Reflex-ology New Brunswick style

I have been watching this whole NB Power drama unfold with great interest.

The media and punditry reaction has been expected – I am actually quite pleased with David Alward’s comments – this would have been a convenient time to pull a “Bernard Lord and the Toll Highway” stance to garner a few votes.  But that little promise has cost the province several hundred million in lost revenue and increased debt service so a reflexive promise to scrap any deal here with similar ramifications – would have been a big strategic error and Alward was smart to avoid it.

I actually have an interesting window on this because I also followed with great interest the sale of NBTel to Aliant and Bell Canada a few years back.  The hope was that NBTel (New Brunswick) could have become a living laboratory for Bell Canada.  That the innovative and creative team at NBTel would be leveraged by Bell leading to jobs and economic development for the province.  After all, Bell had talked lovingly about NBTel – “the little Telco that Could”.  Some of us actually – and naively – thought that New Brunswick could end up as the jewel in Bell’s crown.

The fantasy never materialized and NBTel has been gutted to a local telco service provider.  For my Aliant readers, don’t get me wrong.  Aliant is a good, stable provider of services to New Brunswick and a good employer and an excellent supporter of local communities and charities.   I appreciate that – but they are not developing innovative services here.  Bell has not made New Brunswick a “living lab” and has not set up development activities here.  In fact, hundreds of jobs have been eliminated.

As I have pointed out elsewhere, the NBTel sale was not all bad news.  I did a quick review of New Brunswick’s successful IT firms a couple of years back and almost half them had NBTel ties in some fashion (exNBTeler management, etc.).

So you might expect me to be very reticent to show any optimism about the sale of NB Power to Hydro-Quebec.  As one reader points out, Quebec is ruthlessly self-interested as has been shown many times over.

NB Power is not NBTel and electricity is not telecommunications.   I have a hard time looking into the future and seeing a successful, limited debt NB Power providing cheap energy to industrial and residential clients.   I can’t see a pathway to this and, in fact, several NB Power people have told me in recent years that lower electricity rates in the past were subsidized by not paying down debt in an orderly fashion and eventually New Brunswickers will have to pay the piper.

So we could be looking at a near term future where power rates drive more industrial activity out of the province or at very least are an impediment to future economic development. 

To rework the the book title of the CFR’s Richard Haas, there are political moves of necessity and political moves of choice.  I think NB Power’s sale to Hydro-Quebec is a political move of necessity.

This assumes, of course, that what we are reading about power rates and debt reduction are the reality.  Any deal would need to have an iron clad agreement to treat New Brunswick businesses and residents the same as Quebec businesses and residents. 

There is just no way that NB Power can compete with the cheap power production capacity of either Hydro-Quebec or a future Lower Churchill Falls project.  Because of the huge costs and uncertainty, nuclear is tricky.  Wind and solar are still very expensive and oil or natural gas are likely to become very expensive.  Hydropower is still the cheapest and relatively green source of power and Quebec has this in spades.

Why would Hyrdo-Quebec want NB Power?  Ask Danny Williams.    Buying NB Power would be a strategic move to ensure that Quebec controls access to the lucrative US electricity market. 

Jacques Poitras makes an interesting point over at his blog. It is likely that Hydro-Quebec would end up mothballing certain power production assets in New Brunswick (over time) and that would take out potentially hundreds of high paying jobs.  That is a risk but I would like to think that the New Brunswick government could continue developing its energy policy to promote alternative energy development that would lead to job creation.

In my opinion, governments in New Brunswick have not been very good at long term thinking.  They talk long term (prosperity plan, self-sufficieny plan) but the act very short term.  Because trees take 40 years to grow, the forestry industry needs long term thinking.  Energy supply is also a long term issue.  I would argue that highway transportation should be set in a long term framework as well.

NB Power’s sale to Hydro-Quebec is a long term issue.  Let’s hope that policy makers and politicians get it right.

6 thoughts on “Reflex-ology New Brunswick style

  1. lol, Humpty Dumpty! So Irvinish. Odd how NB power did so well, as NB tel, before mckenna, eh?

    Hugh John Flemming was first elected to the province’s Legislative Assembly in 1944 after more than twenty years as a municipal councillor. In 1951 he became leader of the Progressive Conservative Party of New Brunswick leading the party to victory in 1952. As Premier, Flemming modernized the province’s hydro system, built the Beechwood Dam, the then largest project of its kind, and presented a balanced budget every year in office. In 1960 his government was defeated over the issue of hospital taxes.

  2. Throughout his years as a public servant, Hugh John Flemming distinguished himself as a man of honesty and integrity. His family-run lumber mill in the village of Juniper, New Brunswick ran into financial difficulties in the late 1970s, but his impeccable reputation was such that his friend, but staunch Liberal Party supporter, Harrison McCain, organized an investment campaign that raised sufficient capital from businessmen to allow the mill to make a financial recovery.

  3. You have mis represented the job losses. Yes, many of the 2500 NB Power jobs will be impacted but so will hundreds at Lorneville Mechanical, Sunnycorner Mechanical, Neill and Gunter (Stantec), Jacques Whitford (also now Stantec) and dozens of smaller companies that supply to NBP. We can be assured that NB companies will not be supplying Quebec Hydro. We know that they are intensely protectionist and work deals that only Quebec gets away with to block out of province business.

    The point is that it may not be a bad idea to sell NBP but it is a disasterous idea to sell it to Quebec.

  4. I’d like to be a fly on the wall during the bargaining sessions: Is NB talking to Danny as well – perhaps he can make a counter-offer; will NB ask for the right to buy power at below-PQ rates in order to re-sell to export startups / new anchor industries; will NB get access for its industries to Quebec Hydro contracts? Hope none of the orimulsion negotiators are representing NB!

  5. David, as a Québéc-based Hydro watcher who has lived in New Brunswick for a decade, I’m not really surprised by the uproar, however misplaced, regarding this potential deal.

    A lot of people talked about New Brunswick being in a strategic position to serve the New England power market, but this is not the main issue here. The New Brunswick market by itself is the prize.

    Why? For Hydro-Québec, it makes no difference if a MW is sold to New Brunswick or Maine. It’s a MW of exports. And Atlantic Canada’s power market is in even worse shape than New England’s. While the 6 northeastern states generate 40% of its energy from natural gas, New Brunswick generates half of its supply with oil, petroleum coke and coal. It’s expensive and it releases millions of tons of carbon in the atmosphere every year. With the current focus on cap-and-trade in the US, such as the RGGI, fossil-fuel electricity will be even less competitive than it is now.

    So, here’s what’s likely to happen: Hydro will buy the generation (GenCo) and nuclear (NuclearCo) divisions of NB Power, erasing 2/3 of NB Power’s debt; the distribution (DisCo) and transmission (TransCo) divisions will be left alone.

    The new HQ subsidiary (GenCo + NuclearCo) will then sign a long term supply contract with the New Brunswick-owned DisCo. The wholesale rate charged to the DisCo will be lower and less volatile than the current price, since the new GenCo will be less reliant on fossil-fuel generation because they’ll import more cheap hydro from Quebec. In such a scheme, plants such as Dalhousie wouldn’t be closed, they would be run much less often, reducing variable costs and GHG emissions from the electric sector.

    As for transmission, Hydro-Québec doesn’t need the transmission division to control access to the Maine market, since NB Power GenCo already controls 700 MW on that line while the remainder (300 MW) has been leased by the energy marketing subsidiary of HQ back in 2007.

  6. What I want to know is who passed the legislation to sell NBTEL and who held a seat with Aliant board of directers after leaving office.The next question is do you think your phone rates are lower and the service is any better since nb tel was sold.

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