Gordon Weil’s analysis of the original MOU to sell NB Power to Hydro Quebec published in December of 2009 by AIMS quickly became a must-read for anyone interested in the deal. Based on his decades of experience in the electric industry, Weil provided an independent review and unbiased analysis of the original MOU. (see www.AIMS.ca/library/NBPowerMOU.pdf )
On January 20th, 2010, New Brunswick Premier Shawn Graham announced changes to the MOU, changes that addressed some of the concerns expressed by Weil in his analysis of the original MOU. After sitting through a briefing on the changes to the deal, Weil prepared this updated analysis.
- Retention of the NB Power Transmission System and the New Brunswick System Operator are improvements to the MOU that offer possible future benefits to the province including facilitating a regional transmission grid.
- Though it will not own the NB Power transmission system, because it will use its transmission reservations on a continuing basis, Hydro Quebec will nonetheless have control over transmission access similar to ownership.
- The New Brunswick Energy and Utilities Board will be able to regulate transmission and distribution rates and other costs not covered by the deal in line with New Brunswick legislative mandates. Hydro Quebec will pay for the use of transmission at rates set by the EUB.
- In order for rates to be frozen for five years, NB Power transmission and Hydro Quebec will have to cap their rates during the five-year period, and NB Power will undoubtedly defer some costs for later recovery.
- NB Power could have adopted much the same policy as is imposed by the modified MOU including a power purchase agreement with Hydro Quebec without the other terms of this deal. However, NB Power would still have had to deal with its debt, making the Hydro Quebec payment the key to the deal.
- Under certain conditions, NB Power will not be required to purchase the full amount of power that Hydro Quebec would be obligated to provide.
- New Brunswick customers can expect significant rate increases after receiving the initial benefits provided by the deal.
- Other points contained in the original MOU analysis remain valid including issues relating to the risk of Lepreau not returning to service, transmission access across New Brunswick for other provinces, and possible Hydro Quebec market power in New England.
To read the complete updated analysis, click here.