Call off this two-bit energy takeover
Published Friday November 27th, 2009
Twenty-six cents a day! That's the "value proposition."
"Value proposition" is a marketing term, used to explain the cost/benefit analysis that consumers undergo when choosing one good or service over another. If you want clean clothes, you buy this detergent (even if it costs a bit more). Smart children, you buy this computer. A summer cavorting by a lake, you buy this beer. It's the essence of marketing, and fortunes can hang in the balance. After all a BMW and a Kia will both get you from A to B; there must be some other factor that explains the $50,000 price difference in a BMW buyer's mind.
The savings from the NB Power takeover by Hydro-Québec work out to slightly more than a quarter a day, on average, for residential ratepayers. According to the mailer sent out by the Department of Energy, if the takeover goes ahead as scheduled (on March 31, 2010) residential customers will be spared the $97-per-year rate hike due to come into effect on April 1. That's it! That's all!
Now I could parse even these savings if I chose. After all, the 3-per-cent rate hike itself is quite arbitrary. It was announced by Premier Graham back in the winter of 2008 and is, as most readers will know, the maximum increase the utility can charge without justifying its rates before the Energy and Utilities Board. So we really don't know if NB Power actually needs the full 3 per cent or, indeed, if it actually needs quite a bit more. But rate hearings can be time consuming and messy. They involve lawyers, the filing of detailed costs, valuations of assets, financial analyses by accountants and, perhaps more ominously, testimony under oath. They are, in retrospect, the antithesis of how NB Power has operated under the Graham Liberals and so we're stuck with the 3 per cent figure.
On April 1, our hydro bills are going up by 3 per cent (26 cents per day) unless the deal goes through. That, in essence, is the government's case. And it's a pretty strong case. After all, New Brunswickers take a certain pride in being careful with their money (even when their governments aren't).
Of course, there are other ways of understanding the "value proposition" of the NB Power/Hydro-Québec deal. For example the "value proposition" could just as easily be, "Would you pay an additional 26 cents per day to:
A. Keep a Crown asset (NB Power) in hands of its New Brunswick shareholders?
B. Keep hundreds of millions of dollars in taxes and other revenues in New Brunswick?
C. Keep NB Power in public hands until after the next election?
Those are the questions the provincial Liberals don't want New Brunswickers to ponder.
The tax issue is an important one that's been getting short shrift by the government since the deal was announced. Item 7.1 of the Quebec/New Brunswick MOU explicitly states that Hydro-Québec will be exempt from income and capital taxes, as well as "payments in lieu of income and capital taxes to New Brunswick." Questioned on this government officials (most recently Natural Resources Minister Wally Stiles) have claimed that NB Power doesn't pay taxes. The record indicates otherwise.
In its most recent annual report (2007/2008), NB Power reported the following payments: $49 million in "special payments in lieu of income taxes," $21 million in debt management fees, $38 million in property and right-of-way taxes and $43 million from the Orimulsion settlement - $151 million in total. Moreover, the CBC has reported that NB Power made $540 million in payments to the province in the four years between 2005 and 2009. Under the takeover agreement, Hydro-Québec will be exempt from most, if not all, of these payments. There's a good reason why Hydro-Québec expects to receive a 10-per-cent return on equity from its investments in New Brunswick.
The last proposition is equally compelling. What's the hurry? The Graham government has no mandate to dispose of NB Power, inasmuch as the 2006 Liberal election platform specifically promised the opposite. (The premier's recent statement that "NB Power will remain a public utility with a different shareholder" is as big an evasion as Jean Chrétien's denial that he promised to "axe" the GST in 1993. It cheapens the debate and insults New Brunswickers.)
Back in June the premier mused that there might be an issue important enough to justify an early trip to the polls, despite his fixed election date. We now know what he meant and his first instinct was correct. This issue is important enough to fight an election over and, if the premier's not willing to call one, the deal should be put off until after a vote.
The downside of delaying the deal for residential ratepayers would only be "two-bits" a day. Industrial ratepayers would lose more but, under the current deal, they are the only group that comes out ahead. Industrial customers can wait until the shareholders have had their say.
As it currently stands, the takeover of NB Power is a poor deal for most New Brunswickers, cutting government revenues in a time of deficits and recession, and distributing the benefits to only a very small number of users. Hydro-Québec, meanwhile, does very well by the deal.
It's time to take the "two-bit" option. Call it off until the people have had their say.
Lisa Keenan of Saint John is a lawyer and the former president of the New Brunswick Progressive Conservative Party. Her column appears on Friday.
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On top of all this, it's the sensible thing to do in the long-term. Many others (including all of our neighbhours) have privately owned utilties. And many others are partnering with neighbouring jurisdictions on power. It makes sense for us to take advantage of Quebec's excess hydro power, because it's cheap, and renewable, and clean.
'Now I could parse even these savings if I chose'. Aparently you chose so lets parse it a little more 3% is arbritary as you say and historicaly low. If we want to pay down that debt and invest in cheaper power generation it probably should be higher, 5% or more.
'Cutting government revenues' ? Refer to the statement from the Auditor General yesterday, there are no real revenues just creative acounting.
The fact remains that SOMETHING has to be done or it will cost us big time, and not just on our personal power bills.
Think about how much more it will cost as consumers, as businesses try to deal with increasing overhead, due to increased costs on depleting fossil fuels, on increased future costs due to our failure to decrease our carbon footprint quickly enough.
Think about how much money it will cost the government to deal with all this, money that could otherwise go to job creation, social programs, poverty reduction, healthcare in an ageing society.
People, don't be fooled! There's a lot of smoke and mirrors being displayed by Alward and his cronies to keep you from seeing this objectively.
And yet, they can't seem to suggest a better alternative.
Food for thought...
And what about the industrial users? Lower rates for them is good for the province as a whole. Are Conservatives not concerned with costs to our Industrial users, the ones that create jobs.
I am not a Liberal or a Conservative but it seems to me that the Conservatives, especially the leader, is playing politics with this important issue.
1. Not true consumers come ahead also as documented im my comment above.
2. Industrial users are important and every year they wait for lower rates is a year of potential lost job opportunities and lost opportunity to attract new industries with lower rates.
There have been some really dumb decisions made by NB power that even I without an MBA could see were just stupid! Orimulsion comes to mind as does Belldune and the disaster of the lepreau refurbishment.
But there are huge markets for clean energy south of the border. We can produce clean energy. PQ has clena energy that wants a market and we have the transmission lines! NS and NL both ahve power they want to send south.
and NB Power is a monopoly with a captive audience. I really believe that it can be managed to make a crap load of money and benefit NB! To hand over all this potential to someone else just to remove a debt without looking at alternatives is ludicrious.