Transcript of broadcast by CBC Radio – Moncton
Click here to listen to the audio version of this interview
CBC: NS Power wants to hook up with NS Power. New Brunswick’s Natural Resources Minister says that nothing has been decided yet. NS Power Company has submitted several written proposals to form a partnership, what would this mean for consumers? Could it mean lower power rates? Brian Lee Crowley follows developments in the energy industry in the Maritimes, he is the president of the Atlantic Institute for Market Studies.
CBC: Good Morning Mr. Crowley
Brian Crowley: Good Morning
CBC: Why do you think we are seeing this being floated now? NS Power wanting a partnership with NB Power?
Brian Crowley: Well, I think there is a couple of reasons. One of the most important is that since privatization in Nova Scotia, the power utility, NS Power, has been seeking ways to cut its own cost. One of the most obvious ways to do that is through some degree of co-operation across the border with New Brunswick. There are considerable synergies that are possible there, they can buy fuel together and get lower prices, they can each use the most efficient generating capacity throughout the region, wherever it is. One of the best ways to lower cost in electricity is always to use the lowest cost generation to carry most of your load and then use your higher cost generators only during peak times. So if NS Power and NB Power could co-operate in that way it could probably result in reduced cost for both utilities.
CBC: We know that reduced cost is something that both utilities would be interested in, but is there anything that NS Power gets out of this deal that they could get any other way aside from the buying power being a little bit bigger?
Brian Crowley: You have to remember that if NS Power wants to increase exports to the United States, that at the moment, the only way it can get to the US market is through New Brunswick. I think there might be some interest in trying to negotiate some sort of single toll for moving energy across the region. Under the current rules, NB gets to set the rules for movement of power across its territory, the same way Quebec does with electricity from Churchill falls.
CBC: Well that sounds like a reasonable good bargaining chip for NB Power. Do you think that it is enough of an incentive to convince Nova Scotians to take on some of NB Powers debt load?
Brian Crowley: I doubt that NS Power is interested in NB Power’s debt load, although I have not been privy to any of the discussions. I suspect that what NS Power is offering to the province of NB is some money for access to part of the NB Power capital assets, generating capacity and all that. I don’t think they are offering to take on some of their debt, but of course new revenues would help the NB Government and Crown Corporation to service its existing debt.
CBC: So there is probably some negotiation going on about how that would be dealt with then?
Brian Crowley: Well my understanding is that the Minister in New Brunswick has said they are not prepared to consider any of the larger offers on the table like for the purchase of some part of the generating capacity of NB Power. There is already some degree of co-operation, at the moment we are talking about some incremental increase in the existing co-operation. There is no doubt that NS Power has become a stronger power utility since privatization. NS Power would certainly be a player if the New Brunswick government ever announced some or all of the privatization of NB Power.
CBC: Lets talk a little bit about that whole issues of privatization and how it would effect any partnership because NS Power is private, it has share holders, NB Power at this point isn’t and hasn’t been. What kind of difficulties would that create if the two were too look at a partnership?
Brian Crowley: Well I think that one of the main problems is of course that as a crown corporation, NB Power is more politicized than power generation here where the politics has largely been squeezed out of electricity. To give you an example, if you look at the rate structure in New Brunswick, large industrial users are subsidizing residential users. That is probably not an arrangement that would make much sense in the long run, and there is obviously political difficulties in making the rate structure a more sensible one. I think that is something that everyone would want to sit down and have a think about.
CBC: So we have profit and public policy that would have to be balanced, makes for different cultures.
Brian Crowley: Well yes, but don’t forget too that if you have industrial users subsidizing residential users this is an important obstacle to economic development. You are making potential investors pay more than what the market would justify, so there are trade-offs for New Brunswickers in the existing policy as well.
CBC: What would happen to consumers in all of this if there was a partnership, what will it mean for consumers and prices in New Brunswick?
Brian Crowley: Well I think that if you look at, for instance, what has happened with Aliant, which is the same sort of arrangement in the telephone industry, I think that it has brought advantages throughout the region. They seem to have created a stronger company that is able to grow outside the region. Don’t forget that we are talking about an environment in which there is going to be pretty free trade in electricity, which has not been historically the case. We are not just talking about the electricity industry within New Brunswick, Nova Scotia and probably Prince Edward Island. We are talking about people being able to export electricity from outside the region, and other markets open to our own electricity. I think that by creating a stronger company here, we will be able to meet the competition from the outside more effectively, and also probably be strong enough to open some export markets. I think electricity could become a more significant export earner for us than it is at the moment.
CBC: So do you think it is inevitable that we will see the merger take place?
Brian Crowley: Well I don’t know about a merger between NB and NS Power. I certainly think that the status quo in New Brunswick can’t continue. I think that has been the conclusions of all the recent studies, the Hay-Savoie report, the Grant Thornton report, I think they are all saying that the status quo is untenable. One of the possibilities will be some kind of larger co-operation, perhaps a merger or exchange of assets, those are all possibilities with NS Power, but there are certainly other players in the market place. New Brunswick will want to make a decision about what kind of policy they want to pursue and then they will be in a position to decide what those policy options are
CBC: Thank you Mr. Crowley
Brian Crowley: Thank you