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Tuesday, November 17, 2009

Should Newfoundland and Labrador Buy NB Power?

Should NALCOR – Newfoundland and Labrador’s Energy Corporation – make an offer to purchase New Brunswick Power?

Thought it may sound odd just stop and think about it for a minute and you might find the idea has some merit.

Many people of New Brunswick are torn over the proposed sale for one or more of 3 primary reasons.

First, they are rightfully concerned about giving up their sovereignty over provincial resources and power lines.

Second, while the deal contains benefits for big business many are not convinced the it would be a good one for the average consumer.

Third, there is the stigma that comes with selling the farm to a province that has been on the brink of separation more than once and may well be again in future.

From the Newfoundland and Labrador perspective the sale is worrisome because it will give Quebec a stranglehold on power transmission into the U.S. for the planned Lower Churchill project. Not to mention total control of power distribution from the Upper Churchill when that resource is finally returned to Newfoundland and Labrador’s control in 2041.

Other stakeholders, including Nova Scotia and some Eastern U.S. States are worried about a single entity controlling all power imports & exports in the region as they have every right to be.

If, on the other hand, Newfoundland and Labrador were to make an offer for the utility the dynamic would change dramatically.

Not much would change with the public concern over giving up sovereignty of their resources but those concerns might be eased a little knowing that control was being ceded to another Atlantic Province rather than the control of a jurisdiction that might suddenly decide to separate from Canada altogether.

Anyone who has paid the least bit of attention to this entire issue knows full well the only ones who will truly benefit from this agreement are Hydro Quebec and the larger corporate entities in New Brunswick. Not the average rate payer.

It is those large industries, including J.D. Irving, that are driving the deal so, one way or another, the sale will likely be made. In New Brunswick when the Irving’s speak the halls of government shake and things get done.

But what if a competing bid were available that included all of the benefits offered to New Brunswick corporations in addition to improvements on what rate payers could expect?

What if that offer also eased the minds of other stakeholders by ensuring that Hydro Quebec didn’t gain a monopoly over transmission in the region?

What if that offer would also provided Newfoundland and Labrador with its own route from the Maritimes into the Eastern U.S, potentially saving the Province countless millions in transmission fees down the road?

Most assuredly the cost of such an offer would be high, but wouldn’t it be worth it in the long run?

With such an offer the debt load of NALCOR (or by virtue of ownership, the people of Newfoundland and Labrador) would rise by about 4-5 billion dollars. That’s a lot of money but over the past 5 years or so the Province has paid down that amount of debt or more meaning it can likely afford to make such a move. It might inhibit their ability to finance the Lower Churchill project, perhaps even postponing it 5 or 10 years but in the end Newfoundland and Labrador would not only be able to build the project but would own the means to distribute the power from it.

In return NALCOR would forever rid the Province of the albatross its carried around its neck since the 1960’s by no longer being forced to deal with Quebec every time it wants to wheel power to other jurisdictions.

Purchasing New Brunswick Power would not just position Newfoundland and Labrador for future project revenues. Make no mistake about it. Hydro Quebec did not venture down this road without knowing full well there’s money to be made. In fact they’ve admitted they expect a 10% return on investment right away.

Since the money to paid for the purchase will be used to get rid if the NB Power’s debt, the buyer will be getting a company that’s debt free. Even with the financial woes currently plaguing New Brunswick Power the company still pulls in revenues of more than 1.2 billion a year. That alone is many times more than Newfoundland and Labrador sees from the massive Upper Churchill power plant.

The existing MOU between New Brunswick and Quebec Hydro allows either party to opt out at any time between now and the end of March. This means there is an open window of opportunity for Newfoundland and Labrador to walk through.

If the political will is there, this might be a chance to make a “new and improved” offer to the people of a neighboring Atlantic Province that would also force the hand of the government of New Brunswick. It’s one thing to face a political backlash for ignoring the will of the people by signing a questionable deal with Hydro Quebec. It’s quite another to sign such a deal when a better and far more palatable one is there for the taking.


Patriot said...

Email from NB MP

Dear Myles,

I appreciate you taking the time to share your opinion on this important matter that the Province of New Brunswick is selling NB Power to Hydro-Quebec. I totally oppose this sell out of NB Power. At no time it is the mandate of Shawn Graham, Premier of New Brunswick to sell NB Power, especially since he repeatedly promised that he would not sell NB Power. This promise was an electoral promise made in 2006.

The problem here is not with the buyer, but with the seller. If Mr. Graham wants to sell NB Power, this should be done as part as the next provincial election debate. Mr. Graham talks about self-sufficiency. By selling NB Power, he brings this long-term self-sufficiency to a halt. Plants will be closed and jobs will be lost.

There is nothing in this deal for the people of New Brunswick. It only includes a 5 year rate freeze. On the other hand, businesses get a 20% discount on their electricity bills. Also, NB Power assets could be sold out with a one year notice. This is completely unacceptable.

NB Power belongs to the people. Let them get involved. He should put his seat at risk by taking this matter to the next provincial election.

Yvon Godin, MP for Acadie-Bathurst

Patriot said...

Email from yet another NB MP

Dear Myles,

Thank you very much for writing to express your views on the sale of NB Power.

When it comes to this issue, I agree with the Leader of the Opposition in New Brunswick, David Alward, that Premier Graham has no mandate to go ahead with the sale of NB Power.

NB Power belongs to the people of New Brunswick. Also, the process surrounding the sale is seriously flawed because it is going forward without adequate consultation. Moreover, the developments that have occurred recently are especially unfortunate, since Mr. Graham previously promised that NB Power would not be for sale.

Accordingly, I share your concerns about the sale of NB Power. Please do not hesitate to contact me with any additional questions that you have about this very important issue affecting our province.


Rob Moore, MP
Fundy Royal

Anonymous said...

Jingles says.....Thank you for your very well written blog. It is refreshing to read a blog without partisan politics spewed out all over the place. Your suggestion is one of definite reason and why not? It would be an economic move that would benefit all Newfoundlanders for years to come including the Great Mr. Ed. The Newfoundland Government ought to pursue your suggestion now. Thanks again for your objective blog. A former Newfoundlander who would be estatic if Newfoundland were to reach the heights of its potential. I'd move back there in a flash. Cheers, A. Morris