getting from their current client base? We are falling into the classic Maritime mentality of accepting mediocracy; like declaring ourselves lucky to not have an economic boom so we don’t feel the pain of a recession.

    Keep it simple; any deal should have rate equivalency to current Hydro Quebec customers. This deal is forever; why should we commit to paying premium rates forever?

  11. Dave Prebble says:

    If you look at the per kWh rate available in QC to large industrial customers who take power at 120 kVolts it is $.0453 per kWh. Calculate the difference in cost of 14 TeraWatt hours at that price and at the proposed $.0753 per kWh and to get approx. $400. million per year. That is about 12% of $3.2 billion, so the HQ estimate of 10% profit per year is clearly in the range. Since HQ probably makes a bit at the internal price of $.0453 they must expect enough margin to handle the risks and future rebuild costs related to NB generation.

    So why does NB not just set up a shack in QC near the NB border and say: “Hi, we have a big industrial plant here and want to buy power”?

    One reason for sure is QC would not do it. Partly I suspect the internal QC prices may be subsidized for big industry. Also I suspect until more hydro comes online in QC they would be unable to provide that much power. Note that in Jan 2009 (http://www.hydroquebec.com/releases/index.html) press releases for Jan 14, 15, 16 HQ was asking customers to cut back on peak usage.
    ====
    My major complaint against the earlier MoU was the guaranteed CPI increments without justification based on production costs. It appears that within QC their regulation requires justification of costs based on details other than the CPI. Even so I found a reference that since 2006 HQ’s rates increased about 18% compared to CPI of about 12%. It is the risk of big inflation prompted by federal govts interest in paying off current big debt that concerns me.

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