15 August 2010

Williams, Dexter ink secret energy deal …but with whom?

A service contract between a public authority and a private sector concessionaire, where the public authority pays the concessionaire to deliver infrastructure and related services, Typically, the concessionaire, who builds the infrastructure asset, is financially responsible for its condition and performance throughout the asset lifetime, or the duration of the agreement.

P3 Canada Fund definition of public-private partnership

Newfoundland and Labrador Premier Danny Williams and Nova Scotia Premier Darrell Dexter have apparently signed a deal to build underwater electricity transmission between the two provinces in partnership with a private sector company or companies.

Williams revealed the agreement when he launched into yet another tirade against the province of Quebec during a hastily-called news conference in St. John’s last week.

Williams said that the two provinces applied for federal funds in late June under the federal government’s public-private partnerships infrastructure funding agreement.

But that’s all he said about the secret deal.

Six weeks after the provinces reached an agreement, the people of both provinces still don’t know when the deal was signed, the conditions of the agreement, how much taxpayers will be on the hook for or the proposed financial arrangements with the private sector company or companies the two governments are or will be partnering with.

In his scrum, Williams very obviously avoided giving a simple, direct answer to a question on costs. He said only that the project cost would be billions depending on which combination of dams and transmission routes NALCOR built.

The cost of the project is currently estimated at more than $14 billion, including an interconnection to the United States. A study completed for the Nova Scotia government earlier this year  - reported by the Chronicle Herald but no longer on line - put the cost of the interconnections between $800 million and $1.2 billion.

Williams also made the false statement in his scrum that the decision of the Regie de l’energie – presumably meaning the May decision – had blocked NALCOR transmission through Quebec.

Meanwhile, though, the public doesn’t even know the name of the company or companies involved in the new secret deal on an intertie to Nova Scotia.

And obviously, there has to be a private sector partner or partners involved even if the two provincial governments haven’t said anything about that aspect of the deal.

The federal government established the $1.2 billion P3 Canada Fund in 2007 to “develop the Canadian market for public-private partnerships for the supply of public infrastructure in the public interest.” The fund will supply qualifying projects with a maximum of 25% of the projects qualifying direct construction costs. 

Typically, public-private partnerships include private involvement in everything from design to the long-term operation of public infrastructure. As the fund’s annual report puts it,

[t]he P3 procurement model is unique in that the private sector assumes a major share of the responsibility for the delivery and the performance of the infrastructure – from designing the concept, architectural and structural planning to its long-term maintenance.

The public sector gets needed infrastructure at reduced risk and cost.  Among the examples cite din the annual is the Confederation Bridge between PEI and New Brunswick.

In order to qualify for assistance under the fund, the private sector partner must have a substantive, continuing role in the project.  It must design or build the project and finance or maintain and operate it. [Round Two application, s. 5.2

In a P3 project, the private sector partner would also typically share in the profits of a long-term project as well as adopt risk. In some scenarios, as the application appendices suggest, the project may offer potential spin-off money-making opportunities for the private sector partner separate from the core public interest in the project.

Infrastructure assets developed by public authorities are rarely used to generate additional revenue. In some instances, private sector providers are motivated to develop opportunities for revenue beyond the public authority payment stream and this could be used to reduce the cost to the public authority.

Applicants must submit a business plan for the project between September 2010 and March 2011.

While Danny Williams mentioned a connection between the secret deal and the Lower Churchill, the Nova Scotia intertie is a separate project.  

It’s also bizarre that Williams mentioned possible shipment of power from Nova Scotia to Newfoundland and Labrador.  Demand projections used in the Lower Churchill environmental review show that demand on the island isn’t strong enough to support development of the Lower Churchill, let alone warrant importing power from Nova Scotia.

And if the intertie carried Lower Churchill power, there’d be no need to send Nova Scotia power into Newfoundland and Labrador.

A connection to Nov Scotia without the Lower Churchill would facilitate the development of untapped alternate energy potential on the island of Newfoundland.

To do that, though, the provincial government would have to abandon the 2007 energy plan and Williams’ obsession with the Lower Churchill.

- srbp -