Proposed deal gives Hydro-Québec most of province's electricity assets, promised NBers cheaper rates

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BY GREG WESTON
TIMES & TRANSCRIPT STAFF

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FREDERICTON - A $4.75-billion proposed deal between the governments of New Brunswick and Quebec involving the sale of most of NB Power's assets to Hydro-Québec was announced yesterday.

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STEPHEN MACGILLIVRAY/CANADAEAST NEWS SERVICE

Premier Shawn Graham, right, and Quebec Premier Jean Charest shake hands yesterday after signing an agreement on the future of NB Power.

"This creates a true win-win situation and strengthens the bonds between us," Premier Shawn Graham said at the announcement at Government House in Fredericton. "For New Brunswickers, the benefits are clear."

Graham and Quebec Premier Jean Charest signed a memorandum of understanding that, if adopted, will see New Brunswick receive enough money to pay off NB Power's enormous debt, in return for the province's distribution and transmission assets and most of its hydro-producing facilities.

The memorandum must be approved in the Legislature before March 31, 2010 in order to become a reality.

Residential customers in New Brunswick will have their electricity rates frozen at current levels for five years and the elimination of NB Power's debt will also reduce the province's total debt by almost 40 per cent.

Industry will receive significantly reduced rates under the new arrangement, with small industrial customers' rates dropping 15 to 20 per cent and large operations seeing their rates go down by about 30 per cent.

NB Power will continue to exist as a separate corporate entity from Hydro-Québec, retaining control over its fossil-fuel burning plants at Dalhousie, Coleson Cove, Belledune, Courtenay Bay and Grand Lake.

Under the terms of the proposal, those plants can be closed by Hydro-Québec on one year's notice. That would happen if they cease to be economically viable, possibly due to augmented environmental restrictions or tariffs on unclean power.

The Dalhousie plant, which employs about 100 people, will be shut down when the Venezuelan oil deal runs out in late 2010 or early 2011.

In return for its money, Quebec acquires all of New Brunswick's more environmentally friendly power plants and its distribution grid, which sits geographically between Quebec and the lucrative customer base in the northeastern United States.

Quebec will also gain ownership of the Point Lepreau nuclear facility, but not until the refurbishment process has been completed and the plant is again operational. Hydro-Québec would not assume any liabilities for cost overruns.

But replacement power, required while Lepreau is out of commission and that was projected to cost about $800 million, will come from Quebec and will be cheaper, so the indirect costs of the project should drop by about $300 million or almost 40 per cent.

Graham said the one-time cash injection will help the province realize other goals.

"By eliminating that debt, while it's important, it's also cost-avoidance in the future," Graham told the Times & Transcript.

"We're continuing to find efficiencies within the system and we're continuing to reduce taxes as well to position us strategically. In plain and simple terms, you can't cut the debt of New Brunswick by $4.75 billion and not be noticed."

The premier also said that the deal will not remove the province's ability to determine its own energy policy.

"We will still clearly maintain our sovereignty on energy policy. It will be, though, now delivered in a more transparent fashion," he said, adding that he hopes private companies within the province will step forward to generate and sell energy to Hydro-Québec.

Following the five-year rate freeze, residential electricity price increases will be linked to rises in the cost of living index, thereby limiting annual increases. However, any projects that create additional energy production can also be considered, meaning future rates could potentially rise faster than inflation, under some circumstances.

The New Brunswick Energy and Utilities Board, which currently regulates electricity rates, will retain its position under the new arrangement, although some changes will need to be made to harmonize the system with that in Quebec. At this point, the board's exact role is unknown, but it will be determined during the upcoming legislative session. In recent days, other Atlantic provinces have voiced concerns over a deal between New Brunswick and Quebec, saying that it could limit their abilities to export energy into the United States. Both Graham and Charest responded to such claims, pointing out the grid remains open to all potential users.

"I never had the view that if we succeed, we're doing it at someone else's expense," he said, indicating that he has already has his eye on relationships with other Atlantic provinces.

"I want to be very clear on one thing: that it is in the vital interests of Quebec that there be an open market. It isn't whether or not one (province) is succeeding better than the other. The issue, if we have our eyes on the ball, is to the south of us. That's where things are going to happen."

Charest pointed out that the newly partnered provinces share similar histories, cultures and languages, making such an arrangement an obvious choice.

"The people of New Brunswick and the people of Quebec share a common dream and a common vision," he said. "This is going to be a part of what we're going to do together."