MOU II: Electric Boogaloo

Shawn Graham at an agriculture meeting in Fredericton this week, maybe showing a bit of wear from the NB Power circus. (Photo courtesy GNB)

Shawn Graham temporarily saved his political career on Wednesday with the new MOU. But will is it a better deal for New Brunswick? Will it save his government?

Let’s look at the facts.

Under MOU II, New Brunswick keeps the NB Power name, the transmission grid (NBSO), the distribution company (Disco), and the fossil-fuel plants. In return, Hydro-Quebec will pay only $3.2-billion for the hydroelectric plants and Point Lepreau, $1.8-billion of which will be paid, up front, March 31. The other $1.4-billion will come to this province when Point Lepreau is back online.

NB Power is now responsible for the deferral account on Lepreau (essentially replacement power costs). Hydro-Quebec took this estimated $525-million cost on in the first MOU.

Industrial power rates will not fall as low as Quebec’s, but they’ll still fall by 23%. The five year rate freeze for everybody else remains.

Hydro-Quebec will still provide 14 kilowatt hours (kWh) of power in a heritage pool. It’s unclear if it will still be divided 4.5 kWh/9.5 kWh between industrial and residential users.

Actually, much of MOU II is unclear, since the premier said that he won’t be releasing the text of the new agreement until the deal closes, at least. More on that later.

But first, here’s what this deal means.

The Mactaquac Dam, along with NB Power's other hydro plants and the Point Lepreau nuclear plant, will still be sold to Hydro-Quebec under MOU II. (Photo courtesy Wikimedia Commons)

The province will take less money, but they’ll keep the most profitable part of NB Power – Disco. They’ll also have less debt to service and might be better able to pay it down. On the other hand, if Lepreau doesn’t restart, the province is on the hook for refurbishment and dismantling costs, pending the inevitable lawsuit with Atomic Energy of Canada (AECL), who’s responsible for the refurbishment. Those dismantling costs, by the way, would be at least $450-million.

What does keeping the grid do for us, other than maybe getting Danny Williams to STFU? Not much, apparently. H-Q will get most of the transmission capacity – including about 97% of the  export capacity to Maine. New Brunswick could build another transmission line to the States, but Newfoundland would probably have to outbid H-Q to get control of the line.

Apart from choosing who gets access to our lines, however, we have no control over our electrical supply unless we decide to build new plants. If NB Power builds more plants after the sale, however, kiss low rates goodbye.

Come to think of it, we have no idea if we’ll continue to have low rates after five years, anyway. We don’t know anything about MOU II except what the government’s told us and we won’t know until the deal’s done. Everybody is assuming MOU II is the same as MOU I except for X, Y, and Z. I don’t expect there to be any difference, but I expect opponents of the deal to seize on this uncertainty. It’s insulting to New Brunswicker’s intelligence not to give them a look at the new MOU before all the i’s are dotted.

Couldn't have put it any better, Billy. (Record by Columbia)

It doesn’t help that the many people in New Brunswick don’t trust the government on the NB Power file. Justifiably, too – Graham spectacularly over-hyped MOU I, from dubious $10-billion value first advertised, to continually highballing power rate savings.

This government’s overall record won’t help the sales job. The track the NB Power sale has taken mirrors many of the Liberal’s other big ideas the last three years – announce huge, comprehensive, and unprecedented changes somewhere, defend it to ever-growing public protests, backtrack when the uprisings grow too threatening, and (this step optional) institute instead a half-arsed, watered-down solution that pleases few. Compare NB Power to other Liberal fiascoes: polytechnics, Early French Immersion, uranium exploration, ferries, the doctors’ wage freeze, all of last year’s school cuts….

This watered down solution will please few because most people don’t want this sale to go through at all. That’s the feeling I got seeing the protests about the deal in front of the legislature, and that’s the feeling I got from the audience at Tuesday’s forum on NB Power. No doubt, that’s the feeling 3 cabinet minister and 2 other MLAs felt when they told the premier they couldn’t vote for MOU I. It could have even been the feeling that led Mike Murphy to need more time with his family. And, if this gamble doesn’t pay off, it could be the feeling that kicks Graham out of politics.

Walter Crane's woodcarving of Jack and the Beanstalk. Are the beans Graham's getting fo NB Power that magic? (Photo courtesy Wikimedia Commons.)

But at least Graham’s seems to have took the gamble out of genuine interest in bettering New Brunswick, even if the beans he’s getting for our beloved NB Power aren’t magic in the least. David Alward, the PC leader with all the charisma and personality of a potato chip, has had three months to decide what to do about the NB Power sale (which was then, as now, inevitable) if his party wins the election. His first position was bland, but very sensible: he’d try to get NB Power back if it was affordable.

Thursday, however, Alward threatened the n-wordnationalization – if he couldn’t find a legal out in the contract. That would be either reckless or deliberately misleading. If he’s serious about re-nationalizing the power plants, he’d have to buy them back from H-Q – at a price higher than we sold it for because H-Q isn’t stupid. If he tried to nationalize the plants through legislation, there would  be a very long court challenge that H-Q would probably win, meaning that they’d either still have the plants, we’d be out a ton of cash, or both. In each case, we’d be shelling out a lot of money we don’t have – not under a $700-million deficit. We can’t afford another Tollbusters boondoggle.

If he’s not serious about nationalizing NB Power, he’s trying to sweet-talk his way into the premier’s office, posing as NB Power’s savior just long enough to win the election. He would be playing New Brunswickers for chumps, especially given what a loaded word nationalization is. At least the NDP, in saying from the start it would reverse the deal, is taking a principled, if naive and equally reckless, stand.

But it all depends on public sentiment. It was going to move five Liberal votes away from MOU I. It will either move governments away from this deal this winter or away from public office this fall.

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  • Show Comments (2)

  • herringchoker

    “If he’s serious about re-nationalizing the power plants, he’d have to buy them back from H-Q – at a price higher than we sold it for because H-Q isn’t stupid.”

    Actually you have that backwards Sean. The law surrounding expropriation is well-established in Canada: the government (or public agency) doing the expropriation must pay a “fair” price for the asset or assets, nothing more. A fair price is well settled in economics, its the price that someone else is willing to pay for an asset.

    In Alward’s case he can simply say to H-Q, “Here’s your money back, we’re taking back our facilities.” If H-Q wanted to contest this, it could go to court (the case would have to be tried in NB) and explain why the price it had just paid for the assets wasn’t fair. I’m sure the judge would be amused but, beyond that, there’s not a lot H-Q could do if the NB gov’t decided to take back its assets.

  • Sean Thompson

    Herringchoker, you do have a point. H-Q would have to be paid a fair price if Alward wanted to expropriate the assets and, in all likelyhood, it would be the courts deciding what that fair price would be. While the courts could decide that just giving the money back is good enough, there is a chance (and I’m really not sure how large, so take this with several grains of salt) that they could decide that the power stations are worth more than we sold (selling?) them for. The ratepayer (read: us) would also be fully back on the hook for refurbishing or dismantling the Mactaquac Dam – estimated to be at least $2-billion.

    Relative to nothing, Quebec nationalized its power industry in the 1960s not by expropriating every power asset in the province but by buying out all the private utilities – at greater than market price.

    Ideally, voters should have their say on this sale before it goes through. It’s a move that requires very careful thought and meaningful debate (of which we haven’t had enough). If it does go through, though, I just don’t think we can afford to buy it back (unless government finds a couple billion dollars between the couch cushions).

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