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.

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One comment

  1. Dan Fitzgerald · January 23, 2010

    Hey, check it out.

    I caught a PR agent going after me about the NB Power ‘deal’ on twitter:

    http://qslspolitics.blogspot.com/2010/01/spun-in-place-to-be-nb-pr-firm-goes-on.html

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