AIMS report says Quebec will have virtual ownership of grid

FREDERICTON – The energy analyst who raised a series of concerns about the original deal to sell NB Power says the new agreement also presents many worries for New Brunswick.
Gordon Weil, president of the Standard Energy Company of Maine and an energy market analyst for the Atlantic Institute of Market Studies, released his updated appraisal of the newly announced $3.2-billion deal to sell NB Power’s nuclear and hydroelectric generating stations to Hydro-Quebec this week.

In December, Weil criticized the initial memorandum of understanding for giving more benefit to Quebec and for placing extra risk on New Brunswick’s ratepayers.

He says there are some improvements in the new deal, but many concerns still remain. Specifically, he says Quebec will have contractual access to the electricity grid that is tantamount to ownership.

“From the Quebec perspective, there was virtually no loss of what it had gained, but an immediate saving of the $1.55 billion that had been assigned to acquiring the transmission system,” Weil states, adding that Hydro-Québec will assume almost total control of electricity transmission to the United States.

“Should more transmission be needed either to serve provincial customers or for exports, NB Power will be able to undertake the construction. Cost recovery would come either from the entity requiring the added facilities or from all transmission customers or a combination of the two.”

Weil also discusses the five-year residential rate freeze, which he says will only provide a short-term benefit.

“As with any other rate cap that has been applied in the period since electric industry restructuring began in 1992, it is certain that at the end of the freeze there will be significant amount of deferred costs to be recovered from customers,” which Weil says customers could pay for after the freeze is lifted.

But Energy Minister Jack Keir says the utility will not be able to claw back those savings.

“(Increases are) going to be based on NB Power going before the EUB to justify any increases to transmission and distribution for year six,” as well as New Brunswick’s inflation rate and additional generation needs, Keir says.

“That’s what people are looking for: a guarantee of what’s going to happen in year six. When somebody says, ‘Guarantee me what the price is going to be in year six,’ of course you cannot do that,” but the regulatory system will provide protection from unwarranted increases, he says.

The report also highlighted several benefits included in the new deal, such as the future possibility of developing a regional electricity grid and the ability to purchase energy outside of the 14 terawatt hour heritage pool. It also approved of the retention of the New Brunswick System Operator.

“The continued existence of the NBSO provides greater assurance of independent transmission operation than if the operator had been transferred to Hydro Quebec,” it says.

The Opposition raised the report during yesterday’s question period, asking the Liberals whether Weil’s concerns were valid or simply “fearmongering,” as the government has previously labeled some criticisms.

Energy Minister Jack Keir did not directly respond to the Weil report in the house, instead reading extensively from a newspaper commentary that supported the deal.

“I will give an evaluation of someone who is a New Brunswicker, who pays taxes in New Brunswick, who not only understands the intricacies of NB Power but also was chairman of NB Power,” he said of Derek Burney, the former chairman of NB Power under the Bernard Lord government who wrote the commentary.

“That is not coming from somebody outside the country. That is not coming from somebody who may or may not have an agenda. It is coming from a New Brunswick taxpayer who understands NB Power very well.”

Opposition MLA Kirk MacDonald said that if Burney was providing Keir with his speaking notes, the government didn’t need to hire a consulting firm to help sell the deal.

“If he is putting together the speaking notes for the minister, then we have wasted all that money on Hill & Knowlton for nothing,” he said.