03 December 2009

The NB Power deal: AIMS releases comment

The Atlantic Institute for Market Studies today released its assessment of the NB Power/ Hydro-Quebec memorandum of understanding. 

The author is Gordon Weil, an energy consultant in Maine with decades of experience in electricity issues.

The conclusions:

  • The cash price of $4.75 billion to be paid by Quebec to New Brunswick is subject to reduction if the Lepreau nuclear generator does not return to service and because of additional debt that New Brunswick must assume.
  • NB Power customers will receive significant rate relief in the initial five-year period following the sale of NB Power’s assets, but the promised additional benefits are considerably more speculative and will be received over a period extending more than 30 years. The initial benefits may be as much as $1.25 billion.
  • Transmission and distribution rates will be based on actual cost plus several surcharges and can be expected to increase after the initial period much more than they have in the past.
  • NB Power will retain and close, mainly at its own cost, five major generating stations with the future of the nuclear facility in some doubt. HQ will acquire only the Mactaquac hydro station, three combustion turbine facilities and possibly the Lepreau nuclear facility.
  • HQ will obtain, manage and control the NB Power transmission and distribution system, which can enhance its ability to exploit its own generation resources.
  • The size of the HQ power supply and its control of an extensive transmission system may cause anti-competitive concerns for entities outside of the two provinces.
  • Utility regulation in New Brunswick will be required to follow the Quebec regulatory system and be subject to specific legal requirements limiting its discretion. Such a transfer of regulatory control is unprecedented.
  • New Brunswick customers will continue to deal with NB Power, the HQ subsidiary.
  • Full impacts, both positive and negative, will depend on a host of variables that are impossible to forecast with reasonable certainty.