FREDERICTON – An energy expert in the United States says there is growing unease in New England about Hydro-Québec’s dominance and control of the region’s energy markets.
A new report released Thursday by Gordon Weil, president of the Standard Energy Co., in Maine, says there are significant problems that need to be resolved in the memorandum of understanding for the sale of most of NB Power to Hydro-Québec.
“There’s a need to take a closer look at many of the provisions and, in my view, at the distribution of the risk,” Weil said in an interview.
“Virtually all of the risk in the MOU falls on New Brunswick and very little on Quebec.”
Weil states in his report that it’s likely the U.S. federal energy regulator, FERC, will hold hearings on the potential for greater market dominance by Hydro-Québec as a result of the NB Power sale.
“Some of the generators and marketers have already spoken out on the matter and expect to speak about it to FERC,” Weil said.
“One of them reported to me – this is second hand – that people from Hydro-Québec had come to Boston and said essentially, ‘Don’t worry about it. We’ll take care of supplying all of your power.’ Well, obviously, the competitors don’t like to hear that.”
Weil’s report, released by the Atlantic Institute for Market Studies, a Halifax-based think-tank, closely follows a letter sent this week to Premier Shawn Graham by Premier Danny Williams of Newfoundland and Labrador and Nova Scotia Premier Darrell Dexter.
Williams and Dexter fear that Hydro-Québec is acquiring NB Power’s transmission lines so it can squeeze out competitors selling into the northeastern U.S.
Weil said a FERC hearing on market dominance may be the only opportunity for provinces like Nova Scotia and Newfoundland and Labrador, as well as northern Maine, to seek assurances of open transmission access through New Brunswick.
“It is possible that their best chance for more assured market access to New England would be the FERC proceedings on market dominance,” Weil writes in his report.
“One way to reduce market dominance, if it is found, could be to provide corridors on the Hydro-Québec transmission system for generation in the locked-in provinces (such as Nova Scotia and Newfoundland and Labrador).”
Energy Minister Jack Keir said Thursday the concerns expressed by Williams and Dexter are unfounded.
He said open access for transmission is now guaranteed by the New Brunswick System Operator and it will continue to be so in the future.
“One of the major reasons that Hydro-Québec wants to get into this agreement with us is to get electricity to New England,” Keir said.
“They will not want to go against FERC rules and jeopardize in any way the market they have down there currently and any future markets they might want.”
But Weil said there is reason for concern.
He said that under the MOU, the New Brunswick System Operator will be abolished and control of the transmission system will go to Hydro-Québec.
“So there is a regional impact both in terms of transmission access and in terms of who is managing the system,” he said.
“Also the commitment to open access in the MOU is limited to power in excess of the amount Hydro-Québec will be responsible for supplying to New Brunswick, so the transmission lines, by preference, get used by Hydro-Québec to serve New Brunswick before anyone else gets access.”
Weil said the major risk for New Brunswick lies in uncertainty surrounding the Point Lepreau Nuclear Generating Station.
He said that if the plant does not return to service, the province would not receive the full cash price in the MOU – $4.75 billion.
“That’s a very big item,” Weil said.
“If Lepreau doesn’t come back into service, there are substantial costs for New Brunswick and they don’t get the $4.75 billion. They get something less – how much less is missing from the agreement. But I have heard $1 billion could be assigned to it.”
Perhaps even more serious, he said, is that New Brunswick would remain responsible for the decommissioning of the Lepreau facility and all of the costs associated with it, existing Lepreau liabilities and the deferral account.
The nuclear power plant is currently undergoing an extensive refurbishment and is expected to return to service in 2011.