NB Power: Golden egg or gilded turd

The happy dealmakers: clockwise from top right, Nathalie Normandau, QC Natural Resouces Minister, Jack Kier, NB Energy Minister, NB Premier Shawn Graham, and QC Premier Jean Charest. Photo courtesy CNB.
The happy dealmakers: clockwise from top right, Nathalie Normandau, QC Natural Resouces Minister, Jack Kier, NB Energy Minister, NB Premier Shawn Graham, and QC Premier Jean Charest. Photo courtesy CNB.

It’s New Brunswick’s biggest political story in the last three years, and perhaps in my lifetime: the sale of NB Power to Hydro-Quebec. It’s not quite a done deal yet, but the final agreement is likely going to look very much like this memorandum of understanding (MOU; .pdf file). In case you didn’t read a provincial paper this week and you don’t want to sift through the wonder of bureaucratese, here are the main points:

  • Hydro-Quebec (HQ) agrees to buy practically all of NB Power (NBP) for $4.75-billion, roughly NB Power’s total debt. H-Q will run NBP as a wholly-owned subsidiary.
  • The NB government keeps generating stations at Dalhousie (which will close), Grand Lake (which was closing), Belledune, and Coleson Cove (which can be closed with a year’s notice).
  • HQ will take over the Point Lepreau nuclear plant once its refurbishment is finished and the plant is licensed. New Brunswick pays for all construction overruns, but not replacement power.
  • Residential power rates will be frozen for five years. Industrial rates will be lowered and tied to Quebec’s rates. Those rates may increase if electrical consumption exceeds certain amounts.
  • Our Energy and Utilities Board (EUB) can still set the price for using the grid, but it must ensure the prices are “fair and reasonable” for H-Q.
  • The crumbling Mactaquac Dam becomes Hydro-Quebec's problem if the NB Power sale goes through. (Photo from Wikimedia Commons)
    The crumbling Mactaquac Dam becomes Hydro-Quebec's problem if the NB Power sale goes through. (Photo from Wikimedia Commons)

    On the surface of things, it seems like a good, fair deal for New Brunswickers. The $4.75-billion sale price will take 40% off New Brunswick’s debt, money we won’t have to pay interest from next year. Predictability will come to residential power rates, and that translates into better rents and utility bills. Industrial rates will be on equal footing with Quebec, hopefully stopping companies like Fraser Paper from moving to that province and taking New Brunswick jobs with them. This province’s dirtiest fossil fuel plants will likely be phased out.  Somebody else will now be on the hook for the crumbling Mactaquac Dam. And it looks like few, if any, workers will lose their jobs. What’s not to love?

    The more you sniff at the agreement, the more it stinks. Let’s start with the rates. Residential power rates, although they will be frozen, will still be substantially larger than rates in Quebec. By my math, a homeowner in Ste-Foy pays $60.59/month for power and while the same homeowner would pay $105.78/month in Saint John (based on an average consumption of 888 kilowatt hours (KWh)/month and the rates listed here and here). If my math is right (I am a liberal arts student, after all), the New Brunswick homeowner pays roughly 75 per cent more in this example. While the difference varies with power consumption, it’s clear that we will pay considerably more than the Quebecois. Premier Shawn Graham hasn’t adequately explained this discrepancy, emphasizing the fact that rates won’t go up under this deal. Not to mention the fact that, after five years, power rates will skyrocket if inflation does.

    The Irving Pulp and Paper Mill in Saint John. How much savings will they have under this new deal? (Photo from Wikimedia Commons)
    The Irving Pulp and Paper Mill in Saint John. How much savings will they have under this new deal? (Photo from Wikimedia Commons)

    The picture for industrial rates isn’t much better. Yes, industrial rates will be tied to Quebec. Except, the MOU only commits to sell industrial users 4,500 million KWh of power at Quebec rates and New Brunswick industry consumed 5,589 million KWh in 2007-08. While the EUB will set any rates above the agreed amount through “a market-based competitive process,” nobody else has the resources in place to supply a significant amount of power to the province, not Nova Scotia Power (if Dan Leger is to be believed), not the States, and not our minuscule wind industry.  That gives HQ as close to a total electrical monopoly as you can get, which doesn’t bode well for low industrial rates.

    The energy hub concept is dead as we know it. The government is now saying they wanted a province-wide energy hub by talking up a solar panel manufacturing plant in Miramichi, but Graham hitched his horse to projects around Saint John from day one. He moved the energy department to the Port City and talked up the potential of a second oil refinery (shelved this summer), a second nuclear reactor at Point Lepreau (which likely won’t happen after this deal), and the soon-to-close Coleson Cove plant. Elsewhere, the province’s Self-Sufficiency Action Plan committed government to explore a second generator at Belledune, a plant that will close not long after the deal closes.

    How much would NB Power get on the open market? Who knows? (Photo from Wikimedia Commons)
    How much would NB Power get on the open market? Who knows? (Photo from Wikimedia Commons)

    How do we know that $4.75 billion is the most anyone wants to pay for NB Power? We don’t – Graham didn’t give anyone else the chance to make an offer – like Fortis, whose holdings include Newfoundland’s Norelco and PEI’s Maritime Electric, or Emera, owners of Nova Scotia Power. The deal with HQ was made behind closed doors, somewhat understandably – it is big business, after all. But such lack of transparency will only serve to remind people of other government decisions made without public consultation, like last year’s school support/ferry cuts budget. The issue of selling the utility to another government – never mind Quebec – also raises a few questions about our own sovereignty.

    I could go on about provincial sovereignty and about potential pitfalls with Point Lepreau, but I’ll leave it at this. Selling NB Power to Quebec could be a godsend to this province. The public utility has a crippling debt load that its modest profits can’t cover and a terrible management record. If handled properly, I think this could be the best thing to happen to New Brunswick for decades. But, as it stands right now, this deal is a gilded turd. It may look lovely and precious on the outside but, at its core, it still stinks. Graham’s government must answer some tough questions and be prepared to make some substantive changes to the MOU in order to get the best possible deal for this province. Otherwise, Graham’s going to get a raw deal at the polls in September.

    Friday, among other things, I’ll talk more about government spin and Opposition criticism of the deal.

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    • Show Comments (4)

    • Facebook User

      Good article. Thanks. Not bad math for an arts major.

    • Marylynn Cote

      Have you seen: http://www.facebook.com/group.php?gid=17638718390
      What do you think about the idea that HQ will implement green power? What of the criticism that this isn't likely considering the citizens will have no say?

    • Greg Rodger

      Public tenders should work both ways. Quebec, not worrying about refurbishing infrastructure, will essentially pay off NB Power’s debt with residential rates. NB is getting nothing out of this deal except a good excuse for Mr. Graham to say he got rid of debt.

      A valuable lesson for New Brunswick – The Liberal Party pays government debt, not through prudent spending and sensible budgeting, but through selling off our assets to the first offer that comes around.

      What next opening toll booths to pay for mismanaged roads… er wait that’s already been done.

    • Tyler Barker ☭

      I think substantial public consultation and even a province wide referendum should be considered before this massive disenfranchisement of new Brunswick public infrastructure. I just keep remembering the Churchill falls deal ..

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