Recommendations include strengthening EUB, investing in energy efficiency

If you are looking for new reasons to love or hate the NB Power deal, then the independent advisory panel’s report, released yesterday, probably isn’t going to be of much help to you.
If, however, you are looking for a little clarity, you may just be in luck.

The panel was charged with comparing the benefits and risks to the province of continuing to own and operate NB Power versus the agreement to sell some of the utility’s assets to Hydro-Québec.

In its 31-page report, the panel is unanimous in its endorsement of the NB Power deal, but does offer five recommendations to government, including strengthening the Energy and Utilities Board and investing in energy efficiency.

Mostly the report confirms the benefits and risks the government has been saying all along are the reasons it went ahead with the deal: achieving lower power rates, mitigating the risk of our dependence on fossil fuel generation, reducing NB Power’s debt, and avoiding future costs related to refurbishing generating stations like Mactaquac.

Charles Cirtwill of the Atlantic Institute of Market Studies called it last week when he said he’d be very surprised if New Brunswickers were surprised by anything in the panel’s report.

“I’m not taking any credit for being able to look into a crystal ball. It was pretty predictable,” he says. While Cirtwill says the report hasn’t really added anything to the public debate, he does believe it has value.

“What it has done is in a single page, in relatively non-controversial language, it has made the case for the deal, laid out the risks NB Power is facing, why going forward (in the same way) wasn’t going to work,” he says. “It also lays out the up side of the deal and here are three or four other ways you might be able to make this a bit better. They had to do that. They couldn’t just come out and endorse this deal.”

Besides giving the Energy and Utilities Board (EUB) more power and investing in energy efficiency, the panel recommended that the province make the use of new technology to improve the electricity system a strategic priority for the energy sector, that it integrate energy policy and economic development to get the most out of the benefits of the deal, and that the costs related to the Point Lepreau deferral account begin to be collected immediately instead of beginning after the five-year rate freeze.

Cirtwill says for the most part, the recommendations are things the province has heard before.

“Strengthening the EUB, everybody has said that since a previous Liberal government cut the legs out from under the EUB,” Cirtwill says. “So the advice is to go back and fix what you messed up before.”

Panel chairman David Ganong says New Brunswick is the odd one out when it comes to the EUB as similar boards in other provinces have much more power.

“What has happened, and this has been unfair to NB Power, is government has consistently overruled the EUB or NB Power’s requirement for increases because power rates have become a political lever in this province and we’re really recommending that should not take place in the future,” he says.

Making the EUB stronger is something Energy Minister Jack Keir said last week he would welcome.

Neither Keir nor Premier Shawn Graham were granting media interviews yesterday, though Graham did issue a statement thanking the panel for its work and saying the government would be offering a formal response once it has fully reviewed the recommendations.

Moving up the collection of the Lepreau deferral account might be more problematic for government since it would effectively eliminate the promised five-year rate freeze, one of the government’s biggest selling points for residential customers.

While the Point Lepreau nuclear reactor has been offline for refurbishment, New Brunswick has had to purchase replacement power. The money it is spending on that power is to be paid back over the life of the refurbished plant, but under the current agreement, New Brunswickers would only start paying that money back five years from now once the rate freeze is over.

The advisory panel says that means rate payers will pay more in the long run.

“It’s a pay me now, pay me later, but if you pay me later, you’ve got to pay me more,” Ganong says. “The rate freeze and the reduction to the large industrials is a decision of the government. We felt this one we at least wanted to put on the table, the fact they may want to reconsider that. Then you get into the politics of it and I’ve got to leave that to the premier and his government to decide, but we felt that should be started sooner rather than later for the benefit of the rate payers of New Brunswick.”

Cirtwill expects the government will move ahead with those recommendations easiest to implement.

“My suspicion is the government will pick and choose recommendations, if for no other reason than to demonstrate the independence of the panel,” he says. “Strengthening the EUB is an easy one, but changing the deal at this point, I don’t think it is in the cards.

The reason they can’t mess around with that Lepreau deferral recovery is they lose part of the benefit (of the deal).”

If the panel did have one criticism of the deal, it was that it focused too exclusively on lower rates.

“Having just low-cost electricity is not an answer in itself. How do we utilize that asset for the long-term betterment of the province of New Brunswick?” Ganong says.

The panel suggests the province include energy efficiency and new energy technologies in an overall economic development plan.

Energy efficiency, in particular, will be important in coming years, it says, in order to keep our energy usage within the 14 terawatt hours of electricity — the heritage pool — that is to be supplied at a low rate by Hydro-Qubec in the proposed agreement.

Any usage above that must be purchased on the open market, which is usually more expensive, thus it is in the best interests of the province to figure out ways to reduce electricity usage.

An independent analysis prepared for Efficiency NB and provided by the panel in its report shows that an aggressive investment in energy efficiency could decrease residential, commercial and wholesale usage from about 9.1 terawatt hours to about 8.7 terawatt hours over the next 10 years instead of the forecast of an increase to almost 9.8 terawatt hours — a figure that would be beyond the 9.5 terawatt hours allotted to residential, commercial and wholesale use in the heritage pool.

The panel also suggests the province move forward with developing green power.

That is what its vaguely worded fifth recommendation is all about, Cirtwill says.

“The English language translation is, ‘Continue to invest in small green energy projects in rural and northern New Brunswick,'” he says. “But that is only good if Fort Reliance or someone else invests in transmission capacity. It’s great to do that, but unless there is space on the grid to move that power, you are wasting your money.”

While the panel examined and dismissed most concerns that have been raised about the deal, it didn’t totally rule out the possibility of the agreement having an impact on the province’s energy sovereignty.

“It is apparent that if the Proposal is implemented the province would continue to have the authority to set energy policy and to influence developments in the sector through regulatory frameworks and economic measures,” the report reads. “However, some of the ability to implement such measures may be affected by the detailed agreements being negotiated.”

When questioned about that point, Ganong said he wasn’t aware of anything that might cause a problem.

“This deal has not been finally signed and until any transaction has been finally signed, it’s always under active negotiation,” he says. “So as of the 26th day of last month, we’re not aware of what those final little pieces that might be under active negotiation. So I think that clause was really just to indicate that it is still an ongoing process. I think I can safely say we are not aware of anything of substance that is under active negotiation, it is just a whole lot of wording that needs to be concluded and sometimes there can be surprises.”

Tory MLA Jody Carr, who attended yesterday’s news conference, says that makes it even more imperative that New Brunswickers get a chance to see the final agreement before it is signed.

“What that raises is our need for the contract to be provided to the public well in advance of this official signing,” he says. “The opposition has been asking for a minimum of 30 days to have the contract made public with the final wording … We don’t trust the premier’s ability to negotiate. We want to make sure it is vetted properly.”

Ganong says that even if the government declines to act on the panel’s recommendations, the deal is still a good one.

“In that case, you have to compare the status quo to the revised MOU (memorandum of understanding) and if you do that and everything else remains the same, yes it is a better deal for the province,” he says. “What we endeavoured to do in our homework and studies that we had done is to say yes, but there are some things that we can do that will make this better for New Brunswickers as we go forward in future.”

The panel also included former University of New Brunswick president John McLaughlin, Efficiency NB president and CEO Elizabeth Weir, McCain Foods Ltd. chairman Allison McCain, Universit de Moncton professor Louis Lapierre, and former Mouvement des caisses populaires acadiennes president and CEO Gilles Lepage.