Candy maker warns NB Power sell-off is flawed
Published Tuesday November 10th, 2009
Energy: David Ganong argues province could be devastated by deal tying rate increases to inflation
ST. STEPHEN - New Brunswick can benefit from selling the provincial electrical utility to Hydro-Québec, Ganong Bros. Ltd. owner David Ganong said Monday.
However, New Brunswick should insist on tying New Brunswick electrical rates to those that people in Quebec pay after the first five years of the agreement, he told provincial energy minister Jack Keir.
Premiers Shawn Graham of New Brunswick and Jean Charest of Quebec signed a memorandum on Oct. 28 under which Hydro-Québec would buy most of the New Brunswick Power Corp.'s assets for $4.75 billion, just enough to eliminate NB Power's debt.
Industrial power rates would drop to the same rates as in Quebec immediately, while the deal would freeze residential rates for five years, saving New Brunswick customers $5 billion over five years, the provincial government says.
In an Oct. 29 newspaper commentary, Université de Moncton professor Donald Savoie urged the provincial government to insist on a clause that New Brunswick never pay more than five per cent more than Quebeckers for electricity.
As it stands, the agreement would tie New Brunswick's rates to increases in Quebec after five years, but also tied to the annual rate of inflation, Savoie noted.
In the final negotiations New Brunswick should insist on the protection that Savoie suggests, Ganong said.
"I personally would encourage you to take a very hard look at just this cost of living," Ganong said, noting that two years in a row of 20 per cent inflation - which has happened within living memory - would devastate New Brunswick.
"If it is possible, bench-mark it as Don Savoie said, to something that is going on in Quebec, to maintain relative competitiveness. It seems to me that is the right way to go."
The province has nearly five months to negotiate the protection that Savoie and Ganong support before the March 31 deadline, Keir said.
If the two provinces meet this deadline, Hydro-Québec will assume the cost of electricity that NB Power buys to replace what it loses, with the Point Lepreau nuclear generation station out of commission for refurbishment after March 31.
Up to March 31 replacement electricity will cost NB Power $525 million, Keir said. If the provinces miss the deadline, NB Power might have to pay the entire bill of $800 million, the minister insisted.
Besides getting cheaper power rates, New Brunswick will need Quebec electricity when federal government policies force provinces to shut down oil- and coal-fired thermal generation stations, Keir said.
NB Power plans to shut down the Dalhousie station once the contract to buy orimulsion fuel from Venezuela expires, Keir said.
Quebec does not want the coal-fired plant at Belledune or the oil-fired plant at Coleson Cove, but New Brunswick will keep these to provide peak power in the dead of winter, Keir said.
However, these plants have a limited future. Power from these plants costs 17 cents per kilowatt-hour compared to two and one-half to three cents from hydro power. A federal carbon tax or cap and trade system would add another two or three cents per kilowatt-hour, Keir said.
Selling the provincial utility to Hydro-Québec will not stand in the way of New Brunswick developing alternative energy sources, the minister said in response to a question from Larry Lack of St. Andrews.
The sale would fit well with the plan to develop wind power, he said, by providing clean back-up power. "Cheap hydro-electricity from Quebec is a great way to balance wind," he said.
If the two provinces consummate this deal New Brunswick will still control its energy policy, Keir claimed.
Further, the sale would not stop Nova Scotia or Newfoundland and Labrador from moving electricity through New Brunswick to New England markets, he said. The United States Federal Energy Regulatory Commission insists that anyone selling power into New England must make extra room on its grid available to other bidders.
"One of the reasons Hydro-Québec wants in here is access to New England. They are not going to screw up any FERC rules that they can't sell electricity into New England. So there will be open access tariffs."
Keir is willing to fight and lose an election over the Hydro-Québec deal, he told questioner Art McKay, who opposes the sale.
"If at the end of the day it's a good decision for New Brunswick, and I pay a price for that? I can sleep well at night," the minister said.
Following his chamber of commerce engagement, Keir toured the Flakeboard Co. Ltd. mill in St. Stephen where chief executive officer Kelly Shotbolt along with Ganong wanted to talk to him about natural gas distribution rates - another big issue.
Like Ganong, Shotbolt sees the advantages to the Hydro-Québec deal; and like Ganong, he says New Brunswick industries cannot survive further increases in their natural gas rates.
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"In fact, the numbers are so heavily tilted toward industry that Energy Minister Jack Keir didn't believe them at first, even though they came from his own department.
"I don't know where you get your numbers.... I don't agree with them, frankly," he said Wednesday.
On Thursday, Keir acknowledged the numbers are correct. But he said residents would eventually save just as much as industry, if not more."
http://bit.ly/4nyFZK
"Up to March 31 replacement electricity will cost NB Power $525 million, Keir said. If the provinces miss the deadline, NB Power might have to pay the entire bill of $800 million, the minister insisted."
The fact is, NB Power makes money. Look at their annual reports if you have to. They can pay down their debt because they make money, and three separate credit agencies agree that their debt is acceptable, and further state that clearing it off the books does nothing to help the province's credit rating.
If we sell to Hydro Quebec, we are still on the hook for the Lepreau refurbishments, plus the closing of our old plants that they don't want. Without the revenues of NB Power, how are we going to pay for this? Higher taxes?
Actually if you check the government's site, they do source how they got that number. It's by calculating what we'd pay under the rate freeze from this deal, and comparing it to what we'd pay under NB Power assuming they hiked rates by 3% every year.
The problem is in the mid to long term where this deal offers zero guarantee of lower rates.
Quebec Hydro will have no use for it therefore why sink money into it. Ganong Chocolates better do the math fast because they'll be out of business when they can't afford the electricity to run their plant. More lost jobs for the east cost.
In other words, if you think its expensive now to heat your business or home, wait until this cap and trade system takes effect. By the way, cap and trade is based on climate change which appears to be a giant hoax.