Energy: Graham, Quebec’s Charest say they are getting what they want out of revamped agreement to sell NB Power assets

FREDERICTON – The premiers of Quebec and New Brunswick both say they are getting what they want in the revised agreement for the sale of some of NB Power’s generating assets to Hydro-Québec.

Quebec premier Jean Charest and Hydro-Québec CEO Thierry Vandal said Wednesday their province will get from the deal what it needs most – priority access to U.S. markets on New Brunswick’s transmission grid.

“The transmission rights allow us to move power into markets, New England markets, for example,” Vandal told reporters in Quebec City.

“We’re talking about tens of millions of dollars of additional revenues.”

Charest said he now realizes that New Brunswickers have a strong sense of ownership regarding their provincial utility.

“Today we are proposing an agreement that meets the same goals while respecting the will of the citizens,” he said.

The deal, which the two provinces hope to sign on or about March 31, would increase Hydro-Québec’s export capacity by 15 to 20 per cent.

The giant Quebec utility would have access to about 970 megawatts of transmission capacity – the lion’s share of the roughly 1,000 megawatts available between New Brunswick and Maine.

Hydro-Québec would pay $3.2 billion to acquire NB Power’s hydro-electric facilities – and the transmission rights that go with them – as well as the Point Lepreau nuclear power plant.

Premier Shawn Graham said the proposed deal satisfies New Brunswick’s goals while allowing the province to retain ownership and control over NB Power and its transmission and distribution networks.

As well, New Brunswick’s System Operator, which regulates the transmission grid and maintains a competitive electricity market, will remain an independent, arm’s length agency rather than coming under the control of Hydro-Québec.

“Our principles and objectives have been met,” Graham said at a news conference.

“We still get the heritage pool of cheaper power; we still have full control of the development of the energy hub; we still will be relieved of the cost of replacement power at Point Lepreau through the heritage pool; we still sell the assets with major cost risks and we still eliminate the majority of NB Power’s debt.”

Graham noted that stiff opposition to the original deal from Newfoundland Premier Danny Williams and Nova Scotia Premier Darrell Dexter has evaporated with the new agreement.

“The oxygen has come out of the debate from some of our fiercest political opponents,” Graham said in an interview.

Dexter said Wednesday the new deal appears to address concerns surrounding access to New Brunswick’s power grid.

Dexter said that’s important because decisions now will more likely be made in the interests of the region rather than in the interests of Hydro-Québec.

“Nova Scotia is not an energy island. It needs strong connections with the rest of Canada and North America,” he said in a statement.

Graham said he suspects the new deal will not completely silence his government’s critics, but he said he has the complete support of his caucus and cabinet and he is prepared to defend his decisions in the coming provincial election, scheduled for September.

“I look forward to that campaign,” Graham said, admitting that public outrage over the original NB Power has cost him precious political capital.

“Our party has been underestimated may times, but we have the courage of our convictions.”

Political pundits wonder if that courage will be enough to save the Graham Liberals from a beating at the polls.

“He (Graham) is going to have to take more positive action before the Liberals see a reversal of their fortunes,” Don Desserud, a political scientist at UNB in Saint John, said in an interview.

“It’s not just the deal and it’s not the fact that he has come up with a better deal – his problem is the pattern of looking like you make rash, thoughtless decisions that have to be fixed following a public outcry. This government’s reputation has been seriously damaged and it really is running out of time.”

Under the revised deal, Hydro-Québec gets seven hydroelectric generating facilities, two diesel units and transmission rights associated with those units for $1.8 billion. Hydro-Québec will buy the Point Lepreau nuclear generating station for $1.4 billion upon successful completion of its refurbishment, expected early in 2011.

The original purchase price of $4.75 billion equalled the amount of NB Power’s debt. Graham said the $3.2 billion still will pay off most of the debt and the remaining amount owning will be paid off from transmission profits.

Business would see substantial rate cuts under the reworked deal, although not as much as originally proposed. The large industry cut drops to 23 per cent from 30 per cent, while medium-sized businesses will receive reductions averaging 15 per cent, rather than 20 per cent.

The agreement stays the same for residential customers – a five-year rate freeze to be followed by increases based on the rate of inflation.

Reaction from business leaders and economists who attended the announcement in Fredericton was generally positive.

“This agreement is delivering more competitive energy rates,” Mary Keith, spokeswoman for J.D. Irving, Limited, said in an interview.

“So if the question is, have we achieved a more competitive rate that will help sustain jobs? We believe, yes – it’s less than the first agreement provided for but it still enables us to achieve a much more competitive position “_ It’s a step forward.”

Barbara Pike of the Atlantic Institute for Market Studies, an independent economic think-tank, said the lower power rates for industry will make the New Brunswick businesses more competitive.

“Any day that you retire $3.2 billion in debt is a good day,” she said.

“It does make it more competitive for New Brunswick. They have paid off most of the credit cards, let’s just hope they don’t start racking them up again with NB Power.”

Pike said there had to be change because NB Power was poised to cost a lot of money down the road.

Energy Minister Jack Keir said status quo for NB Power is not an option.

“It’s not a matter of bad decisions on the part of NB Power – it’s a matter of what it costs to generate electricity and it’s a lot cheaper when you have a barrel of rainwater rather than a barrel of oil,” Keir said.

Opposition Conservative lead David Alward said he wants to see more details.

He said an alternative plan is in the works by the Progressive Conservative party, but he said it would not be made public before an election call.

– with files from The Canadian Press