by Charles Mandel
As published on page A1 on December 2, 2006

The business case for delivering New Brunswick electricity to the energy-starved northeastern United States may only be an expensive pipe-dream.

Jack Keir’s recent trip to the U.S. sparked the energy minister’s conviction the Liberal government should pursue feasibility studies on a Point Lepreau II and a coal-fired plant in Belledune. If built, the new plants would provide energy to the northeastern U.S., where ISO New England, the regional energy operator, anticipates 5,000 megawatts of electricity will be needed over the next decade.

Energy experts agree the potential exists for NB Power to export to power-hungry states such as Massachusetts and Connecticut, but only if the price is right.

The uncertainty is great enough that even David Hay, president and CEO of NB Power, greets the idea with caution. Hay points out a nuclear plant could cost $2 billion to $3 billion, while a new coal-fired facility could rack up another $1.5 billion.

“These are very big numbers and we’ve got to make sure we get all the pieces in the chain right.”

Hay says while the public utility is committed to exploring the feasibility of the two new plants, NB Power plans to analyze the options.

As it turns out, sending power south isn’t just a simple matter of stringing a few lines and transmitting electricity. Both the infrastructure and the market are extremely complex.

Keir, Hay and others celebrated the launch last Tuesday of the construction of the International Power Line that will carry energy from Point Lepreau to the Maine border. Once that electricity hits northern Maine, it currently has nowhere to go because of three transmission line bottlenecks, which are loaded to capacity. Two jam power from northern Maine to southern Maine and to the rest of New England, while the third lies on the outskirts of Boston.

“It doesn’t mean the power is worthless, but it means any incremental injection of power in Maine has much less value and can drive down the cost,” said Robert Stoddard.

Stoddard, a vice-president in Boston-based CRA International’s energy and environment practice, knows a few things about power.

He acted as the lead economist and architect of a settlement agreement known as ‘forward capacity market’. Essentially, it encourages building more power plants in the crowded northeastern U.S. through the use of incentives.

A number of new plants built to take advantage of New England’s deregulation of the energy market in 1999 went bankrupt. Those, along with tight financial markets and little land availability, have led to the construction of fewer power plants in recent years – especially close to the areas which need them the most.

Forward capacity market is still in its very early days and no one is certain whether a new flurry of plant construction closer to their markets will negate the need for exported power through transmission lines.

Steve Allen, a spokesman for the Northeast Power Coordinating Council (a regional power reliability council made up of American and Canadian utilities and energy operators), says because incentives exist to construct more plants doesn’t mean they will be built. Natural gas supplies, price considerations and the cost of importing power are among the variables that need to be weighed.

“If it’s very expensive electricity and there’s adequate supply in New England, it won’t be purchased,” Allen says.

Charles Cirtwill, acting president for the Atlantic Institute of Market Studies, warns that a utility with a lot of debt or a reliance on government subsidies isn’t in the best position to chase export markets.

“Probably NB Power is not the best placed out of the Canadian generators to do this exercise,” Cirtwill suggests. “They’re carrying a lot of debt, much of that underwritten by the government, and they’re not really in a position to aggressively go after new opportunities without increasing that load.”

Currently the utility is $3.2 billion in debt and expects its debt will climb to $4 billion with the refurbishment of Point Lepreau.

Cirtwill cautions NB Power can’t expect to single-handedly make a significant inroad into the market. Rather, he says the utility will need its friends, neighbours and even some of its competitors to reach a point where they are able to compete in the northeastern market.

“At least it’s interesting to see that they’re starting to look at other ways of increasing their revenues rather than just hosing the people of New Brunswick again.”

While Stoddard believes a potential export market is available, he also believes it won’t be easy going. “I’m not going to say New England is going to become self-sufficient in power. I’m not going to say that a very economical source located outside New England can’t compete here. But I think there’s going to be a lot of people building new power plants in New England.

“That’s going to put the competition squarely on anyone who wants to go head-to-head with that.”

Charles Mandel is a contributing editor with the Telegraph-Journal.