Saturday, December 12, 2009

On the NB Power Sale

I am in broad agreement with the argument presented in this article.

The crux is the following: NB has no internal energy resources except wind, a limited amount of hydro, and a very limited amount of gas. If we're lucky, we'll discover uranium and have the argument about whther to mine it.

The current generating capacity using coal and oil is (a) environmentally unsustainable, and (b) increasingly expensive. In short, we cannot rely on it.

Wind is a viable alternative. However, wind power capacity costs on average at least a million dollars per megawatt. http://www.nrel.gov/docs/fy07osti/41435.pdf It's a fantastic investment, and we should make it, over time, but the cost to generate 4000 megawatts is 4 billion dollars, which we cannot afford carrying existing NB Power debt and provincial debt.

I agree that there are concerns about the proposed deal. That's why it is important to remember that it is an MOU, not a signed contract, and that during this period of consultation before the final signature it is important to highlight areas for improvement.

LePreau is LePreau and we are going to encounter huge costs no matter which way we go on that.

NB power rates are roughly twice Quebec rates. The five year freeze should equalize that a bit, but then the inflation clause kicks in. There should be a condition linking NB rates to Quebec rates, so that power costs cannot be used to create a competitive advantage. Ideally, we should push for parity (absent transmission costs).

Additionally, we need to be clear about our capacity to build and manage parallel infrastructure. This includes the wind, which we will build, and the thermal, which we will eventually decommission, but also transmission lines, which we could build for Newfoundland and Nova Scotia.

But these are minor factors, and should not be seen as over-riding reasons to reject the agreement. They are conditions that can be negotiated. There will be a cost to them, but we may be willing to bear that cost in order to ensure energy independence.

Delaying the agreement also has a cost. There is an expected price increase, the latest in the series of steep and annual increases from NB Power as it tries to dig itself out of debt and fiasco (orimulsion, LePreau).

And there is the ongoing cost - more than $400 million annually to service the NB Power debt, increases in the costs of raw materials, the ongoing need to refurbish ageing infrastructure, the continual loss of industry to cheaper energy markets like Ontario, Quebec and B.C.

The status quo means, simply, that we will continue to overpay for power, and that there will be no industrial development in NB, and that the industry we have will become less and less competitive as costs rise. It's not acceptable.

The opposition is saying that we should hold a provincial vote on the matter. That is why they advocate for a delay on the issue.

But what they really seem to hope for, I think, is a repetition of the highway toll case, where a single issue topples the government. We should not link NB Power with an election, for two reasons:

1. We may be replacing what is a reasonably competent government with one which, up to this issue, failed to demonstrate the capacity to even be an effective opposition, much less a government.

2. On the issue of selling NB Power there is actually no distinction between the two major parties. The Conservatives also wanted to sell NB Power, and made structural changes to enable this sale, but were unable to find a buyer. The odds are excellent that, even if they were to win power on this issue, they would turn around and sell NP Power, and possibly for terms substantially weaker than the present deal.

In contrast, I would support a provincial referendum on the sale, as it is a huge issue, and believe we could hold one before the march deadline. For me, a referendum is a win-win.

First, because if the sale is approved, then we have a substantial improvement in our energy security and stability in our energy costs.

Second, because if the sale is rejected, then the government can stake out an alternative course for managing the utility as a provincial entity, and the election can be fought on the basis of that, or other issues.

Most of all, it prevents what I would consider the worst case scenario: outright privatization as a stand-alone entity, at much worst terms than to Quebec. This is what Nova Scotia got, and the results have been disastrous.

Despite Nova Scotia's energy resources, the price of electricity is actually higher in Halifax than in Moncton. http://tinyurl.com/ycypmv6 Moreover, the NS infrastructure is in tatters; every storm there are long outages.

To summarize, then, we need to look at the NB Power deal, not just from the perspective of the terms of the deal, but also considering what happens if the deal is not signed.

- if the deal is not signed, then we have no way to generate clean power other than an outlay of $4 billion to generate wind capacity (probably the plan before the sale, and would have been bridged via market-rate purchases of power from Hydro Quebec - the 'million dollar a day' situation we are in now).

- worse, if the deal is not signed, or if the government falls as a result of the deal before it is signed, then we face a worst-case scenario of outright privatization of the utility, which would leave us with rapidly increasing costs and no clean energy sources

- otherwise, it's status quo: an increasing NB Power debt, rapidly increasing energy costs, uncertain supply, and expenses of a million a day until LePreau is finished.

None of these is better than the sale, and should not be accepted.

8 comments:

  1. you don't have a clue what you are talking about

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  2. What, you call that a criticism? That's the level of opposition to the sale?

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  3. Another uninformed cluless moron!

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  4. 1. The current government is NOT responsible at all. They have continually back tracked on every issue that they have presented - all due to the fact that they did not consult the public first. That should be Shawn's first clue. ALWAYS ask the public. Our government is voted in by the people for the people. I do not believe that we are not a communist dictatorship - yet.
    2. NB Power has generated 1.3 Billion dollars in revenues in the past 5 years. Where is the money? In the governments pockets!! We need to get government out of NB Power revenues and use this money to repair and maintain current systems while putting in place newer systems that are cleaner and more viable.
    3. The Conservatives did not try to sell NB Power. They looked into cost vs. profit on selling off a couple of segments of NB Power. This is entirely different from the current Liberal agenda.

    With that being said, I do agree with you in the fact that we need a referendum on this issue. Too many people are opposed. Let us as a province decide our future - not 33 MLAs.

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  5. I'm pretty sure Darren Egers is the dim witted Anonymous person. He's on the NO to Sale of NB Power Facebook group and never has anything of substance to offer. What they fail to realize is that every government has had their hand in NB Powers piggy bank. What They also dont seem to get is that their mighty Facebook group's numbers are about half of what they thought, as alot of people are there as the "yes" side to see all what is being said.

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  6. Hi Stephen

    I think the 'big picture' is lost on most people. In my view, with the rise in oil prices energy consumption will have to dramatically decline.

    It is one thing to use Ore from south america, but when the cost of transport shoots up, then the cost of the energy produced by the ore will also climb as well.

    We have to get off oil and coal. I don't think anyone will argue that.

    So, we are now looking at getting hydro power from Quebec in return for our transmission lines. While the NB govt is saying this deal gets us access to cheap hydro, that is true, but only for the next 5 years.

    But, when the price of oil skyrockets all of the oil fired and coal fired plants across North America will be too expensive to operate.

    So in the long term, the demand for replacement energy will climb across the board. For Quebec, as everyone scrambles to find replacement energy, they will have the one source to fill the need.

    End result, more areas wanting to buy the same hydro energy will drive the price up. Yes, the cost of production of hydro is cheap, the demand will cause the current price to rise.

    We do need a long term strategy, and we need to start addressing the impacts the world oil consumption will have on our region.

    So given these conditions, here are some basic ideas:

    1) Stop the sale. We'll need the transmission lines.

    2) Invest heavily in green technologies (solar / tidal / wind). When the cost of energy goes up in North America you will likely see a rapid return on the investment.

    3) Plan the decommissioning the coal and oil plants, coupled a replacement plan for affected communities.
    As new technologies can replace the supply, they should be shut off.

    4) Reward industry, not with cheap energy up front (which encourages them to use more) but give them tax breaks for those who restructure to use less energy, or partner with those companies.

    5) offer tax breaks for everyone who can contribute energy to the grid. For example home owners who put up wind or solar who produce more than their own consumption.

    I'm still digging into the Bloomington IN document, but there is a ton of info there which is equally applied to this situation:
    http://bloomington.in.gov/media/media/application/pdf/6239.pdf

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  7. how stupid can our goverment be. QUEBEC won't even allow ENGLISH SIGNS.

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  8. I think when (Open minded) said what he did about Darren Egers involvement on the No sale of NB Power site, as he posted on your blog he is insulting the man's intelligence, knowledge and character.

    He was THE SOURCE of correct information on that site throughout the opposition of the sale and is an educated man and an engineer with many years of experience in a uitity.

    I'd say he's owed an apology or the comment be taken down!

    I would guess he would not be overwhelmingly pleased to read this when I forward a copy of it to him.

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I welcome your comments - I'm really sorry about the moderation, but Google's filters are basically ineffective.