Everyone agrees energy sector must change, but disagree over how

Whether or not everyone agrees on the solution, most people agree with one thing the Shawn Graham government has been saying about the NB Power deal: the status quo is not an option.

“We’ve been saying the status quo is not an option since about 1994,” says Charles Cirtwill, president and CEO of the Atlantic Institute for Market Studies.

Cirtwill says the status quo is only an option if New Brunswickers are prepared to pay exponentially higher power rates or pay higher taxes to continue subsidizing electricity, which he says the province has been doing for the last decade.

Not only that, says utilities public intervenor Daniel Thériault, but NB Power’s current debt is crippling.

“The utility is so debt-ridden that it would be virtually impossible to ever come out of that,” he says. “More importantly, we are stuck with fossil fuel and that will do nothing but increase the price of electricity in the next year.”

Thriault says on that point he paints an even bleaker picture than the government.

“I think in 2011-2012, I wouldn’t be surprised if we had a double-digit increase,” he says. “(NB Power) would have sought over 10 per cent last year if not for the government (intervention). Those rates will continue to climb because of world oil prices. I just think our electricity prices would go through the roof with the mix of generation that we now have.”

Thriault says if ratepayers are looking for lower rates, then change must come. “There is no easy way out of it. I understand what the government is attempting to do, to change our generation mix so we are not relying on fossil fuel, but on hydroelectricity, which is definitely going to lower the price over the long-term substantially.”

Even Tory leader David Alward is in agreement that things can’t stay the same. “I’ve said from square one the status quo at NB Power and the future of energy is not an option,” he says.

But Alward says the people of the province need to be given a say in what that future will hold. “The future of NB Power and energy consumption in New Brunswick needs to be multi-faceted,” he says. “Most certainly things like long-term power purchase agreements make sense. Partnerships, co-operation make a lot of sense.”

But some wonder why the rush.

Yves Gagnon, the K.C. Irving chair in sustainable development at l’Universit de Moncton, says there is no doubt we are moving to an economy where carbon use is regulated. But he says the failure of the Copenhagen conference on climate change to produce any binding regulations on carbon emissions has bought the province some time.

“Carbon markets are not coming within the next few years, but it will come, so here in New Brunswick it gives us time to make adjustments. If we keep NB Power, we can control the agenda of phasing out carbon plants,” he says. “I’m not convinced that the government has looked at all options possible. It is maybe the best one, I don’t know, but the government has not proven to the population that they have looked at all options possible.”

If there is a positive in the controversy over the deal, Gagnon says, it is that it has made people realize the importance of the energy sector and the challenges it is facing.

“People are realizing we need some change in the energy sector but, obviously, the population is not ready to accept the proposal that is being put on the table,” he says. “The population of New Brunswick is ready for a change in the energy sector, the partners in the region are ready for a change, so this notion of a March 31 deadline, I see no rationale to rush a decision.”

Cirtwill says the reason change needs to happen now is the high cost of NB Power’s fuel supply coupled with the environmental impact of the current generation mix.

“No offence to those in New Brunswick, but you are using dirty power,” he says. “Everybody needs to find a green source of energy and this (deal with Hydro-Quebec) is a cheap, immediately available source of green energy which is why it is very attractive to make the deal with Quebec today.”

David Coon, executive director of the Conservation Council of New Brunswick, says the answer to whether or not we can maintain the status quo really depends on what government means by status quo.

“I think what they mean is the status quo for industrial power rates is not an option from their perspective,” he says.

Coon says NB Power residential rates are among the top four most affordable in Canada and our industrial rates are about middle of the pack. “And North America-wide, they are low,” he says. “It is not just the rates that is the issue, of course, it is the monthly bill… Rates are not the be all and end all and one of the reasons on the residential side we have a challenge is because we are so dependent on electric heat. If we had an energy policy, which we don’t have, one of its objectives should be to break New Brunswickers’ dependence on electric heat.”

David Plante says this situation has been brewing for some time.

“We’re expecting to see double-digit increases (in power rates) in the near future,” says the vice-president of the Canadian Manufacturers and Exporters’ N.B. division, given the volatility of oil prices which are only expected to rise.

Plante points out that while NB Power increases have been capped at three per cent for the last two years and eight per cent the year before that, NB Power had looked for increases of up to 9.6 per cent.

“It is not out of the realm of possibility that following this year’s three per cent that we could see 12 per cent,” he says, adding an increase that big would put the manufacturing sector in jeopardy.

“Many people may not realize it, but New Brunswick has the third most manufacturing in Canada. Our economy is heavily industrial-based and a large part of that is extraction and processing of resources. Those are energy intensive activities. Upwards of 25 per cent of an operation’s costs can be in energy and electricity,” he says, an indication of just why energy increases have such a huge impact on those companies.

“But it’s not just for larger industrial operations,” Plante says. “Even companies spending in the order of $40,000 to $50,000 per year, it may not be their biggest cost, but the cumulative impact (of that and other cost increases) can drastically impact their ability to compete in the world market.” Plante says the nice thing about the deal is not only lower rates for industry, but that it offers a degree of certainty on rates, something not possible in a market dependent on fossil fuels.

* With files from Nick Moore.