The sale of power assets and The anatomy of a debt

Just when I think I’ve heard it all. It’s hard to imagine a stranger scenario than the present storyline. NB Power was originally being sold to pay down its $4.75 billion debt, but now the sale will be for $3.2 billion. At the same time, Premier Shawn Graham has been running provincial budget deficits consistently and intends to do so until 2014 for a grand total of $3.8 billion. These figures can be found in the public accounts 2009 and the budget speech 2010 on the government’s website.

So, it’s pay down debt and then incur larger debt? What doesn’t make sense here? What most people may not understand is that replacing a funded debt with an unfunded debt is a small distinction that will cost them dearly.

Higher debt means higher taxes at some point. Paying for the new $3.8 billion debt will take about $300 million in additional revenue or service cuts by 2014. That could mean a tax increase of $400 for every resident of New Brunswick or, for a family of 2.2 persons, $880 per year.

Now, are the savings from foregone power rate increases significant enough to counteract the new provincial debt being incurred? Well, the full debt arranged by Premier Graham and the full savings implied by the sale won’t be in place until 2014, so let’s examine at that date. Energy savings for the typical household are 15.92 per cent in year five, or $473, but the additional tax burden for the average family of 2.2 people is $880. So, the net effect of government policy will be an increased tax burden of approximately $407 a year. Not so good an idea. The effect on apartment dwellers is worse, as their energy savings are minimal.

Perhaps you think that large industry, the big winner in the 2010 rate sweepstakes, might contribute towards these taxes. Based on historical precedents, we probably won’t see them at the front of the line to pay any portion.

A previous column mentioned another inconvenient fact – lost revenue streams that could reach as high as $200 million dollars per year would erase the value of this deal, such as NB Power’s “in lieu of taxes” disappearing, reduced jobs at NB Power and related tax revenue. Expressed as dollars per year, that’s another $266 per person ($585 per family).

Politics is the fine art of kicking a problem down the road to the next guy. It is also the art of misdirecting the audience. Lower energy rates here, and nobody notices the higher taxes there.

We have a bad habit of giving a leader two terms. The present occupant plans to get finances under control by 2014, when his second four-year term ends. Any new premier will inherit a fiscal mess to deal with either in 2010 or 2014.

A recent Telegraph-Journal commentary by Toby Couture made an important distinction between energy politics and the larger framework of energy policy. Lacking a rational energy policy, we might be tempted to embrace this deal, and there are indeed attractive elements. However, the numbers don’t support the framing of this deal as a “money saving” experience for residential and commercial customers.

What will likely happen is that the loss of revenue streams will negate the benefits, at least for residential customers. And quite co-incidentally, the premier’s lack of fiscal control will increase net costs to New Brunswickers for taxes and electric energy.

The idea of lowering the cost of energy is fundamentally flawed. Conservation and innovation happens with higher energy prices, and waste occurs with low prices. By choosing this approach, we ignore reducing energy usage for homes, make renewable energy policy next to impossible, and we risk losing control of our energy costs in the long term.

There’s a real alternative out there, and perhaps we can save the best aspect of Shawn’s initiative. More to come..

No information available from Government on sale of NB Power

Weren’t we promised a public debate about the merits of the NB Power sale? So far, the debate is rather stale with questions being spun, or not answered on the government web site.

The Province hired a public relations team called Hill and Knowlton to sell this deal. Are they doing a good job with so many people upset and without answers? Is that the intent?

So far, this deal presentation reminds me of the way that parents, at some point in time, take the easy way out when dealing with their children. You give the child two choices, one terrible and the other becomes the one that you want the child to choose. Then, you pressure the child to decide quickly. That makes the con work better.

Are we seeing that tactic is this case? NB Power – bad, big debt, unmanageable, uncertain future with never – ending power rate increases. On the other hand, sell to HQ – good, lower debt, managed by others, great stable power rates. Oh, and by the way, the deal is closing in March. Why do I feel like I’m being spun like a top?
Here’s three questions I sent to the Energy department over three weeks ago. While I wait, maybe one of my readers can answer me.
Question 1 – Will Saint John Energy be receiving a freeze in the wholesale rate they pay to NB Power? Or some discount to allow them to provide the proposed discounts to their industrial customers. Moosehead, served from the SJE system is not on the list of 41 companies released by the government. Are they going to receive the significant industrial rate discount like their competitor Molson from Moncton?
The MOU qualifies “direct or indirect industrial customers in the Province of New Brunswick who would qualify for the HQ “L” or “M” rates if in the Province of Québec” and class M is for customers above 100 kW demand. One would think there could be hundreds in this province. Are they not included in this deal? Perhaps some clarification is in order.

Question 2 – How does the Quebec regulatory system that we are being asked to install in NB differ from the EUB now in place in New Brunswick. More on this later.

Question 3 – I requested a copy of the background spreadsheet for the NERA report so that I could review some of the assumptions that compose the $5.6 billion rate savings. Later, I read in a news report that it doesn’t exist. We’re talking about big money here. We really should have something other than fifteen pages of words saying it’s a good idea.

One of the bigger questions that we haven’t asked ourselves: What are the economic impacts of having a takeover of a local industry?(NB Power) We are reassured that nothing will change, yet experience tells us differently.

The eventually reductions in personnel of perhaps 1000 employees at NB Power are left unspoken. That’s a normal occurrence with a takeover. Synergies will be found between the nuclear plants at Lepreau and Gentilly, Quebec. Back-office items like accounting, engineering, customer service, accounting may be relocated and about $100 million annually in payroll savings will impact on the New Brunswick economy. With income taxes and spinoffs it could be twice that.
Another stream of revenue that will slowly disappear are some contracts to local companies to provide services to NB Power. Some of these may to migrate to Quebec in-house expertise or contractors from elsewhere. It’s a natural process. Call this figure conservatively $25 million.

A third reduction is “income taxes” of $50 million charged annually to NB Power and the $25 million loan guarantee fee that will no longer be obtained.
Taken together, we could see a reduction of economic activity and revenue in the province of $200 million annually. Over a period of 20 years, the present value of that series of losses is $2.3 billion (at 6%).

Then we could add in a few one-time items like the decommissioning of thermal plants at $125 million (just a guess) and future discounts on oil from Venezuela settlement, valued at $147 million. This gives us a negative impact of roughly $2.5 billion or more.
Since a lot of the $5.6 billion in rate savings is back-end loaded, the proposed benefits of the deal would be erased in the first twenty years by negative economic impacts related to the takeover process. How will we really know if we don’t have a full and open discussion?

The process of answering questions is flawed and prevents serious debate on the bigger issues. There is no forum for serious discussion and eventually public consent to a future path. Without that public consent, Quebec undertakes serious risks related to contract legitimacy that were not present in their Newfoundland deal on Churchill Falls.

UPDATE….
8 hours after this article was published in the Telegraph Journal, I received what I like to call a “non-response” or a “response with little useful information” from a government spokesperson.

1- The background spreadsheet to which you refer is an internal and proprietary financial model which is not available for general consumption or review. However, the report highlighting the conclusions of the spreadsheet is available online. (http://www.lowerratesnb.ca/downloads/Rate_Impacts_of_MOU_en.pdf) ROY’S COMMENT – I GUESS THIS MEANS “TRUST US, WE GOT THE MATH AND ALL OF THE ASSUMPTIONS RIGHT”

2- The possible impact of the proposed agreement as it relates to the municipalities in New Brunswick continues to be under negotiations between the Provinces of Quebec and New Brunswick. ROY’S COMMENT – HERE WE ARE ALMOST A YEAR SINCE THE BEGINNING OF NEGOTIATIONS AND WE DON’T HAVE THE BASIC WHOLESALE RATE FIGURED OUT FOR SAINT JOHN ENERGY?

3- It is important to note that Quebec’s regulatory system is more stringent than ours. For example, Hydro-Quebec must go before its regulatory board if seeking a rate increases, regardless of the amount. In New Brunswick, rates can be increased by three per cent without the approval of the Energy and Utilities Board. ROY’S COMMENTS – MINOR CHANGE

As well, Hydro-Quebec must follow the regulations of the U.S. Federal Energy Regulatory Commission to continue to export energy into the United States. Those regulations require that New Brunswick operate an open transmission system, just as it does now, that allows all jurisdictions to bid for any excess transmission capacity. ROY’S COMMENTS – NO CHANGE FROM OUR PRESENT SYSTEM

For New Brunswick, a heritage pool is a new concept. The regulatory framework in Quebec is designed around a heritage pool which would become an important part of New Brunswick’s electricity system as well therefore our regulatory framework would have to reflect that.

How the sale of NB Power affects residential customers

What will residential or commercial customers get from this deal? Will anybody really notice a freeze in prices as gas and food rise? Perhaps over time. Here’s a quick way to determine your five year theoretical savings from the sale of NB Power. Just take your total electric bill for the year and multiply by 47%.

The 47% comes from avoiding compounding increases of 3% per year for five years. We all received in the mail the example of a house that uses roughly 29,000 kWh per year, who will save $1,392 over the five year period as compared to NB Power remaining owned by us.

In contrast, an apartment dweller like me, heated by natural gas, would save $327 over the same five years on an annual bill of $700. I’ve been able to control my excitement over this potential $65 a year bonanza? That’s maybe two tanks of gas or 5 bottles of cheap wine.

Before I get overwrought with our good fortune, consider how much the average Quebec resident will pay less than our frozen rates – $4,000 less over five years.
The deal is being presented as a money saver but if our goal is to save a lot of money on our power bills, then the logical step would be to get real Quebec rates for residential power. That, however, would only happen if we were citizens of Quebec. Wait now, don’t laugh, there’s big money savings here! No nasty contracts to worry about! Just one big happy family.

OK, if you’re not buying that amalgamation thing right now, what are the residential contract terms being offered to us by Premier Graham?

The proposed deal freezes NB Power residential and commercial rates for five years. Starting in year six, the energy portion of the bill (roughly 65%) would be increased at the level of the NB consumer price index. The other 35% of the bill, costs related to the transmission and distribution networks, would be regulated by the EUB, include a rate of return on investment, and be passed on to customers. Lepreau replacement energy cost deferral would fall into distribution costs and raise rates in year 6, perhaps substantially. If the deferral is $500 million, then we are talking about a 5% rate increase. As well, any costs of supply due to usage above the 9.5 TWh heritage power would accumulate and be charged in year six.

This contract is for eternity, and must conceive of unknown future conditions. Newfoundland now receives less than ¼ of a cent for each kWh they sell from Churchill Falls. Not so good a deal for them. We are going to pay roughly 8.3 cents after the deal (average of all customers)

World oil production will decline and will stress the contract in ways not considered. Although the Minister of Energy Jack Keir indicates that the heritage pool has a small margin for growth of load (I’m guessing 5% if distribution losses are included). He may not be considering the plight of oil heated homes, whose owners were starting to panic in 2008 as light fuel oil price skyrocketed. Only the fall of the economy and oil prices prevented a disaster towards wintertime.

New Brunswickers use 282 million liters of furnace oil annually as compared to the Atlantic Provinces total of 1.4 billion. As oil prices rise, about 25% of NB Power customers could turn to electric heat, and that’s 2.5 TWh of possible new load. Because this oil is used over five months of winter, conversion would require a high capacity that we would need to meet. (700 MW of peaking power, or more) Not a lot of those customers can migrate to gas due to lack of pipes in their street and we don’t have an energy plan or even a real “conversion to wood” plan.

As Claude, a reader from Quebec, quite rightly points out, the peaking character of electric heat presents a serious problem for power suppliers to meet. NB Power’s peak summer load is 1600 MW and 3200 MW in the winter. The difference is electric heat. Electric Thermal storage units (ETS) are a device that can work for residential or commercial customers and Time of Use (TOU) meters to store heat from off peak times and use it during the day but little interest has been shown by this province. We haven’t seen the need to adapt.

So we don’t want to be driving electric heat onto fossil fuel plants like Coleson Cove which has an efficiency of less than 40%, and very high fuel costs. But that is exactly what will happen without a plan. And we will go over the heritage pool limit and it will cost more than we are told.

For those who don’t believe oil prices will rise again, consider this article in the English newspaper, the Guardian: a second senior IEA source, who has now left but was also unwilling to give his name, said a key rule at the organization was that it was “imperative not to anger the Americans” but the fact was that there was not as much oil in the world as had been admitted. “We have [already] entered the ‘peak oil’ zone. I think that the situation is really bad.”

Really bad? I don’t hear a word from our government about these problems.

Is this an offer we can’t refuse?

There is a natural resistance to change that resides deep inside every one of us. Researchers indicate that acceptation of change is easier when the decision is fully explained – how it was made, why it was made, what the alternatives were, and how it will impact the corporation (in this case, province) and individuals. Based on public reaction so far, the information campaign of the government may have been deficient.

It’s been difficult for many to “buy-into” the sale of NB Power due to the change in story. For years, NB Power has been praised as a crown jewel, one that contributes greatly to the well being of the province. Now we have the spectacle of the government turning on the company, suggesting that is mortally debt-ridden, that it has been mismanaged for generations, and we need to sell it off. If the first story is now a lie, then is the present story actually the truth?

The demonization of NB Power may have merit to some extent, or be necessary to provide the “why it was made”, but it is at the political level where the buck should stop. It is the political classes who have insisted that necessary rate increases be rolled back, that their friends be hired, or not generally allowed professional management.

If NB Power is operated as a business, then it cannot respond to political influence and it’s only benefit to the province is via lower rates. On the other hand, if it submits to the chicanery of political influence, then it becomes ineffective and perhaps a burden on the public by its indebtedness. This is the classic conflict of the capitalist versus state-owned enterprise. While either can work, the principal difference is that financial discipline imposed by the state is less rigorous than the private model.

What is interesting is the path of two public utilities. In the 60’s, Quebec Hydro became the sole developer of new hydro facilities, started nationalizing the patchwork of power companies and created a huge state-owned revenue generator for their province. In 2008, HQ paid a dividend of $2.25 billion built on the wealth of hydro power.

Here, in New Brunswick, we have been on the downhill trail financially for the past thirty years for a number of reasons. In a number of instances, starting with integration of Lepreau into the rate base, inadequate rate increases encouraged debt to soar. There is a saying by mechanics that you can pay me now or pay me later. Well, we’re at that “later” time, it seems.

Our government has been negotiating with Quebec for the better part of a year and recently unveiled a framework for an agreement, called a memorandum of understanding (MOU). It is now signed and further discussion will bring forward a detailed agreement for signature in the spring of 2010.
So let’s talk about the deal as it has been presented to us. HQ proposes to pay us $4.75 billion dollars for the assets of NB Power that it wants. This includes the hydro plants such as Mactaquac, among others, the transmission and distribution system but not the thermal plants such as Dalhousie, Grand Lake and Courtenay Bay which will be closed. Coleson Cove (heavy oil) and Belledune (coal) will remain the assets of New Brunswick but be contracted to supply power at the request of HQ when needed. When judged no longer necessary, they will be decommissioned at New Brunswick’s expense.

What brings some real benefit to New Brunswick is that HQ will sign a supply contract to deliver two blocks of power annually – firstly, 4.5 Terrawatt-hours for industrial customers above 100 kW minimum demand (HQ rate M), and above 5000 kW (rate L). The existing rates would drop about 30% upon signing (6.99 cents to 4.79 cents per kWh), and follow HQ increases for the first five years
After five years, the rate increases would be determined by several items. The energy component would rise by the New Brunswick Consumer Price Index (CPI-NB).

Although the CPI has typically run at 1.9% in recent years, it could rise considerably higher in inflationary times. Given the printing presses pumping out US dollars south of the border, we could be in for significant inflation in the near future.

As well, any power usage greater than the 4.5 TWh heritage pool would be supplied by prices bid in a competitive process governed by the EUB, our public regulator. We don’t know much about this process but we can safely assume that the price would tend to increase rates of the original pool. The transmission and distribution component of the rates would be determined by the EUB based on giving HQ a return on its investment in those facilities. How much will this add to the “1.9 %”? Given that we must upgrade the links with HQ, it could be significant.

We do know that the savings in the first year to industries is $91.6 million or roughly 80% of the benefit, according to a CBC report. According to the President of HQ, Thierry Vandal, it was New Brunswick who decided how the division of benefits would be accorded. If we were to consider only the industrial benefits package, this would indeed be an offer quite difficult to refuse. But there is much more to this story.

NB Power sale to Hydro Quebec – The jury is still out

Like a few brave souls, I haven’t yet made up my mind on the possible sale of NB Power. To me, one should listen to all of the facts first.

Most New Brunswickers have one concern about the proposed sale of NB Power to Hydro-Québec: what will the impact be at their power meters?

Last week, it wasn’t immediately clear to me what motivates the Hydro-Québec purchase of NB Power. After all, we’ve been next door since forever; we’ve traded power back and forth (mostly towards N.B.) and I’m sure it’s been good for both utilities. So why the purchase proposal at this point?

Since then, I’ve done a little research – looking into Hydro-Québec’s strategic planning document on their website. They foresee an 8.5 terawatt-hours reduction of sales to industry and business based on the recent economic downturn. That figure is equivalent to 60 per cent of NB Power’s total annual load. Most interesting is that 25 per cent of the reduction is from the pulp and paper sector in Quebec (2.2 Tw-h). Industry in New Brunswick sees the lower priced energy coming from HQ as part of the solution to their survival. In the Quebec example, lower power rates alone do not guarantee survival.

According to Hydro-Québec, with upcoming expansions in their capacity, “by 2013, we will have nearly 24 TWh at our disposal.” The plan is to export more to Ontario, New England and even into the American Midwest. Now New Brunswick will feature more significantly.

Close to 40 per cent of Hydro-Québec’s profits come from export sales. That’s only natural when your average cost of production is presently 2.2 cents per kWh and the retail cost of energy in New England is roughly between 15 and 20 cents U.S. for residential rates. However, the average retail cost of energy in New Brunswick is only 9.5 cents, giving a lower return than in the U.S. Perhaps New Brunswick is an export road to New England – or, as Newfoundland suggests, perhaps this is a way to tie up existing capacity through New Brunswick.

Historically, N.B. has exported considerable power through its major tie line with Maine. Seeing further possibilities, it constructed a second line in coordination with U.S. utilities in recent years. According to new rules by FERC, the regulatory agency of the U.S. government, utilities must provide access to other utilities to transmit power across their network (for a regulated fee, of course). The auction of capacity on the new line was reserved by Hydro-Québec in 2008 for an annual fee of $10 million. Bingo – the new transmission line blocked off, even though it is little used at this moment by Hydro-Québec. Now, if the proposed sale of NB Power goes through, the original export transmission line is in the hands of Hydro-Québec.

The first benefit to Hydro-Québec is that N.B. will serve as a flexible market for Quebec’s hydro power, ramping up or down local plants as required by Quebec system operators to make the most profit. Plants like Coleson Cove, which burn expensive fuel, will be under contract to Hydro-Québec, probably for winter peaking power. Theoretically, it should operate fewer hours, and that’s a good thing.

Secondly, the proposed agreement would secure a large part of the New England market for Quebec hydro power. That means that P.E.I., trying to export 500 MW of wind power, or Newfoundland with dreams of the Lower Churchill project, will be at the back of the bus. One exporter to New England means no pesky competitors to drive down margins.

Newfoundland could request more capacity from New Brunswick (as per FERC rules) and it would eventually happen, but south of the border, it could be blocked in by a lack of transmission capacity in the U.S. There have been numerous examples of public opposition stalling lines, causing bottlenecks across the U.S. – ironically demonstrating how U.S. law may be more effective in Canada than in their own country.

Perhaps the most significant impact, by delaying transmission paths for Newfoundland either through Quebec or New Brunswick, is the financial uncertainty that accrues to Newfoundland’s financing of the Lower Churchill project, a project that could cost up to $10 Billion and provide 2800 MW’s of power (16.7 TWh).

The legacy of the original Churchill contract between Newfoundland and Quebec remains until 2041. It’s a complicated story, but suffice to say that nobody has disputed Danny William’s assertion that $22 billion of the benefits have gone to Quebec and $1 billion to Newfoundland. The business purists among us would say that a deal is a deal, but shouldn’t we, among provinces, brothers and sisters, search for a greater justice than simple legality? Can I feel comfortable as a Canadian if either Quebec or Newfoundland were unjustly mistreated?

Quebec deserves great credit for their vision and perseverance to develop the hydro resources of its province. However, the lessons learned by Newfoundland have relevance to any contract that New Brunswick may sign with Quebec. As well, for us to sign a contract without ensuring that the aspirations of Newfoundland are fully addressed is detrimental to my vision of a just Canada. In the absence of leadership from the federal government, it remains crucial that Premier Graham modify this agreement in a way that respects all members of this confederation.

What is tragic in this energy competition is that we (in Atlantic Canada) will need all of the hydro power that we can find in coming years to replace fossil fuel for heating homes and businesses in New Brunswick (20%), Nova Scotia (65%), PEI (80%) and Nfld. We burn 1.4 billion litres of furnace oil each year in Atlantic Canada. That’s equivalent to 12.7 TWh or close to the output of the proposed Lower Churchill Falls project. The needs of Atlantic Canada could use most of it’s output before even sending it south of the border. It’s not a case of whether we must have only one winner, Quebec or Newfoundland. We need both and right now.

My next column will look at the deal being offered.

Let’s look at the facts

The announcement of the tentative agreement to sell NB Power is a game changer on the Atlantic Canada political scene, with severe reverberations hitting Newfoundland and to a lesser degree, Nova Scotia. Only Quebec, the originator of the storm, seems immune. Of course, Quebec is 10 times larger than New Brunswick, so the $4.75 billion proposed purchase of NB Power is relatively small potatoes compared to Hydro-Québec’s debt of $35 billion. With total assets of $67 billion their debt-to-asset ratio of 53 per cent is quite healthy.

One of the facts of business life is that most businessmen don’t make difficult choices until it becomes absolutely necessary. Shawn Graham, as CEO of this province, is no different. Nearing the end of his first mandate, he has two financial problems looming – first, the provincial deficit is ballooning and $1 billion may be added for the current year.

Secondly, delays in the refurbishment of Point Lepreau have delivered extra costs to NB Power for the purchase of replacement power. This would make a rate hike unavoidable, and certainly unwelcome before an election.

Given that discussions began early in 2009, it is likely that a sale of NB Power was seen as the neutralizing agent to fix these potentially fatal electoral roadside bombs.

Let’s look dispassionately at the proposal. What is the reality, what is just spin and what is just not true? There are many talk radio shows going on and I’ve listened to a few. Citizens are concerned and want answers.

One of the recurring themes of callers is the idea that Quebec is suspect and their hydro company cannot be trusted to provide power to New Brunswick. We might call it fear of the unknown or fear of significant change in our lives, xenophobia or in some cases Francophobia.

Leaving aside the Quebec-Newfoundland issues related to Churchill Falls for the moment, most observers would say that Hydro-Québec is a well run-utility that is professional and technically competent. Like all large organizations within the state sector and often the private sector, the productivity of employees may leave room for improvement. This also is the case at NB Power, which has consistently avoided making those tough management decisions. (NB Power does find the time to address and implement management bonuses.)

Hydro-Québec regularly delivers power or contracts with utilities south of the border and one doesn’t hear of broken contracts or poor performance. In fact, given the worst case of a separate Quebec outside of Canada, wouldn’t it be extra important for credibility of the new state to fulfill all contracts signed by state organizations like Hydro-Québec?

Could we set aside the Quebec-baiting or fear factor and understand that our own failure to manage NB Power is not the fault of Quebec or their utility?

A second theme mentioned by the government and by some citizens is that NB Power’s debt is unmanageable and we would be unable to reduce it. Not so. For example, under the management of Jim Hankinson between 1996 and 2001, NB Power reduced net debt by $423 million. There is a natural pattern of capital expenditures on new plants in some years and subsequent debt reduction in following years. It happened again after the Coleson Cove rebuild. What remains crucial is good operational cost control and that ongoing capital costs are cut to allow debt to shrink quickly after a major project.

If we compare NB Power’s rates with many others, we can see that the rates are very reasonable. Residential rates in N.B. are 11.66 cents; N.S. is 12.88, and P.E.I. at 17.3 cents; Calgary charges 12.13 cents and New York, 25.3 cents. Only the provinces with significant hydro power, such as Manitoba, B.C. or Quebec, are lower. The same is true for large industrial rates. Ontario charges a cent and a half more than N.B., and who has more industry than our Upper Canadian brothers?

Let’s not fool ourselves that debt at our utility was the reason for the sale or the most important factor. But ever since the building of Lepreau, we haven’t wanted to pay the real cost of electric power, and political leaders from Richard Hatfield down the line wouldn’t bite the bullet and allow rates to rise to lower the debt level. As well, management at NB Power hasn’t controlled costs on a consistent basis. The debt is high but manageable on every level but political, it seems.

We’ve only begun the peeling of this particular onion. This story is quite complex for one column, so let’s look at the self-sufficiency agenda, emissions, peak oil, Newfoundland and lower power rates, on another day. Hopefully, our eyes won’t water too much when we discover the rest of the story.

The Future of Local Food

This op-ed appeared in the Moncton Times Transcript as an introduction to local food and a talk by radio host Jon Steinman (of “Deconstructing Dinner” fame)

“For climate change; for water; for energy; for all sorts of reasons our diet is going to change. Consumers are not going to like it, although it is probably going to be healthier and definitely more sustainable,” says Tim Lang, a Professor of food policy.

Later this month, we’ll be talking about food in greater Moncton. It’s one of the essentials for life, along with housing. It’s part of our daily social interactions. Yet, we take for granted the existence, quality, and cost of our daily sustenance.

Most of us have noticed the decline of agriculture in New Brunswick over the past century in favour of factory farms and corporate concentration in the processing sector. This is a global phenomenon. Should food be just a commodity like all others? Did you ever wonder why there are 850 million people in the world without sufficient food and over a billion who are obese?

Is there a way to provide a fair living for farmers, improve the economy of our province and increase food security for the people who live here? What is community supported agriculture? What is the effect of processed food on our health? Should we be worrying about the food that we put into our mouths? These are just a few of the questions intriguing to many consumers.

Leading the presentation and discussion at the Dieppe Market will be Jon Steinman from Nelson, British Columbia. His remarkable radio program entitled “Deconstructing Dinner” serves as a sounding board for his belief that “food deserves far more attention than it currently receives and that we owe it to this planet and each other to fully understand the implications of our food choices.” His broadcasts bring together farmers, journalists and researchers who “deconstruct the issues” to provide deeper context to consumers.

Those of you with an internet connection can access past programs at any time via podcasts. A podcast is simply a file found at a website that can be opened by your computer to play an audio recording. In other words – radio when you want it. A wide ranging list of food related topics is covered by this unique program that is heard on 34 radio stations. http://www.cjly.net/deconstructingdinner/

The Fundy Biosphere Reserve, the New Brunswick Food Security Action Network and Post Carbon Greater Moncton are partnering to bring Jon Steinman here. Jon brings innovative ideas that may generate community interest to meet the increasing demand for locally produced food.

While we presently see the widest variety of food at our local supermarkets from all points of the globe, Post Carbon believes that food security will become an important issue in coming years. Today’s global market is only possible with cheap and accessible fuel, a prospect that will be changing in the near future.
Your food travels thousands of kilometers to get to your plate – for example, lamb from New Zealand, vegetables from Mexico, or water from Fiji, if you can believe it.

Such a long chain needs a considerable energy footprint, and leaves us vulnerable to transportation glitches or economic damage in the producing countries that will be caused by price spikes following a permanent decline in world oil production. An “oil crunch,” to put it politely, is expected in the next few years by the chief energy economist at the International Energy Agency.

Based on the wonderful Deconstructing Dinner programs that I’ve heard on the internet, I’m looking forward to a very interesting talk by Jon entitled “The future of local food.” It takes place at the Dieppe Market on September 28th at 7:00 pm. A bilingual discussion period will follow. Admission is free.

Be… in this place (without a doctor)

Respect is a universal requirement. We all need it. Country songs bemoan the lack of it. (“Take this job and shove it”). Aretha Franklin had a song called “RESPECT.”

Doctors are suing the New Brunswick government for reneging on a tentative salary deal. According to the president of the N.B. Medical Society, “The proclamation of Bill 93 is a bitter reminder of the Shawn Graham Government’s total disrespect for the negotiations process.” Unfortunately for the doctors, a serious decline in government revenue forced Premier Graham to consider a wage freeze.

There is a delicious irony that recalls the NB Power v. Venezuela case. We insisted then that a deal which had been negotiated, but not officially signed, was valid.

Is Premier Graham trying to have it both ways? It seems so.

So, what’s the point of this lawsuit? It’s about the money, of course. The negotiated settlement of $35.6 million would have brought each doctor a $24,000 increase, on average. That’s an eight-per-cent wage increase. The final contract will not ensure that all citizens have a family doctor. It won’t provide for creative and sustainable solutions to medical care.

One in every five health dollars goes to pay doctor’s salaries. The 2007/2008 global wage budget of $455 million, shared by 1,482 doctors, gives an average salary of $304,000 per year. Typically specialists make more and general practitioners make less. To be fair, there are expenses for a receptionist, office and related things. But all in all, far from poverty wages.

Eight per cent of the 750,000 New Brunswick residents don’t have a family doctor, the gatekeeper for entry into the health care system. Those 60,000 people aren’t too happy that governments didn’t act on the demographically predictable aging of physicians.

The province is presently served by 723 general practitioners and 759 specialists. The College of Family Physicians suggests that each family doctor should have approximately 1,200 to 1,500 patients. If this is true, we should have between 500 and 625 GPs. Theoretically, we have enough but emergency room doctors, those in management or semi-retirement perhaps make the difference.

The government is committed to adding 50 doctors in the next few years, which should fix the problem. The question for many people is, when?

Couldn’t we bring doctors in from Cuba or Mexico into New Brunswick on a temporary basis to fill the gap until we train other doctors? We do that with welders or many other trades. Talk to anyone out in Alberta.

Logic would say yes, but the doctors’ union is very tough. Canadian immigration permits a foreign doctor into Canada based on credentials, but provincial medical societies refuse to accept those same credentials in many cases. Better that they drive a cab for a year or two to gain Canadian experience. Should Canadians die from no treatment, or have a foreign-trained doctor examine them?

You, like me, may be one of the 20,000 people on the Regional Health authority waiting lists for the next available doctor. There’s a recording, “Leave your name and number.” Several months after I left my name and number, someone called me, but that was a long time ago. No explanations and no personal touch. The whole system radiates lack of respect.

Recently, I called an after-hours clinic to schedule a prostate exam. Apparently, they don’t do that. They said I should go to the emergency room at the hospital. That is too funny! I instantly had this mental image of me trying to explain to the triage nurse what I wanted. Her response would probably be, “This kook will wait here for three days.”

So what are eight per cent of New Brunswickers to do for the gaps in our medical needs? Continue to pay our taxes for medical treatment we don’t receive? I could have prostate cancer developing and wouldn’t know it until too late.

Perhaps we should look south at the experience of Cuba. According to some evaluations, “Its public health indicators are consistently similar or superior to those of wealthy, industrialized nations such as the United States and Japan. Cuba’s per-capita GDP, however, has more in common with Third World countries such as Indonesia and Bolivia. Their solution has been built using low-cost, high-impact techniques in preventative medicine, primary care and community education.”

Cuban society is fairly egalitarian but poor. People make roughly the same amount of money. Doctors make $20 a month, which is $240 a year. Put another way, the average Canadian doctor works less than two hours to make the annual salary of the Cuban doctor. Cuba has sent doctors to Venezuela and other countries as a way to earn foreign exchange. I suspect they could provide 50 doctors to New Brunswick until we train more local students. Alternatively, Mexico has doctors who could fill in for a short term.

Doctors are better respected than most in our society. It would be nice if that respect was extended to those paying for Medicare but not having access. Is it time for us to organize politically to ensure that the situation is solved quickly?

Develop an energy strategy that serves New Brunswick

Building a new oil refinery with a price tag of $8 billion was never going to be an easy task, but saying goodbye to a project where millions have been already spent must be quite difficult.  Collateral damage may include employees losing work and the investments made by individuals in the community expecting a boom.

There is always a risk of becoming emotionally invested in a concept, whether it’s private or public sector managers.

According to news reports, Irving Oil now sees declining customer demand for gasoline “from 2015 out for the next 25 years.” They didn’t divulge the reason for the decline, despite an expanding U.S. population. One likely cause is the reinvigorated corporate average fuel economy standards (CAFE) in the U.S. gas market and hence in Canada. The new refinery would have added capacity into a declining market.

But looking beneath the surface, rising oil prices in 2007 and 2008 made it clear that we are reaching a tipping point in world oil supply. About 40 of the world’s 54 oil producing countries have passed peak production and are declining. Reduced supply means fewer refineries, as I noted in a previous column from 2007.

Has the present government become so emotionally attached to its self-sufficiency agenda and “energy hub” job strategy that they reject the reality of an oil production decline in coming years with its consequential economic chaos? Or is it just saving face until the next election?

Self-sufficiency, as proposed by Shawn Graham, was fatally flawed from the beginning.

It was based on growing a larger population, a strong industrial economy and sufficient cheap energy, all of which are unlikely in the next decade.

With the passing of the refinery project, the “energy hub” seems an empty shell.

There is talk of an Irving wind power export project, which is like assembling Lego blocks made elsewhere – few construction jobs, and few or no permanent jobs. A related concern: do we want to use the best wind sites for export power rather than local use? A proposed natural gas plant is comparable, giving some short-term construction work but few permanent jobs.

The fallout from the refinery decision means expected tax revenue will not materialize.

Based on reduced revenue expectations, one would hope that the expenditures of government (both capital and ordinary) would be reviewed. As an example, New Brunswick’s latest budget proposes spending $160 million on new technical schools and programs, which were partially intended for training of refinery construction trades.

Demographic forecasts of a 20-per-cent reduction in student population in coming years and with more distance education, would see significant spare capacity in existing“bricks and mortar”institutions.

Does this expenditure still make sense? Perhaps lowering tuition would keep the institutions filled in coming years.

Having misunderstood the threat of an impending energy crisis, it’s time for Premier Graham to return to the basics of government.“Government intelligence” could produce an energy policy that meets our needs.

Should new homes have to meet an energy code? Is Efficiency NB making a serious impact on heating costs for existing homeowners? I recently talked to a hard-working woman in the process of being cut off from electricity. Due to misfortune and remarkably high bills, she couldn’t catch up from the high winter costs. This is real life for the less fortunate among us.

What is the role of wood in New Brunswick for heating homes? Why can’t NB Power reduce its winter peak? Should NB Power be consolidated and work on improving operational efficiency and reducing costs? Should new appliances sold have to meet energy efficiency standards? Since we are facing an impending crisis of very high gasoline prices and energy shortages in the near future, should we be setting a floor price for gas to encourage the purchase of high-efficiency vehicles? Would incentives help us? What about mandatory standards for vehicle mileage or speed limits?

These are but a few of the questions that I would ask the premier. Will he change course? What will be his legacy? His three years of power have shown little progress in setting a new course on energy. Considerable time was occupied in the energy department marketing the “energy hub” idea.  Being a strategy for job generation, it should have been handled by Business New Brunswick.

Who are the losers with three years of an energy policy abyss? The people of New Brunswick, who won’t be prepared for hard times.

But it could be worse, I suppose. Mexico is again facing large decreases in government revenue, as their oil exports declined 14 per cent during the first half of 2009. That decrease of 200,000 barrels a day amounts to $4 billion less revenue for Pemex, the state oil company.

Why solar thermal energy still shines

Is the sun a renewable resource?  Well, technically it isn’t, as it will burn out in about five billion years.  But for all practical purposes, 5 billion years is the same as a renewal source.  In contrast, world oil production started in 1859 and will start declining sometime in the next five years.  So, what’s the most reliable natural resource to provide our hot water from for our homes? The sun, oil wells, or electricity?

Remember that electricity in New Brunswick is roughly 60 per cent from fossil fuels.

If you chose the sun, you may be on to something sustainable.  People thinking about solar energy systems may confuse solar thermal with solar photovoltaic (that provides the electricity for your calculator).  One of the types of solar thermal uses a liquid, propylene glycol, to avoid freezing concerns while effectively transferring heat from the sun to your hot water.

A typical collector consist of a number of black-painted aluminum fins or plates bonded to copper tubing in a box that’s covered by a tempered glass cover. The glycol is pumped through the collector on a roof or wall, absorbs heat and transfers it, through an exchanger, to a storage tank for use when required. The interesting part is that there’s no charge for the energy provided by the sun, so it’s inflation-proof.

At the surburban home of Gordie Smallwood of Moncton, you can find a solar thermal system he’s built with reclaimed collectors. The collector area on his roof is 160 square feet (roughly 8 x 20 feet). That’s bigger than your typical system. His hot water is totally solar heated, with the excess going to partially heat the house.

As Gordie explains, “this is not rocket science. The technology has been around for a long time and there are lots of good manufacturers out there.” The day I saw his unit, the collector output was at 140 degrees Fahrenheit.

I also spoke with Gordon MacDonald of Harvest Energy Solutions about solar thermal. He suggested that people take all of the energy conservation steps that they can as a first step to energy independence, being the biggest bang for your dollar. Each site has challenges as the building may not have a good southern orientation, the angle of the roof may be less than optimum and shading may exist. The roof structure should be in good physical shape to support the weight of the collectors, and space is required for the storage tank, among other considerations.

The cost of a system will vary depending on your requirements – how much heat can you effectively use? For example, the heating demand of a home varies greatly in a winter and is not required at all in the summer. However, hot water heating requirements are relatively stable throughout the year and therefore more economic to design for.

Apparently, commercial and industrial users of large quantities of water are the big winners with solar thermal, as the economies of scale kick in and many companies use hot water only during the day, minimizing storage requirements. Paybacks are quick.

So, if there is an economic advantage, why aren’t more residences and businesses using solar thermal? Very simply, initial installation costs are in the thousands of dollars, and you can rent an electric water heater from N.B Power for less than $10 a month. Which would most people logically choose? Lower first cost wins almost every time. In addition, there are few installed systems in New Brunswick to serve as comfort for those of us who only believe in what we see. Lastly, with a small number of retailers and trained installers, you may understand why solar hasn’t heated up our interest.

The federal government has several programs that reduce payback time and stimulate the industry. The EcoEnergy Retrofit program provides $1,250. The temporary Home Reno Tax Credit has a maximum benefit of $1,350. And there may be others. Be careful to ensure that you qualify and that you follow all the right steps.

In Kingston, Ont., the utility will provide a two-panel unit for $49 a month. Larger sizes are slightly higher. You can also purchase the system for $5,000, not including installation. Other utilities in Canada are getting involved as well, including Manitoba Hydro, Enmax and FortisBC.

What could New Brunswick do to encourage solar water heating? NB Power provides hot water tanks that use electricity at a monthly rental rate. That electricity mostly comes from non-renewable sources (oil, coal, and natural gas). The province could require NB Power to lease solar thermal hot water systems, as well. At 10,000 new systems per year, that’s 20,000 collectors or more. These could be produced locally if we chose to do so.

If you include all of the installation work, you have the start of a new green industry in New Brunswick.