Lines are drawn

After well over 100 comments (many of which were not publishable), the lines are pretty well drawn on this NB Power issue.  I have read hundreds of tweets as well on this issue.  There are basically four groups of viewpoints:

1. Those that are in agreement with the broad strokes of the deal but want some of the short strokes better fleshed out (I am in this camp).

2. Those that have legitimate concerns about the deal and have thought it through and still believe in the long term it is not good for New Brunswick.

3. Those that have reflexively decided they are against the deal without really thinking it through at all.

4. Loonies.

Those in the first camp agree that all things being equal it is better to have the ultimate decision making about your electricity generation, grid and services be made in the province.  We also agree that there is a direct economic development issue related to the jobs associated with generation and support services.  We realize some of these jobs are in jeopardy under the HQ deal but on balance we think that NB Power is not a sustainable model as is and that something needed to be done.

The second camp needs to be convinced by those that advocate on behalf of this deal.  All I can say is that each of the legitimate points should be addressed.   You won’t change the position of many of them but at least rationality will be injected into the process.  In addition, they will realize that a lot of thoughtful people were involved in this process and poured over thousands of pages of actuarial tables to come up with the model (I talked to an old friend in the Dept. of Energy). These folks still may not agree but maybe those that feel this was a back of the napkin deal that wasn’t thought through will realize there was actually serious deliberation.  I still think the second camp needs to run their reservations through the filter of other alternatives.  It is easy to be against something but not so easy to find something to support.  I have a hard time believing that anyone really believes that NB Power as currently constituted was on a path to sustained competitive rates, reduced debt and significant new investments in new clean generation.

The third camp needs to look at the facts.  They still may end up not liking the deal but at least it won’t be based on their dislike of Jean Charest’s hair or the deal that Joey Smallwood struck with HQ 40 years ago.  I suspect that one of the main reasons there was so much forward actuarial analysis of this deal was precisely to avoid the Smallwood situation.   Nova Scotia Power is owned by a TSX-traded firm as is Maritime Electric and Newfoundland Power (Not Hydro).  This issue of constitutional rights or sovereignty is a bit of a red herring – if we are being honest about this.  The electricity market will still be regulated by the New Brunswick Energy and Utilities Board and – as stated in the MOU and they will be developing the “circumstances under which either party will be entitled to unwind the transaction.

The fourth camp I don’t know what to say.  You are bound up in anger and frustration that isn’t tied to this arrangement.  You are using this situation as a proxy for a wider concern.

28 thoughts on “Lines are drawn

  1. You forgot a 5th group, one that wants a serious alternative on the table. If no one else is interested, there is at least one option within our control; a revamped NBP model. The ‘debate’ is unfair in the sense that those concerned about the year 5 loopholes kicking in are dismissed as fear mongerers but those in support of the deal are using fear at will; fear of crippling debt, fear of a April 1 rate increase, fear of continued mismanagement.

    Perhaps a bigger issue that is getting little attention is that we have a government that took office with less than the majority of the vote and a platform that included a specific promise not to take an action (in this case sell NBP) All of a sudden they change their minds, make a deal, use taxpayer money to promote it and threaten us to accept it else face consequences. Do we not, as a minimum, deserve a referendum on such an issue that will influence generations to come and one where the elected government has flip flopped their policy?

  2. I think you could say there is a fifth group of undecided, where I have been. As I learn more about this however, I find myself increasingly leaning to the first group. Interestingly, one of the reasons I’m leaning that way (but not the only one) has been the response of those opposed. They appear to be the larger group and while many have legitimate reasons for being opposed, I see few if any alternatives offered, suggesting an approach of “do nothing and hope it all works out.” If there are alternatives, I wish someone would spell them out.

  3. I wonder how fluid public opinion is on this issue. A few days ago, David Coon of the Conservation Council of NB stated that he was in favor of the sale because it would be good for the environment. Yesterday (2 Nov), however, the Council issued a press release saying that the sale should not go through. When interviewed by the media, Mr Coon started off by saying that he initially supported the sale because it was good for the environment, then spent some time showing how the sale was actually bad for the environment. I wonder if his spouse Janice Harvey, who opined in the press in favor of the deal and who is a Director of the Council, has also changed her opinion. Perhaps someone feels it is better not to be seen to be allied with GNB on this issue.

    There are some things about this deal that need to be clarified, but I have not heard much in the way of solid alternatives. It is also perhaps not clear what the consequences of not selling would be. What would a realistic scenario be of power rates 5-10 yrs from now, should NB Power remain as is?

    A considerable amount of the opposition to the sale comes from those who fear the effects of the sale on ‘alternative’ power sources. But if those sources cannot compete with hydro, are they worth pursuing? There has also been talk re the adverse effect of the deal on a ‘Maritime energy strategy’ utilizing tidal, wind and other renewable sources. Again, where is the advantage to NB Power customers in that, given relatively inexpensive hydro from PQ?

  4. I think one of the problems is HQ is owned by the government of Quebec, and therefore, will not be as responsive to real market conditions as a private company. Quebec will sooner or later vote in a Parti Quebecois government. I, for one, am ambivalent about that.

    While I can see all the benefits, at least for the next five years, I am not sure I want the Province of Quebec to own it. I think I would even feel better if it was a private company, and that is not an economic question, but a political one.

  5. That’s not actually accurate. There ARE people who support the decision as is and don’t need any more details (it can be argued that some bloggers are in this camp:)

    This group comes in several camps as well.

    1. Those that simply don’t like public ownership of ANYTHING.
    2. Those who just like to see large changes because it shows that at least the government is doing SOMETHING.
    3. Those who see ‘rate freeze’ and controlled increases and who are simply scared of the future.
    4. THEN there are the legitimate ones, those who have read through all of NBPower’s yearly reports, etc.

    There is NO evidence that NBPower is ‘unsustainable’. None. The debt is not substantially more than most utilities. It is less per capita than Quebec’s, close to Manitoba’s, and MAY even be less than Ontario’s, but in this province utilities are so messed up nobody even knows what the ontario utility debt IS.

    Those in this camp, including this blogger, have never offered ANY proof for the ‘unsustainable’ argument. There has NEVER been a public utility that has gone bankrupt. Rates may increase, but will increase regardless. As somebody pointed out on facebook, the amount Quebec Hydro has agreed to allot NB isn’t even enough to cover projected growth estimates through next year.

    Like I said at Charles blog, I’ve read through every NBPower annual report, the reports of every utility in Canada, and a couple of american ones. I’ve looked at the budget of every province, plus, apart from having family there, I really don’t ‘care’ whether NB Power gets sold or not as I don’t live there anymore, probably never will again.

    As I”ve said, the main argument really has nothing to do with the deal. In a democracy people are free to choose bad deals if they so choose. This is an ILLIGITIMATE decision, in fact may well be an illegal one, and it looks like the facebook group may well be contacting a lawyer if the protests aren’t successful. Like I said before, a court found that Lamrock had broken ‘common law’ which requires public involvement in government decisions. If this isn’t a decision that requires a referendum, I don’t know what is. However, I do think that many proponents think the average New Brunswicker is just too dumb to think this is a good decision (if they thought they’d win then they’d be calling for a referendum too). It’s interesting that the liberals held referenda on the amalgamation of several rural areas-THAT was important enough for a referenda, but the selling of a public utility is not.

    The only reason I care is due to basic questions of rights, and thats a national and international issue, not exclusive to NB. When Harris was trying to deregulate ontario’s energy we welcomed groups from all over to help turn over an anti democratic decision.

    Jacques Poitras has some comments on that as well. Graham said clearly and articulately that NBPower would stay public, its even in writing. The only defense of that in court would be “but we lied about EVERYTHING before the election so what’s the difference?” That’s rarely discussed in the media because it quite simply makes any kind of pretense to democracy a joke. If parties can lie all through a campaign-whats the value of the vote?

    So that’s a whole different category and I’d suggest FAR more important than even the ownership of the public utility. IF this goes through, then any claim of ANY kind of functioning democratic system in NB goes out the window-and let me tell you, its already not exactly a system than anybody is lining up to duplicate.

  6. “The second camp needs to be convinced by those that advocate on behalf of this deal. All I can say is that each of the legitimate points should be addressed. You won’t change the position of many of them but at least rationality will be injected into the process.”

    I agree with this, but I think this needs to be a two way conversation. The first group must listen to the second group without dismissing their concerns as “emotional” or “uninformed”. If the MOU remains unchanged, I don’t think you’ll sell many of the second camp on the deal. If there is a concerted effort to show NBers that the gov’t hears our concerns, and changes the deal to reflect these concerns, I think this thing sails through (and Graham is re-elected).

    “These folks still may not agree but maybe those that feel this was a back of the napkin deal that wasn’t thought through will realize there was actually serious deliberation.”

    I think this had a lot to do with the roll out of the deal. Last week, provincial ministers were denying any sale was to take place. The denials continue until Thursday, when the sale is announced. You can argue that negotiations are sensitive, and that you can’t negotiate in the open, but I think people ought to have been informed that the sale of NB Power was on the table. Maybe then people wouldn’t think Graham and Charest put this together on Wednesday night before the announcement.

    “The fourth camp I don’t know what to say. You are bound up in anger and frustration that isn’t tied to this arrangement. You are using this situation as a proxy for a wider concern.”

    Barack Obama got in a bit of hot water when he said bitter people who were left behind by change clung to guns and religion. Maybe we New Brunswickers cling to NB Power as our only shred of independence in a globalized world.

  7. Mikel, I don’t particularly like to get into a direct debate with you because it is a waste of digital ink. You won’t change your mind – which is fine – and I won’t change mine without any real evidence. In my opinion, the fact that residential electricity costs have risen faster than all other provinces over the past five years is evidence of unsustainability. The fact that NB Power wanted to increase rates again 3-4 times the rate of inflation and had to be capped by legislation is a sign of unsustainability. And the debt load is high. I was in a meeting a couple of years ago where an independent energy consultant was talking to a group of economic development types about energy and he said NB Power was one of the most debt laden utilities when you align the debt against the market value of its assets. Per capita debt means nothing if there are significant assets of value underpinning the debt.

  8. “However, I do think that many proponents think the average New Brunswicker is just too dumb to think this is a good decision ”

    I agree with this statement completely. There are people arguing on the Facebook groups that the opponents are all uninformed, and thus cannot actually oppose the deal on any logical level. This is were the real disconnects between political elites and the general public really begin to show. As mikel said, what’s the point of an election if promises are fast and cheap?

    I’m not a communication or marketing man, so I don’t know the best way to “sell” this to a dubious public. However, I think plowing ahead on the basis that the average man on the street is too dumb to realize a good deal when he sees it is a dangerous path to take.

    Today’s Gleaner has a good opinion piece from the UNB Poli Sci dept on the formation of Hydro-Quebec by then-Liberal Rene Levesque. Levesque took the deal to the people, showed them the benefits, and then his premier called an election on the matter. Jean Lesage said that he’d stake his political career to the nationalization of Hydro-Quebec, and ran solely on that issue. I think people respect a move like that.

  9. “Gleaner has a good opinion piece ”

    Well, I think the author of that piece was comparing apples to oranges. The establishment of Hydro Quebec appealed to many nationalists in PQ and had a great deal of popular sentiment behind it. It was about maitres chez nous and was a brilliant electoral strategy. let alone a good industrial strategy. That is not really comparable to this issue, IMHO. Graham can roll out more favorable details to his (and your) heart’s content but I can’t see this being a winning issue were he to call an election. He is likely going to lose the next one anyway, so we will have the PCs in power shortly. They will not reverse a single thing Graham has done, and certainly will not do anything to strengthen the EUB should HQ become predatory.

  10. “Graham can roll out more favorable details to his (and your) heart’s content but I can’t see this being a winning issue were he to call an election…”

    That delves further into what mikel had said about elections and promises. We wonder why fewer and fewer and fewer people vote, but this is the best example yet. Promises are made and situations change. However, if people lose the basic trust that political parties will honour their platforms, they will stop participating in the political process.

    Just as I’m not a marketing guru, I’m not a political guru either. I’m sure the politicos in each of our political parties are mapping out entirely new electoral strategies based on this deal. However, I am a citizen, and I think that we ought to have a bit more consultation that a website and a phone number to lodge complaints. We ought to have an election, and settle this. The people not be on the same page as the elites, but the people are never wrong. That’s all I need to know about politics.

  11. So it appears the new economic development strategy for New Brunswick is slowly emerging.

    With this deal as evidence, the strategy is to focus our resources and policies on pulp mill survival.

    Hmm, not sure I buy into that one. Don’t we spend a lot of our time on this blog talking about animation, IT, data centers, financial services, aquaculture, and energy? How did pulp mills so suddenly emerge as the priority issue?

  12. Generally apeaking, I’d rather have a premier who is adaptive (or a “flip-flopper” to some of you) than one who is completely bound by a pinky-swear. The economy is a dynamic entity, and you can’t predict which decisions will need to be made based on the state of the province three years ago.

    A proper compensation scheme and inron-clad protection clauses could make this an incredible deal for New Brunswick.

  13. It’s not a waste of ink David, the point is not to convince those whose mind can’t be changed, but to bring out the issues so people know more about them. You could just ban comments and have a poll asking what people want and wouldn’t have to deal with this. But, IF people want to be taken seriously they have to be able to defend their position, so…

    Rates have NOT risen faster in NB than in other public utilities. There was a larger increase during ONE year, but only because NBers rates were very low. Currently, NB has among the lowest rate in eastern canada and comparible to manitoba. So rates CANNOT be proof that they are unsustainable. They have also stated publicly that rates will only rise by 3% through to 2011. There is no guarantees in life but they state this with relative certainty because they’ve already paid for much of the fossil fuels they will be needing. There are far more loopholes in this document to give cause about paying more than can be found with NBPower’s statement.

    The main concern of course is the memory of two years ago when they wanted to raise rates substancially. However, thats what government legislation is for, and thats what it did in that case-it lowered the rate.

    The big issue here is that IF problems and rates don’t rise, then the corporation may assume more debt. This is quite an interesting line of thinking because the province itself has been doing exactly that for YEARS and yet we don’t have a hue and cry that the province is going to go bankrupt. Now, we know this blog thinks current economic practices in the province are ‘unsustainable’ as well, so its not surprising that David would think the same about NB Power. Not to get too personal,but David may be a little TOO cynical and that cynicism may be clouding the issue.

    As for the ‘worth’ of the company, this is almost proof in itself that the ‘due diligence’ that is assumed on the part of the province hasn’t been done. Don’t people think it strange that it turns out the value of the public utility is the same as its debt? The question of assets is a tough one for utilities. What is the value of Dalhousie? Is it the value of how much power it produces at market rates? But what if it needs to be mothbolled? So is the dalhousie plant ‘valueless’? Are coleson cove and belledune valueless? So essentially the belief here is that the ‘value’ of NBPower is some broken down dams that may need to be replaced.

    But wait, what if, there is value in the transmission lines? It turns out that Hydro Quebec already leases one transmission line, so obviously that has a different value. Now, how do you value THAT asset? Like a porsche it turns out that asset has a lot more value than simply what it cost to put it together. Although David doesn’t say it here, the MAIN argument in the business press has been the ‘debt per capita’. That’s because energy assets are EXTREMELY difficult to evaluate.

    As for alternatives, that is straight out of the playbook. WHen people agree with something, they always say ‘there are no alternatives given’. First, this wasn’t even an issue last week. How many blogs were about how NB is doomed because NB Power is unsustainable? So why all of a sudden is the status quo NOT an alternative. People REALLY need to read the annual reports from NB Power.

    But there are more alternatives out there than sticks to shake at. I’ve mentioned many numerous times, net metering still hasn’t been taken seriously, and Hydro Quebec certainly would be in no hurry to implement it (they haven’t in Quebec). Small scale power generators haven’t even been discussed, and like I said at the CBC site. If you want to save 3% on your energy costs this year-get an insulating blanket for your water heater. Turn down the heat one notch. That will save FAR more.

    Just another quick point, that NB Power pays a ‘fee in lieu of taxes’, but its just another work for taxes because it goes to the government revenues. Quebec hydro will NOT have to pay any taxes in NB.

  14. So John Doe. How do we go about voting if we cannot believe the promises that are made? Do we guess who is less likely to change their minds?

    There are better ways to handle this. If the deal of the century comes along and happens to conflict with, actually directly oppose, your promise and election policy platform you either 1) make it part of your platform for the next election and, if 10 months is too long to wait, 2) have a referendum.

    This threat of a 3 percent rate increase is bogus; that is 6 months of increased rate. Before an election and 6 months more of debt NBP pays down. Using the propaganda savings charts, that will cost us $48.50 to ensure there is a public mandate for the decision.

  15. “I’ve mentioned many numerous times, net metering still hasn’t been taken seriously, and Hydro Quebec certainly would be in no hurry to implement it (they haven’t in Quebec)”

    They actually have implemented net-metering in Quebec – for residential, small commercial, and farmers. However, you can only run your meter backwards if it’s a renewable source (solar, wind, micro-hydro). Gas-fired devices, such as the FreeWatt, do not apply.

    Jack Keir took an interesting tack yesterday when he discussed the 14.0 TWh ceiling that the MOU defines. His approach is that New Brunswick should invest in energy efficiency so that we do not exceed the 14.0 TWh limit, and create room for growth within that bubble. It doesn’t convince me that the Heritage Pool is large enough, but it’s an interesting way to look at it.

  16. “But there are more alternatives out there than sticks ”

    Those are not alternatives. An alternative would be a realistic plan from the political opposition to get alternative power sources into the system. Those providing the political opposition to Graham and this proposal have to come up with a plan to deal with the problems at NB Power and a real plan to get other power sources into the system. I haven’t seen that yet, just ‘no’. Sorry, but ‘no’ isn’t enough.

    “We wonder why fewer and fewer and fewer people vote”

    I wonder what the turnout would be if Graham called an election on this issue? A new low, I’d predict. We have became used to instant solutions to ‘problems’ via the mass media, so we expect things to be resolved quickly by politicians. No one wants the murky details, the greys; we want the black and white. We are no longer prepared to engage in rational discussion. Politicians respond by delivering the black and white promises; the actions that follow are almost entirely grey. People respond by abstention from voting.

  17. @richard

    And the author wrong on some details. Hydro-Québec was established back in 1944 when it bought the assets of Montreal Light Heat & Power. The 1962 hostile takeover targets (nationalization is not the right word to use) were the 11 companies operating in areas outside Montreal, including the most powerful, Shawinigan Water & Power. By the way, back in 1962, René Lévesque was a Liberal, not a péquiste (the PQ was created six years later). Yes it was a brilliant strategy at the time, because HQ needed customers for the big hydro developments to follow (Manic-Outardes was being built at the time) and after 1950, the Quebec government was reluctant to give hydraulic rights to private entrepreneurs.

    You can read more about this episode Wikipedia. I wrote the page after doing some research for a term paper, back in March…

    @RobHQ’s net metering program is a failure. I remember reading a few months ago that only 13 (yes thirteen) customers enrolled in the program. Low electricity prices make that option uneconomic for HQ’s residential customers because payback times are measured in decades.

  18. I guess if you feel it is necessary to sole-source a deal without proper competition allowing for improper value of the asset being sold moving forward, than so be it. But it’s also important to weigh the “cons” of this deal. Will the backbite from such a deal prevent relations between the Atlantic provinces to be untenable? If so, what will this mean for a region that can only wield serious political clout together not apart? Will this deal be the fatal fruit that tempted NB to its ultimate doom? Only time will tell.

  19. Anonymous :So John Doe. How do we go about voting if we cannot believe the promises that are made? Do we guess who is less likely to change their minds?

    Are you actually that naive that you believe political pinky-swearing? Regardless of which party they belong to, politicians will go back on their word. The good ones go back on their word when it is in the best interests of the province. lets assume for a second that we had a general agreement that NBP was a financial parasite beyond redemption, but the current premier refused to unload it because he made you a promise during his campaign. Would you think he was competent?

    I elect my representatives based on a purposive analysis of their rhetoric. If a politician said that his main priority was to lure large industries to the area and nothing more, he’d likely get my vote. But if he said that his goal was to bring RIM to New Brunswick, I’d have to question his rigid thinking and short sightedness.

  20. @Bill
    I have suggested that we buy power from Newfoundland – probably can get it at a cheaper rate than Quebec will sell for. Then the rates might be lower for the residential users and the thermal plants could be fixed or shut down while there would be some money left to service the debt. Ask yourself – if Quebec Hydro can successfully run this, then why can’t New Brunswickers? Premier Graham needs to FIX THE PROBLEM – not give our resources away.

  21. Mr Doe. Could not have said it better myself. Are we actually naïve enough to believe the premier when he and his propaganda machine tell you this is a good deal? Naïve enough to believe a rookie premier with no business experienced has managed to negotiate a great deal when other provinces and jurisdictions could not?

    It works both ways my friend. Once your word is no good, there’s no telling what is real and what is crap. You are quite right to take the safe approach and assume it is all crap, including this deal.

  22. @Jerry Viel

    Jerry, how much power does Newfoundland have to sell right now and at what price? They probably have 150 MW from Churchill Falls available, but they probably sell it on the New York State spot market. And 150 MW is not enough to do even half of what you suggest.

    If the Lower Churchill complex is ever built, its power will cost ±6.5¢ (2004 $) + wheeling through Quebec (±2¢). That’s roughly equal to the price of oil fired generation ca. 2007. But construction hasn’t started yet (the EIA is stalled) and need I remind you this project has been discussed for 30 years?

    Danny Williams cannot sell what he doesn’t have, unless you can wait until 2041.

  23. “we buy power from Newfoundland ”

    We probably are now; it just comes via PQ. If you are suggesting direct import from NFLD, then someone has to build and pay for the transmission lines across the Gulf. That would certainly add to the cost of the power.

  24. I’d take that bet Richard. I predict that if this thing drags out (even, especially if it goes through) then the voting turnout will be higher than last time. NB tends to get a high voter turnout for some reason, odd since its pretty much a two party system, although the aging population does explain SOME of it. If there were an election right now I’d put money on a 75% turnout.

    However, for alternatives, NBPower is already getting almost the equivalent of Dalhousie from its wind turbines, and they don’t have many turbines. Investing in turbines makes far more sense than nuclear, but its still not too late. It’s also something that SHOULD have been done incrementally years ago, as turbines are relatively inexpensive. Wind power has barely been tapped and so they could most likely easily replace thermal with wind, with Coleson Cove just providing backup when the winds don’t blow. Again, like net metering they’ve barely even tapped into wind and not looked at ‘micro’ sources at all.

    But to the above about voting, what we are getting is similar to what they have in the states at the federal level where they attempt to convince voters on the basis of ‘qualities’, where people essentially vote for the guy ‘they’d most like to have a beer with’. Thats why the US has even lower rates of turnout at the federal level than Canada usually, because issues are never discussed. If thats a persons idea of a democracy then so be it, but for the rest of us, the political system is not about electing a new dictator.

  25. “However, for alternatives, NBPower is already getting almost the equivalent of Dalhousie from its wind turbines”

    Ok so let’s say there is an election and the PCs take over. What is their plan to deal with NB Powers problems? Their plan is the ‘alternative’. What evidence is there that they will do what needs to be done to, say, ramp up wind power, replace fossil fuel plants, get a handle on debt? I don’t see anything but rhetoric from them, and until I see a real plan, I see little point in an election.

  26. The only point of an election is to simply ‘demonstrate’ people’s views on the matter. Far better would be a referendum. I’ve said before that Alward can’t be trusted-his first reaction was ‘what were the terms’. As I’ve said, his opposition has expanded with the numbers of people at the facebook site.

    Without a referendum we simply don’t know the views of New Brunswickers. It is sad but true that an election would be fought pretty much on this one issue, again, showing just how dysfunctional a system we have in Canada. The NDP may be the big gainers, IF they can get their act together.

    The GOOD thing about this is that people are paying attention to energy policy. Contrary to popular opinion, there are lots of people at the facebook group who are looking very carefully at the deal and energy policy. Why an election is good is that Alward WILL be pressed to provide some sort of policy. I’ve posted the numbers before, and like I’ve said, NB Power isn’t ‘right now’ in the dire straits people think they are, and those people who keep saying that need to read their annual reports and ‘get educated’ as much as the people who are reacting without reading the MOU.

    That’s the good thing at least about planned elections, there is now a good year for all the various factors to come out and people to simmer down and really get a handle on this. Having an election on it is literally the ONLY way that this can’t simply be considered the fascism that Charles Leblanc is always being ridiculed about. The assertion that ‘governments need to govern’ and ‘times change’ is simply ludicrous and belongs to ages past.

    A referendum is the only way it can be considered ‘democratic’, however, I will readily admit that Canada’s claims of democracy are pretty tenuous at best, and there are lots of people who consider democracy to be ‘no way to run a government’.

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