FREDERICTON – A revised deal to sell NB Power to Hydro-Quebec maintains New Brunswick’s control over its transmission system, but the Quebec public utility retains the right to use almost all the available export capacity on those lines to send power to lucrative energy markets in the northeastern United States.
Hydro-Quebec said the $3.2-billion deal announced Wednesday achieves one of its main goals in negotiations with New Brunswick.
“What was always key for us was the ability to access the transmission system to reach markets, to basically a bridge from our resources here in Quebec to markets along the eastern seaboard,” said Thierry Vandal, president and chief executive officer of Hydro-Quebec.
“Those transmission rights will be transferred over to Hydro-Quebec and that’s very positive.”
The new deal includes 670 megawatts of transmission rights for Hydro-Quebec into the U.S., in addition to the 300 megawatts of transmission capacity it gained after being the successful bidder on a new line that opened in 2007.
That gives Hydro-Quebec the rights to 970 megawatts of transmission. The total capacity between New Brunswick and Maine is only slightly more than 1,000 megawatts.
New Brunswick Premier Shawn Graham said the deal doesn’t give Quebec any special treatment for development of new export capacity to the United States and open access to that market will be maintained.
“Those rules have to be followed,” he added.
“So whether it was ownership of NB Power or Hydro-Quebec, the rules applied for open access to that U.S. market. And today, those rules will be followed, but they’ll be put in place by a New Brunswick system regulator and, at the same time, ownership of the lines belonging to New Brunswick.”
Still, the new deal is much different than one worth $4.75 billion that was originally announced in October, causing protests and a revolt in Graham’s Liberal party that cast doubt over the original agreement’s survival.
Instead of selling almost all of NB Power, the rewritten agreement will see fewer pieces of the Crown utility end up in Hydro-Quebec’s hands.
Under the revised deal, Hydro-Quebec gets seven hydroelectric generating facilities, two diesel units and transmission rights associated with those units for $1.8 billion. Hydro-Quebec will buy the Point Lepreau nuclear generating station for $1.4 billion upon successful completion of its refurbishment, expected early in 2011.
The original agreement also saw NB Power sell its transmission and distribution systems, which angered other Atlantic premiers who feared Quebec would have a stranglehold on the energy pipeline to the States.
Under the new agreement to be finalized by March 31, NB Power would continue to operate as a New Brunswick-owned and operated Crown corporation, employing more than 60 per cent of the utility’s current workforce.
The original purchase price of $4.75 billion equalled the amount of NB Power’s debt.
Graham said the renegotiated agreement still achieves the original objectives of lowering power rates and reducing debt, while maintaining his goal of making the province a so-called energy hub to the northeastern United States.
“We still get the heritage pool of cheaper power, we still have full control of the development of the energy hub,” he told a news conference. “We still sell the assets with major cost risks in the future, and we still eliminate the majority of NB Power’s debt.”
Quebec Premier Jean Charest said he understands the reluctance of some in New Brunswick to give up control of their public utility.
“The people of New Brunswick said I’d rather have my government be the owner of this and, intuitively, I think people felt that they wanted it to stay close to home,” he told a news conference in Quebec City. “That’s why the transaction is different today and from our standpoint it’s better because it’s more simple.”
Premier Danny Williams of Newfoundland and Labrador was one of the deal’s harshest critics as he raised concerns along with Nova Scotia’s Darrell Dexter about the impact it could have on transmission routes for electricity to the U.S.
In a statement, Dexter dropped his objection to the deal, saying the revised agreement addresses his concerns about the transmission and distribution of energy in Atlantic Canada.
“I still have to review the amended agreement in detail, but it appears that the changes … address the concerns that Nova Scotia had,” he said.
“Nova Scotia is not an energy island. It needs strong connections with the rest of Canada and North America.”
Dexter said the revised agreement will also help strengthen connections with Newfoundland and Labrador.
Williams indicated Tuesday that the changes are an improvement.
Although groups in New Brunswick, including the union representing workers at the public utility, came out against the original deal, it received the backing from business groups that saw a 30 per cent rollback in electricity costs for industrial customers as a competitive edge. Under the new deal, large industrial customers would see their rates drop by 23 per cent while homeowners will still get a five-year freeze on their rates.
Peter Gordon, CEO of Fraser Paper, said the rate reduction is still enough to make a difference for his financially strapped company.
“The rate reduction will mean savings for us of $6 million per year, less than what we originally hoped for, but still significant and will contribute in a significant way to our successful restructuring from bankruptcy protection,” he said.
Barbara Pike of the Atlantic Institute for Market Studies – a non-profit research group – said the revised deal and efforts by the province to change its tax system will help the province’s economy.
“The deal continues to make New Brunswick very competitive,” she said. “You’ve got tax reform and now you’ve got stable power rates that make it very attractive. When companies are taking a look at where they’re going to move, they’re going to look at a place like this.”
New Brunswick Conservative Leader David Alward said the government must provide time for the deal to be studied.
“Don’t make a disastrous decision by forcing a signature on a line on an arbitrary date – let’s get it right,” he said. “He (Graham) proved the first time he couldn’t get it right. We’re going to prove that he still doesn’t have it right.”
The new deal also means New Brunswick will be fully responsible for the cost of buying replacement power during the refurbishment of the nuclear reactor at Point Lepreau, which is about $525 million. Under the original agreement, Hydro-Quebec could have increased rates significantly after the fifth year to recoup that cost from New Brunswickers.
The province blames the extra costs on Atomic Energy of Canada Ltd. – a federal Crown agency – and wants Ottawa to pay the bill. Graham has already told Prime Minister Stephen Harper that the province is ready to sue the federal government if necessary.