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.