Industry big winner
Published Friday October 30th, 2009
NB Power | Status quo for residential power users for five years
New Brunswick homeowners will continue to pay almost 70 per cent more for electricity than residential customers in Quebec after Hydro-Quebec buys most of NB Power for $4.75 billion.
While big industry in this province will see a reduction of up to 30 per cent in its power rates under the deal, New Brunswick homeowners are only getting a five-year freeze on their electricity bill.
Despite that, Premier Shawn Graham said the sale of NB Power to Hydro-Quebec is a good deal.
“For New Brunswickers, the benefits are numerous,” he said.
“Lower power rates for New Brunswick residents and New Brunswick businesses in every corner of the province.
“About $5 billion worth of lower rates, with 60 per cent of the reductions going to residential and small-business customers.”
Graham and Quebec Premier Jean Charest signed a memorandum of understanding (MOU) in Fredericton on Thursday that, if approved, will see Hydro-Quebec buy most of the assets of NB Power for $4.75 billion in March.
Combined with the rate relief, the deal is worth nearly $10 billion.
The memorandum of understanding includes a five-year freeze on residential electricity rates.
“The five-year rate freeze would preclude (scheduled) rate increases of at least three per cent per year and save the average home that heats with electricity about $1,400 (over five years),” said Graham.
New Brunswick’s residential rate is 11.66 cents per kilowatt hour and Quebec’s rate is 6.87 cents per kilowatt hour.
With the rate freeze, New Brunswickers will pay almost 70 per cent more than Quebec residents.
But the MOU states New Brunswick’s large and medium sized industries would pay the same as industries in Quebec.
Graham was asked Thursday why New Brunswick residential rates weren’t reduced to the same level as Quebec residential rates.
He didn’t directly answer the question but said it was a question of balance.
“We wanted to eliminate debt to the province of New Brunswick for the future children and grandchildren of this province. At the same time, we wanted to look at how we could bring forward real rate relief.”
Finance Minister Greg Byrne was asked the same question during an editorial board meeting at The Daily Gleaner after the signing of the MOU.
“Could we have negotiated a deal for a reduced residential rate? Yes, we could have,” he said. “If that was on the table as well, clearly, that is going to affect the value of NB Power, the value of the asset sale.”
He said Hydro-Quebec wouldn’t be willing to pay the same amount that it’s paying now under this agreement if residential rates were reduced.
“So we would end up leaving additional (NB Power) debt on the table,” said Byrne.
“Whether that would be another billion dollars, $2 billion, it would depend on the reduction of those (residential) rates.
“Would that be in the best interest of the public? We believe that it wouldn’t be. We believe this is a good deal.”
After five years, the agreement calls for residential rates to rise no faster than the rate of inflation in New Brunswick plus the cost of whatever new generation capacity is constructed.
The rates for industry aren’t frozen.
The deal also includes Hydro-Quebec taking on any further cost overruns at the refurbishment of the Point Lepreau nuclear power plant.
In addition, the MOU eliminates future risk of replacing NB Power facilities.
Replacing the pump house at the Mactaquac dam in 20 years alone will cost an estimated $2 billion in 2009 dollars.
Charest said Quebec benefits from getting ownership of NB Power’s best assets, access to the New Brunswick market and most importantly access to the rich New England market through NB Power’s electricity distribution network.
“New Brunswick has great geography,” said Charest.
Hydro-Quebec president and CEO Thierry Vandal said his utility expects to earn 10 per cent on its investment.
The province hired Washington, D.C.-based consulting company Nera Economic Consulting to look at various models of future rates and expenses at NB Power.
The Graham government has also hired the merchant banker Macquarie Capital Markets Canada Ltd. to consult on the price of the purchase.
“I acknowledge that there is a lot of detail here to digest,” said Graham.
“This is a significant change in a corporation that belongs to all of us.
“Concerns will have to be heard. I will advocate for this agreement but I will also take time to listen.”
He said he’s setting up a legislative committee to provide input on the necessary changes to the regulatory system.
“I urge the people and businesses of our province to review this proposed agreement carefully, become informed about it and let us know what they think and what it means to them as New Brunswickers,” said Graham on Thursday.
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Nothing for the common man,
Politics as usual.
1) We in NB have been overpaying to the point of being criminally gouged.
2) We homeowners are not catching the same break that business will be getting. We have been told that this is a good thing, that the price will be locked in for 5 years and then adjusted up or down based on cost-of-living adjustments.
So let's look at this. HQ will be getting 70% more money for their product. With that 70% it is estimated that in 4 to 5 years (maybe less) that the cost of acquiring NB Power will have been recovered.
So don't you think that it is a wee bit ironic that NBers will be paying off the HQ purchase for them?
And just think Irving is filling their pockets with money saved.
What ticks me off even more is that they think we are stupid by telling us how good of a deal this is.
We have been sold out to a foreign government and we will pay for it. Shawn Graham should be put on trial for crimes against intelligence.
Ed
The citizens will have there say on this issue some day soon you have 11 months to Govern have fun.
Richard Enrico