The Sale of NB Power: A Bad Deal for workers, their families and our communities - 2009-11-25

On October 29, 2009 Premier Jean Charest of Québec and Premier Shawn Graham of New Brunswick signed a Memorandum of Understanding (MOU), under which Hydro-Québec would acquire most of NB Power. This MOU is not an offer and does not create any legally binding obligations of any party.

Memorandum of Understanding

The assets acquired by Hydro-Québec include: all assets of NB Power Distribution and Customer Service, all assets of NB Power Transmission Corporation, all of the assets of NB Power Generation with the exception of the facilities located at:
Belledune and Colson Cove
Dalhousie, Courtenay Bay and Grand Lake

NB Power must decommission Dalhousie, Courtenay Bay and Grand Lake on a schedule to be agreed by Hydro Québec.

Belledune and Colson Cove will continue to be owned and operated by NB Power under the direction and for the benefit of Hydro Québec. The final agreement will include a tolling agreement for both facilities, with terms of up to 20 years, as determined by Hydro-Québec.

At any time, Hydro-Québec can direct NB Power to shut down both Belledune and Colson Cove with one (1) year’s notice. NB Power will be responsible for all the decommissioning and other costs associated with the closure. Hydro-Québec will benefit from all emission allowances, including any revenue from any such allowances that were sold rather than used.

The sale of our entire transmision lines will remove all possibility of developing future energy sources in New Brunswick. The local power grid will be filled to capacity with hydro power from Quebec, leaving no room for local power production, such has wind power.

All assets of NB Power Nuclear Corporation (Point Lepreau) will be transferred to Hydro-Québec upon: the completion of the current refurbishment project, the restart of Lepreau following successful testing and the issuance of the permits and authorizations required for the restart.

Hydro-Québec will pay to New Brunswick the sum of $4.75 billion, the equivalent of the estimated NB Power debt. According to New Brunswick’s Auditor General, Mike Ferguson, the sale will have no impact on the net debt because the province has always been deducting NB Power’s debt. He added that NB Power has given over $500 million in profits and fees to Fredericton which has been used against the debt, so selling NB Power will worsen the New Brunswick debt and cut an important source of revenue.

Hydro-Québec also agrees to supply 14 TWh of electricity per year to New Brunswick customers to be divided between Industrial Customers (4.5 TWh) and residential customers (9.5 TWh). This is referred as the “Heritage Pool Supply”. If the Industrial demand exceeds the set 4.5 TWh supply, the rates will be adjusted to reflect the incremental cost of supplying that excess demand. If the residential demand for electricity exceeds the set 9.5 TWh, it will be recovered through adjusted residential rates, with interest, after 5 years.

In 2007/2008 New Brunswick residential energy requirements totalled 5556 GWh or 5.556 TWh. The industrial energy requirements for the same period totalled 5697 GWh or 5.5697 TWh Sales to the general service (retail/wholesale, hotel/motel/restaurants, offices hospitals, schools, universities) was 2884 GWh or 2.884 TWh. In their load forecast 2009-2019 issued in January 2009, NB Power predicts Electrical energy required to meet the in-province load is forecast to increase to 15 TWh by fiscal year 2018/19. Clearly, the Heritage Pool Supply is insufficient to meet our electricity demand.

Transmission and distribution rates will be regulated by our Energy & Utilities Board on a “cost-of-service basis with a contractual or legislated guarantee of a “fair and reasonable” return on equity to Hydro-Québec. Meaning that Hydro-Québec can make application to the EUB, legislation in hand guaranteeing them a profit, to demand an increase in Electricity rates.

Hydro-Québec will have Crown corporation status; they will not be subject to income or capital taxes and they will not be required to make payments in lieu of income or capital taxes to New Brunswick. All future NB Power profits will leave our province and go entirely in the coffers of the Québec Government.

Even though New Brunswick residential clients will enjoy a rate freeze, we are still paying much more for our electricity than Québec consumers. However, New Brunswick Industrial clients will enjoy the same rate as their Québec counterparts.

Clearly this is not a win-win deal. Québec is the big winner in this transaction. Hydro-Québec expects a return on equity of more than 10 per cent for the first year alone. The deal provides them with a strategic geographic position with regards to the markets of Atlantic Canada and New England.



Abbreviations

kW: Kilowatt
MW: Megawatt (1 thousand kilowatts)
kWh: Kilowatt-hour
MWh: Megawatt-hour (1 thousand kilowatt-hours)
GWh: Gigawatt-hour (1 million kilowatt-hours)
TWh: Terawatt-hour (1 billion kilowatt-hours)