Sometimes when he’s had a couple of sips of rum, Jack Keir sits back from the vantage point of the private sector in Saint John, N.B., and tries to figure out how the whole thing went south. How something so well-intentioned and undeniably reasonable as shedding billions in debt and giving New Brunswick citizens and businesses a better deal on power rates could go so badly awry.
Who can blame him for being a tad wistful? He was once New Brunswick’s energy minister. Thus, he was a key player in a Liberal government that, if history were any guide, would have at least two terms in power to achieve its political goals.
Then, one day in early 2009, his boss, Shawn Graham, called him to Fredericton for a meeting.
“When the premier summons you, it’s like getting called to the principal’s office,” Keir says. “You’re either in trouble or you’re going to be asked to do something you won’t want to do.”
Sometimes it’s both.
Graham, it turned out, had chatted with Quebec’s premier of the time, Jean Charest, about unloading NB Power’s assets to Hydro-Quebec. Though Graham hadn’t consulted New Brunswickers, or his fellow Atlantic Canadian premiers, he intended to unveil the sale as a done deal. Furthermore, Keir was going to be one of its key pitchmen.
“I believe then and believe now that our approach was the right one,” Keir recalled in a recent interview.
But he also remembers the immediate urge he felt to loosen his tie, and the way his palms suddenly got sweaty. This, he told himself, was going to be a tough one.
He really had no idea.
Keir spend months criss-crossing the province trying to quiet the howls of outrage over a deal that New Brunswickers feared would give control of their electricity to a Quebec utility with a reputation for playing hardball.
It didn’t help matters when Newfoundland and Labrador’s premier of the day, Danny Williams — whose animosity toward the Quebec utility dates back to the one-sided arrangement that allowed the development of the Churchill Falls hydro project on the upper Churchill River decades ago — said the NB Power deal would give Hydro-Quebec a “stranglehold” over electricity exports from Eastern Canada.
Eventually, Graham’s government backed off on the sale. In time, the deal fell apart altogether when Hydro-Quebec pulled out. By then, it was too late to staunch the political blood loss: in September 2010, Graham became the first premier in the history of New Brunswick to be denied a second term in office.
Eleven incumbent Liberal cabinet ministers, including Keir, lost their seats.
“We had to make some very difficult decisions,” says Keir, now director of business development for Lorneville Mechanical Contractors Ltd. of Grand Bay, N.B.
“But there is no doubt in my mind that if you asked the average New Brunswicker why they voted us out of power, they would say NB Power.”
Two years later, Keir’s voice still has a tinge of disbelief. It shouldn’t. He and his caucus colleagues were new actors in an old drama: the eternal tangle of power and politics in Atlantic Canada.
Remember the aforementioned Churchill Falls deal, now seldom spoken of without a grimace and expletive in Newfoundland and Labrador? Some 45 years later, it still casts a long shadow over the immensely politicized Muskrat Falls issue.
Recall Nova Scotia’s massive 1970s switch from imported oil to local coal — even though Cape Breton’s collieries were already failing — to fire its power plants? However well-intentioned it may have been, that decision left the province to this day dependent upon foreign coal.
The list of occasions where political theatre trumped common sense around electricity matters in this region is long: the failed 1960s plan to sell heavy water from plants in Glace Bay and Point Tupper to the nuclear industry; Prince Edward Island, in the 1970s, banning electrons that originated in nuclear power plants from its power grid, even though it’s impossible to know where any single electron originated; New Brunswick, a few years ago, blowing hundreds of millions in a botched scheme to retool the Coleson Cove power station to burn leftover tar from Venezuela’s oil refineries.
What’s more, as Keir can confirm, power — the kind that turns on lights and runs factories and homes — makes political careers rise and fall in Atlantic Canada.
Just ask Gerry Regan.
The Liberal premier launched a massive plan for developing tidal power in the Bay of Fundy and touted the development of offshore oil and gas as the key to the province’s future. But soaring power rates cost him the Nova Scotia premiership in 1978.
Power, though, continued to be a kingmaker in this province: John Buchanan, his Tory successor, rode into the premier’s office on coal-fired thermal electrical plants. Two decades later, John Hamm’s Campaign for Fairness, which sought to reclaim offshore petroleum development revenues for Nova Scotia, was Hamm’s finest hour as premier.
Across the Cabot Strait in Newfoundland and Labrador, Williams saw his ballot box appeal bolstered by his willingness to go at it hammer and tongs with oil companies over offshore revenues and with Quebec over hydro projects in Labrador.
His successor, Kathy Dunderdale, won the 2011 provincial election in part by pledging to forge ahead with the massive Muskrat Falls hydro development.
Starting to get the picture? If not, don’t worry. With electricity rates rising everywhere and Atlantic Canada’s energy grid on the verge of a major rewrite, we’re all about to get a crash course in the politics of power anyway.
Consider the following. An election held today in Newfoundland and Labrador would in effect be a referendum on Muskrat Falls. In Nova Scotia, power rates will be THE issue in an election that could be only months off.
In New Brunswick, everywhere Graham’s successor, David Alward, turns, he is reminded of the intractability of the energy file.
Even in Prince Edward Island, power rates are about to be front and centre because of the five-year power purchase agreement between Maritime Electric, the province’s privately-owned power utility, and NB Power.
Preoccupation with power
Precisely why politics and power are so perilously intertwined in this region is a complex question. Polls show that all Canadians — including even residents of Manitoba, who pay less than anyone in the land for electricity — are preoccupied with how much they pay to keep the lights on.
That, perhaps, is understandable. In a cold country, people take staying warm seriously.
In a couple of unfortunate ways, though, we’re special. Political scientist Donald Desserud says that since the end of the Second World War, the region has believed that only some large-scale economic development policy can change our narrative arc.
“That kind of industrial fix needs energy,” says Desserud, dean of arts at the University of Prince Edward Island in Charlottetown.
Therein lies a problem.
Unlike Alberta with its oil and gas, Saskatchewan with its low-sulphur coal, and Quebec and British Columbia with their hydro rivers, Atlantic Canada by and large lacks plentiful, easy-to-exploit energy resources.
To make matters worse, though we live in an energy superpower, the Trans-Canada pipeline system that delivers Canadian oil and gas stops at the Quebec border.
So we’re edgy about energy due to simple supply and demand: we only have access to natural gas because we discovered some ourselves offshore. Our oil has to be bought overseas. Consequently, we’re backed into a corner.
“Places that don’t have abundant natural resources have to innovate, which means they live or die by their wits and the quality of their thinking,” says Ontario energy consultant Thomas Adams.
Enter, in other words, the politicians — in Atlantic Canada, a breed that understands all too well the price of power.
Nova Scotia, where the Dexter government’s future could depend on short-circuiting the power rate issue before the election writ is dropped, is the most pressing example.
Talk about ironies. In 1992, when Donald Cameron’s Tory government privatized Nova Scotia Power Inc., it was mostly to slash the province’s spiralling debt. From that moment on, ratepayers — not the provincial government — were on the hook for electricity costs.
Technically, parent company Emera Inc. calls the shots at Nova Scotia Power. In practical terms, though, the company operates as a regulated monopoly in which government takes a deep and ongoing interest in every aspect of its business.
And Nova Scotians have long memories. To many, it’s still the Nova Scotia Power Commission, the Crown electrical utility that was merged with the privately owned Nova Scotia Light and Power Co. of Halifax in 1972 to form a precursor to Nova Scotia Power.
That has made it hard for the government to distance itself from the sins of the electrical utility.
“There is no doubt that the NDP is closely allied to NSPI,” says Don Mills, CEO of Corporate Research Associates Inc., a Halifax public opinion and market research firm.
This comes as no surprise to the NDP brain trust. Already facing some of the highest power rates in the country, Nova Scotians will be forking over even more in the new year, now that the provincial Utility and Review Board has approved Nova Scotia Power’s request for three per cent rate increases on Jan. 1, 2013, and 2014.
Higher electricity costs also solidified Nova Scotia Power’s status as the most vilified company in the province. The power company, after all, has been taking it on the chin for everything from the size of its executive pay packets to the effect that high power rates are having on the province’s hobbled pulp and paper industry.
The political opposition, naturally, smells blood. Freeze electricity rates, says Tory Leader Jamie Baillie. Grit Leader Stephen McNeil, whose party tops the public opinion polls, promises he will break Nova Scotia Power’s monopoly.
The whole power rate issue has become so politicized that the Utility and Review Board — set up in part to take the politics out of the setting of utility rates — sometimes resembles a partisan legislative committee complete with grandstanding politicians and soundbite-heavy news conferences.
All of which means the government needs to come up with an answer to its power rate conundrum. Fast. The N-dippers’ best hope may be that legislation halting additional power rate increases and ensuring that Nova Scotia Power shareholders, not ratepayers, pay executive bonuses will challenge the perception that the government is overly cosy with the company.
They’ve also got to refute another nagging notion that’s starting to enter the political discourse: that the Dexter government’s dictate that Nova Scotia Power has to be getting 40 per cent of its electricity from wind, solar, tidal and any other renewable source by 2020 is partly to blame for the rising rates.
Nova Scotia Power estimates that replacing coal with wind and other renewables could add one to two per cent to its costs. A recent study prepared by the Atlantic Institute for Market Studies concludes that hydro power from Labrador’s Muskrat Falls will also eventually add to Nova Scotians’ power bills.
But so would substituting pretty much any renewable energy for coal. Besides, the government says it’s not at fault. It points to new emissions rules from Ottawa that mean coal-dependent provinces like Nova Scotia will have to shut their coal-fired power plants in the years ahead.
That may be a hard sell to a jobless Nova Scotia mill worker who blames high power rates for his empty bank account. The province’s involvement in the Muskrat Falls development could also take some explaining — particularly if costs continue to soar.
Premier Darrell Dexter has called it “our CPR,” a reference to the railway that connected the country. And his support for the project hasn’t wavered.
But the opposition is already grilling him for going so far down the road on the project without knowing how much it will cost taxpayers.
Muskrat Falls upside
The political process tied to Muskrat Falls comes as no surprise to Dunderdale, who will be watching with particular interest to see how a power rate-driven election plays out on the mainland.
A new hydroelectric project on the lower Churchill River could be a game changer for Newfoundland and Labrador. But, at best, it will be years before the hydro power flows.
Polls show the majority of Newfoundlanders and Labradorians favour development of the lower Churchill River. At its earliest stage, the mega project — under which Labrador hydropower would move via subsea link to Newfoundland and then on to Nova Scotia — has an undeniable political upside for Dunderdale.
“It is never far from anybody’s mind that Quebec ripped off Newfoundland,” says political scientist Alex Marland of Memorial University in St. John’s, N.L. Therefore, a Labrador hydro export deal that circumvents Hydro-Quebec, the utility held responsible for the infamous Churchill Falls deal, burnishes the premier’s shine.
On the other hand, Dunderdale is not nearly as compelling a saleswoman for Muskrat Falls as her predecessor, “Danny Millions” Williams — particularly if the project’s economics start to look shaky, which may already be happening.
Critics of Muskrat Falls question the wisdom of building a large power station in a remote area when, even assuming there will be no significant cost overruns, the cost of the power it produces would be twice the nominal price Hydro-Quebec is charging for power from its newest — and currently uneconomic — hydroelectric complex.
“I think there’s a very high likelihood that Muskrat Falls will turn into a disaster worse than the upper Churchill Falls contract,” says Tom Adams, a vocal critic of the deal.
The power issue, you see, summons strong emotion everywhere in Atlantic Canada.
Two years ago, Premier Robert Ghiz of Prince Edward Island felt so strongly about the P.E.I. Energy Accord — a five-year power purchase agreement between the island’s power utility, Maritime Electric, and NB Power — that he threatened to call an election over it. Among other things, the pact called for a 14 per cent drop in power rates that have traditionally been the highest in Canada, as the island imports the lion’s share of its electricity from New Brunswick. To make it happen, however, the P.E.I. government borrowed at least $35 million to assume Maritime Electric’s debt.
The problem for some Islanders is that next April, after two years of lower power rates, the province’s new harmonized sales tax kicks in. While home heating oil will be exempt, electric heat will not.
By 2015, the next time Ghiz has to go to the polls, those events will likely have been forgotten.
“Prince Edward Island has never had an election fought over power rates,” says Jim Sentance, who teaches economics at UPEI.
New Brunswick’s Alward, who faces a mandated election in 2014, may not be so lucky. During the 2010 election campaign, he routinely hammered the Grits over the botched NB Power deal. Now, as premier, he’s empowered a commission to come up with a new energy strategy.
Among its challenges: figuring out a way to deal with the Crown-owned utility’s long-term debt of $4.5 billion.
That number may start to shrink next September. Why? That’s when New Brunswick’s three-year power rate freeze ends. But of course, there’s a flip side for the government: higher power rates.
And in Atlantic Canada, every politician knows where that tends to lead.