PEI buying Quebec electricity #nlpoli

Prince Edward Island is in the market to buy 100 megawatts of electricity from Hydro-Quebec, according to media reports on Thursday.

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Unions oppose energy conservation device #nlpoli

Unions representing Hydro-Quebec employees are oppose to a plan to install so-called smart meters in Quebec homes.  According to the Montreal Gazette:

One week before the Régie de l’énergie is to begin hearings on the controversial venture, the Syndicate des employés de techniques professionnels et de bureau d’Hydro-Québec denounced the move at a media conference.

The union has submitted an economic analysis of the project to the energy board that contends Hydro-Québec would lose $104 million over 20 years, while the new network would wipe out about 1,000 direct and indirect jobs.

 

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If La Romaine isn’t profitable… #nlpoli #nlvotes

An economics professor at l’Universite d’Ottawa thinks Hydro-Quebec’s La Romaine project isn’t profitable at the projected sale price to Vermont of 5.8 cents per kilowatt hour when the electricity will cost 6.4 cents per kwh to produce.

Hydro-Quebec’s retort is that electricity prices will go up.

Sounds familiar.

Jean-Thomas Bernard also doubts HQ’s cost of 6.4 cents per kwh.  The company attributes the drop in cost of production to better interest rates resulting from loan guarantees.  The initial estimate was 10 cents per kwh.  Bernard says the guarantees and interest rate savings would only shave half a cent off the cost.

HQ needs to follow Nalcor’s example.  Rather than sell electricity from La Romaine cheaply to domestic and export consumers,  HQ should force the Quebec ratepayers to carry the full cost of the entire project and sell discount power only on the export market.

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Resource give-away

The provincial government’s energy company controls billions of dollars worth of hydro-electric and oil resources  - much of it handed over as free gifts from taxpayers - but the company pays very little to the provincial treasury in return.

Nalcor hasn’t paid any dividends to its sole shareholder – the provincial government – since 2006. That’s something the current provincial government is proud of.

In 2008, some valued Nalcor’s 4.9% Hebron shares at $1.5 billion based on prices around US$80 a barrel.  Nalcor has control of those shares along with a 5% stake in White Rose and 10% in the Hibernia South extension. The provincial government paid cash for the equity stakes and handed them to Nalcor.

But when it comes to royalties, though, Nalcor won’t pay a penny for its stake in Hebron under the project financial agreements.*  According to Nalcor, the company is liable for royalties on its interest in Hibernia South and White Rose proportionate to its stakes. Those amounts don’t turn up in the company’s annual report.

Nalcor also controls the provincial stake in Churchill Falls and any Lower Churchill project.  The latter will cost at least $6.0 billion to build with considerable cash and loan guarantee backing from the provincial government.

And in return?

According to Nalcor, the company and its subsidiaries don’t pay  corporate income taxes. Twin Falls Power Corporation does pay corporate income tax, but Nalcor holds a one third stake in that small venture. The total value of Twin Falls electricity sales in 2010 was a mere $5.5 million with net earnings of $3.0 million.

Nalcor and its subsidiaries are liable for the provincial payroll tax and Churchill Falls (Labrador) Corporation does pay a small amount of gas tax.

The company has loan guarantees from the provincial government and is looking for more. But the current provincial government has been waiving any fees for those loan guarantees since 2008.  In 2010, that amounted to $9.1 million Nalcor didn’t have to pay taxpayers. In 2007 – the last year it paid a loan guarantee charge – the company paid taxpayers $13 million.

And that beats the only royalty any part of Nalcor pays for hydro-electricity.  Under the 1961 lease act,  Churchill Falls (Labrador) Corporation pays royalties and rentals.  That amounted to $5.0 million in 2008, $3.7 million in 2009 and $5.6 million in 2010, according to Nalcor’s annual reports.

The total Nalcor paid to the provincial government in 2010 for “accounts payable and accrued liabilities” – the accounting term for these payments – was $10.6 million.

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*Correction - 05 August:  Under the Hebron fiscal agreement, the provincial government may exemption Nalcor from royalties but to date it has not done so.

Here’s the full text of relevant part of section 8:

8.4 OilCo. 

(A) Sections 8.2 and 8.3 [guaranteeing no preferential treatment of parties] shall not apply to OilCo as long as OilCo is a Crown corporation of the Province.

(B) The Parties acknowledge that the Province may:

(1) make amendments to the Petroleum and Natural Gas Act;

(2) make amendments to the Royalty Regulations; or

(3) make an agreement pursuant to section 33 of Petroleum and Natural Gas  Act;

to adjust, vary or suspend OilCo’s liability for the payment of royalties on oil produced from the Lands. 

(C) The amendments or agreement in subparagraph B above shall apply to the royalties payable by OilCo on oil produced from the Lands, notwithstanding any other provision of this Agreement, to the extent such amendments or agreement does not affect the royalties payable  by any of the other Proponents on oil produced from the Lands. 

Making the Most of Our Energy Resources (Part I – Electricity Reform)

In slightly more than a decade, fundamentally bad policy decisions by Liberal and Conservative administrations have turned the provincial government’s electricity corporation into an unregulated, unaccountable monster.

Such is the power of this hydra corporation as we enter the second decade of the new millennium that it can corrupt the public body  - the board of commissioners of public utilities - that is supposed to control the corporation in the public interest and turn it, instead, into nothing more than a tool of the corporation’s Muskrat Falls venture, all with the enthusiastic support of the provincial government.

The result of all this is that the people of the province will not be getting the most of their own resources.  Rather, they will pay dearly to supply discounted energy to other people.

No single act created the beast.

No single act will bring it under control.

But there is no question that the province’s electricity industry must be radically over-hauled.  If we allow the industry to continue on its current disastrous course, what should be a very rosy future for the people of Newfoundland and Labrador  may well turn out to be as bleak as the bleakest time in the province’s history during the 20th century.

In reforming the electricity industry in the province, we must keep an eye on our basic principles.

1. The entrepreneurial private sector must be the main engine of growth in a globally competitive economy.
2. The provincial government must regulate the industry to support economically and environmentally sustainable development.
3. At the same time, the provincial government must ensure that the people of the province – the resource owners – get their fair return at the lowest possible level of risk.

With those three elements in mind, let us now turn to some specific actions.

Privatize


While there may have been an argument in favour of nationalising the provincial electricity companies 40 years ago, those rationales have long since vanished.  Even some of the politicians who created the hydro corporation in the mid-1970s now think it was a bad idea. And if privatizing a Crown hydro corporation is a good policy for a former Parti Quebecois activist, the idea is well worth considering in this province.

Privatizing the provincial government’s energy corporation remains the best way to reform the provincial electricity industry almost two decades after a provincial government first pursued the idea.  Turning the corporation over to the private sector would net the provincial government significant cash while at the same time removing a huge debt from public shoulders. 

In the past 20 years public attitudes have changed.  A renewed sense of confidence in the public would support the creation – in effect – of several new corporations doing business within the province and expanding outside its borders.

The provincial government will need a plan on how to privatise the electricity corporations. They could entirely in the private sector from the start.  The provincial government could sell shares or accept offers – as Danny Williams was ready to do – for any or all of the company and its assets. 

Alternately, the provincial government could create Norwegian-style hybrid companies that are jointly own by the state and private share-holders. The public interest in hybrids would be managed through a parliamentary oversight committee similar to the type used in Norway and elsewhere to remove Crown corporations from decisions that may be based on too many partisan considerations.

In either approach, the new companies must be incorporated under the Corporations Act* and subject to exactly the same laws and taxes as all other companies in the province.

Embrace Competition


No matter what route the provincial government choses to take on privatization, it must sell off the generation assets seized from private sector companies in the 2008 expropriation legislation. This will be an important first step in smashing the dangerous monopoly created under the 2007 energy plan.  It will also send a powerful message to investors that the provincial government will not tolerate such grotesque abuses of power.

Reform would also mean replacing the provincial energy corporation’s  tangled mass of interlocking directorates and companies with clearly defined companies that look after electricity transmission (TransCo) and generation (GenCo).  GenCo could be also subdivided into the island generation assets and those in Labrador.

Churchill Falls (Labrador) Corporation should remain a separate company and possibly would be retained as a Crown corporation as proposed in 1994. The provincial government should move quickly to repeal legislation that supports the Lower Churchill Corporation, including the 1978 development corporation act.

In the future any Lower Churchill development should be undertaken by the private sector, based on sound financial plans.

For TransCo, the provincial government will also have to set an open access transmission tariff or give the public utilities direction to do so. OATT allows open access to transmission facilities. It is part of the competitive system fostered by American regulatory changes in the early 1990s. This is an important part of connecting the province into the North American electricity market system fairly and equitably.

Protect the Public


The 1994 version of the Electrical Power Control Act created a role for the public utilities board in managing the electricity industry in the province.  The provincial government should repeal a series of exemptions granted in late 2000 that effectively stripped the PUB of its power to ensure that the people of the province benefit from the electricity they need at the lowest possible cost, as mandated by the EPCA, 1994.

As part of the reform, the PUB leadership must be removed from the realm of political pork and patronage.  New commissioners should be appointed from the winners of an international competition.  Funding for an expanded commission that we will need to carry out the PUB’s new role should come from a combination of public funds and levies on the regulated industries.

The PUB’s first task will be assessing the province’s energy needs for the future.  This will determine what, if any new power sources might be needed.  The PUB can then re-allocate existing generation to meet the forecast need or call for new projects.

Set the Taxes and the Policies


In the new world, the provincial government will have a new role.  At first, politicians and bureaucrats will have to get used to a new role instead of involved in all sorts of high-powered negotiations for which they have usually turned out to be uncomfortably unsuited.

The provincial government will have to set broad electricity policy to deal with environmental issues:  how much of the province’s domestic supply should be from renewable sources?  Should the province allow natural gas generation?  What about nuclear power?

The provincial government will also have to set taxes and other charges that generators, transmitters and domestic retailers will have to pay to the people of the province in exchange for developing electricity resources. This could turn out to be an interesting new source of provincial government cash. There’s another post coming on that aspect.

The government would also have to set the broad rules that the public utilities board would follow when setting retail prices within the province.

Taken altogether, these reforms to the provincial electricity industry would:

• Reduce the public debt load.
• Produce an initial pot of cash for the provincial government from sales.  This would be followed by new annual revenue from taxes and other charges that the provincial government currently doesn’t collect.
• Promote sustainable development of new energy sources at the lowest cost for domestic consumers.
• Create a stable environment in which entrepreneurs can attract investment in order to develop the province’s full energy potential.

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* Corrected from Companies Act

Bury my lede at Muskrat Falls

The Proponent [NALCOR Energy] has failed to justify the Project in energy and economic terms and has not provided an assessment of greenhouse gas (GHG) emission reduction in possible export markets as required in the detailed criteria provided in the EIS Guidelines.

You can find that statement as an attachment to a letter, dated January 26, 2010,  from the joint review panel appointed to conduct the environmental review of the Lower Churchill project.

The attachment lists, in painful detail, the areas of the NALCOR submissions to date that come up so short that the panel could not commence full public hearings.

But just look at those words:  “failed to justify”. They tell you, in the clearest way possible, why the Lower Churchill project is on hold. That’s something premier Danny Williams didn’t admit, incidentally until May 2010, but it is true.

NACLOR failed to justify the project on energy or economic grounds.

And those deficiencies are the reason the provincial cabinet is not even close to giving the thumbs up to start construction.

Forget the Premier’s claims about Hydro-Quebec. They are simply a diversion, a smokescreen. They are, as noted here many times, a complete nonsense given all that is in the public domain and the Premier’s own comments in April 2009.

As a result of that letter from the joint review panel, NALCOR spent another eight months pulling together more information in an effort to meet the review panel requirements.  NALCOR submitted the information to the joint review panel on August 9 and the panel began distributing the information to interested parties for comment on August 12.

Interestingly, that’s the same day Premier Danny Williams held a surprise news conference to accuse the Government of Quebec of interfering in a funding request to Ottawa for a project that, as the public subsequently learned doesn’t actually exist. As it turns out, a power line between Nova Scotia and the island of Newfoundland is merely a hypothetical project that depends on construction of the Lower Churchill. Still, the local media dutifully reported his claims without question and the story went national just like a spark touched to dry embers in the hot, dry woods of a central Canadian summer.

Sheer bunk though, all the same.

You’ll also find that quote from the environmental panel in a Telegram news story, dated Saturday August 21*, under the headline “Nalcor weighs risk and reward”. The article starts out with this line:

The province’s energy corporation has laid out a possible development scenario for the Lower Churchill.

That isn’t news, by the way, even though the most important idea is supposed to go right at the start of a news story.  The development scenario and the rest of the stuff at the front and in the middle of the article is exactly the same stuff that’s been talked about by NALCOR and its predecessor dating back to the 1990s.  It’s the development scenario laid out in the original environmental submission this time around. The complete document record of the review is available online.

You have to read all the way to the end of the Telegram article, though, to find any reference to the environmental panel’s January decision.  And even then the fact the panel told NALCOR their work was fundamentally lacking is presented as if it were merely the innocent stimulus to further action by glorious team at NALCOR:

Timelines associated with the joint federal-provincial environmental assessment panel have dragged on longer than expected.

The panel said Nalcor’s previous filings were lacking.

A pesky inconvenience at worst.

But as a result of this little setback, NALCOR did all this wonderful work, which the Telegram has now told us all about.  Now the panel will “now assess those filings before deciding how to proceed.”

Yay, NALCOR.

In the news business, they call it burying the lede.  That’s a news story that starts out with secondary information and puts the main point farther down the piece.  News stories are usually written with the most important thing at the top and the least important information at the bottom.  Some call the style an inverted pyramid because the big part is on top.

The style evolved over time and it has a number of advantages.  People skimming quickly through a newspaper can get the main point of each story by only reading the first sentence or first paragraph.  Editors running the story who are also jammed for space can safely hack off stuff at the end without losing the important information.

What makes this Telegram story stand out is that it doesn’t just bury the news, it puts the kernel of hard news in a place where editors would normally cut.  Not only that, but people may not even read all the way to the end.  And if they only read the first bit, they’d be fooled into believing that everything is hunky dory with the Lower Churchill when – as a matter of fact – it isn’t.

This Telegram story could easily have been written in the provincial government’s communications department.  But it wasn’t.  And that’s where an article like this  gets it’s persuasive impact on readers.

In the marketing world, a favourable news story is worth considerably more than any amount of paid advertising. That’s because the news story comes with the perception that the news is vetted by a reporter and a layer of editors and ultimately the producer or owner. If it is in the paper or on the air, it must be newsworthy and the information in it implicitly comes with a stamp of truthfulness.

Research tends to bear out that perception.  A 2008 Ipsos poll of Canadians reported that 69% of respondents had trust and confidence in conventional Canadian news media to report the news “fully, accurately and fairly”.  A more recent Gallup poll of American audiences suggests that Americans have considerable faith in conventional news media, even if it is lower than Canadian.

The distortion of reality, the burying in a wider sense, isn’t just confined to this sort of writing. You can find it as well in the stuff that doesn’t get reported locally at all, ever. A good example of that more recently was a story in the Toronto Star on energy issues.  It appeared five days before the Telegram puff piece on NALCOR and it goes to one of the major problems with the Lower Churchill project:  a lack of markets.

The massive, state-of-the-art Bécancour cogeneration electricity plant is capable of powering 550,000 homes. At the moment, however, the only action its gas turbines are getting comes from the dehumidifiers that prevent them from rusting out.

Apart from providing steam for an industrial park neighbour, the plant, 150 kilometres northeast of Montreal, sits largely idle, victim of policies and planning in a province overrun with electricity.

Such is the extraordinary electricity surplus in Quebec that several hundred million dollars are being spent and lost each year dealing with the problem, and consumers are footing the bill.

Hydro-Quebec has so much surplus capacity that it can afford to shutter this plant and others.  The company is still building more hydro and wind capacity.  it forecasts a surplus for 2011 that is enough to power 77 billion 100 watt light bulbs for an hour.

Try and think of the last time any one of the conventional local media reported any discussion of the Lower Churchill that did anything but report government pronouncements or reaction to government pronouncements?

Keep trying. 

There might be one or two, but by far they are outweighed with the sort of stuff the Telegram ran in late August burying the news about the Lower Churchill from last January under a mountain of cotton-candy fluff.

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* 2009 average paid circulation for the Saturday Telegram was 40,166 according to the Canadian Newspaper Association.

Transcontinental claims the Telegram reaches 78% of adults in the St. John’s census metropolitan area and 88% of “managers and professionals.”

Updated 0848 to clarify a sentence.

Maine’s energy future

Maine Governor John Baldacci can easily list off the elements of his state’s energy future.

“This year Maine signed a Memorandum of Understanding on tidal energy with Premier Dexter of Nova Scotia, on offshore energy research. There is a huge development in Eastport with the Portland-based Ocean Renewable Power Company. We can learn from each other and share our experiences with each other.

“We are working collectively as a region. It’s important that we are in sync, especially with the issues surrounding Hydro-Québec and New Brunswick’s nuclear plans.

Newfoundland and Labrador didn’t make the cut.

Wonder why not?

Maybe it has something to do with the current administration’s obsession with a $15.5 billion wet dream for which there are neither markets nor money.  There are plenty of other generation and transmission opportunities, smaller and more financially feasible, even on the island of Newfoundland. 

None will be developed  - including a connection from the island to Nova Scotia – unless it involves the Great White What of the Lower Churchill.

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The Old Man, Old Habits and Old Chestnuts

labradore lays bare the foolishness that is the Old Man’s latest anti-Quebec tirade.

Score one for His Premierness’s crack research and intelligence team; after all it was just three weeks ago that Quebec’s intergovernmental affairs Minister — unlike some provinces, they actually have one — telegraphed his province’s opposition to federal subsidies for transmission lines.

…

Curiously, these nefarious Quebec plots seem to cycle at about three-month intervals; His Premierosity exposed the previous one back on May 12th.

And yes, ladies and gentleman, the last time the Old Man got in a back-risking lather was during the month his pollster was in the field collecting numbers.

Funny how that happens.

Regular readers of these scribbles will recall that the Premier’s foray into the anti-Quebec realm prompted this rather neat diagram of The World as the Old Man Sees It.  Thousands of you read it, no doubt laughed and – in a great many cases- downloaded it as the wallpaper for your computer desktop.

Perhaps it’s time to get some tee shirts made up. They’d go like hotcakes.

Levity to one side – and it is hard not to snort at this same old story being recycled yet again -  your humble e-scribbler would be remiss if there were not reminders of the following salient points:

1. There is no Lower Churchill project the power from which would presumably course down these currently non-existent but hopefully federally-funded transmission lines.  NALCOR has no customers and doesn’t have the $14 or so billion the thing will cost.
2. Not so very long ago, Danny Williams was working feverishly to get Hydro Quebec to take an ownership stake in the Lower Churchill, with no redress for the Churchill Falls contract included.  This would be – of course – completely contrary to his pre-2005 comments/commitments on the subject.  This is the biggest story of 2009, if not the entire Williams administration to date.  It remains one story that the conventional media in the province have steadfastly – and one must say now very deliberately – refused to mention for almost a full year. They have determined it is an “un-story” despite the evidence from natural resources minister Kathy Dunderdale’s own mouth.
3. There is no Lower Churchill project.
4. Your humble e-scribbler first discussed the whole idea of the permanent campaign and the quarterly poll goose in a series of posts in 2006.  There’s “The ‘Danny’ Brand”, “Playing the numbers”, “The media and the message” and “The perils of polling.”
5. There is no Lower Churchill project.
6. The bit from the CBC story after “particularly”  is false:  “Williams has had a tempestuous relationship with Quebec officials, particularly after regulators in Quebec in May dismissed Nalcor's bid to move power to U.S. markets on Quebec's transmission system.”  The Regie d’energie did no such thing. Anyone who read the decision in English or French would know that. Your humble e-scribbler’s challenge from May remains unanswered.
7. There is no Lower Churchill project.
8. This bit is absolutely true:  “when we have a situation when one province is deliberately trying to thwart at least two other provinces, and indirectly affect four other provinces, that's sad."  And the Old Man should know since the last time it happened, he did it.

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Disclosure and scheduling delay Vermont/Quebec hydro deal

A 25-year power purchase agreement between Hydro Quebec and Vermont is being held up because of HQ’s concerns about disclosure of sensitive commercial information,according to Vermont Public Radio.

HQ is reportedly concerned that some information, such as pricing, be held back from public disclosure when the deal goes to the state’s public service board for review and approval.

The deal involves the Vermont Energy Commission, which has already agreed to the terms, but other entities, like the Burlington city energy authority will also buy a small portion of the 225 megawatt purchase.  Burlington and other similar authorities will have to put the deal to a public vote.

“Simple logistics” is also reportedly still holding up the deal. Mid-summer proved to be a difficult time to ensure that politicians and state and provincial officials are all available at the same time when some of them would be taking vacations.

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Quebec and Vermont to keep talking power

Quebec and Vermont have extended the July 31 deadline to reach a long-term power purchase agreement but officials quoted by Bloomberg are optimistic the two sides will reach a deal shortly.

The deal would see Vermont purchase 225 megawatts from Quebec from 2012 to 2038. When the two sides announced a tentative deal in March, they set 31 July as the deadline for the deal.

Vermont’s major electricity producer is looking at a long-term purchase to replace an existing one with Hydro-Quebec.  The state may also be in the market for additional power to replace generation at the 38 year old Yankee nuclear generator.

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Hydro: the wet weekend round-up

1.  A foundation of purest sandstone:  For those who are still following these things, the Telegram’s Rob Antle has a tidy little summary of the case which is the bedrock on which the provincial government’s legal challenge of the 1969 Churchill Falls power contract rests.

Self-Check:  How many paragraphs down did you get before you realised that – in and of itself - the case has absolutely nothing whatsoever to do with the 1969 ruckus?

2. More money for Quebec, yet more billable hours edition: The papers in la pas-si-belle-pour-Danny province have been filled with stories about the hearings over transmission and the promise to sue over good faith or lack thereof.

3.  Rien could possibly be further from the verite. In a scrum the other day, Hisself could recall the pages on which appeared stories in La Presse about the whole Labrador hydro thing from one angle or another.  Helene Baril’s summary of the issue in her January 12 story is tidy and accurate.  Ditto one on the 19th of January.

Not so another one on the 19th in which she writes:

Quatre ans plus tard, le premier ministre Danny Williams est toujours aussi déterminé à développer le Bas-Churchill sans l'aide de personne, et surtout sans celle d'Hydro-Québec.

Still prepared to develop the Lower Churchill without Hydro-Quebec?

Hardly.

Malheureusement en anglais seulement, 

Perhaps it’s time someone worked up:

a.  a French translation of the Dunderdale comments and,

b.  a French version of “Nothing could be further from the truth”.  ‘Pfft”  - another DW staple likely to be heard many times in the next few months -  already translates itself.

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The 1969 Churchill Falls Power Contract

For those who might be interested in these things, here’s the 1969 power contract between Hydro-Quebec and Churchill Falls(Labrador) Corporation in pdf format.

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The Tempest Tick-Tock: key events in the Hydro Quebec and NB Power tirades

It helps to put a timeline on things sometimes.

2006

May:  While a bill that is supposed to create the energy corporation is introduced as the first bill of the session, the text of the bill doesn’t show up until near the end of the spring 2006 session. The record for the bill is bizarre.  It shows the bill passed through second reading and committee stage four days after it passed first reading.

2007

June 4 and 5:   In a couple of short sessions and with very little public debate and discussion, the legislature passes two bills revamping the hydro corporation and creating the energy corporation.  This amounts to a massive  reworking of the province’s energy corporation, originally created in 2006.  

Newfoundland and Labrador Hydro forms the initial core of the company but internal structure  creates series of interlocking directorates of subsidiaries.

NL Hydro retains exemption given in 2006  to EPCA restriction that electricity producers in province delivering to customers in province may only be engaged in electricity activities.  PUB must still set Hydro rates to ensure profitability.

At some point in the re-organization, CF(L)Co becomes a subsidiary of NALCOR instead of CFLCo.  This makes NLH – the Lower Churchill proponent – equal within the internal corporate structure  to the company that was once its subsidiary.

June 13 and 14: In a high-speed process and with very little debate or public scrutiny, the  House of Assembly amends the Electrical Power Control Act 1994 (EPCA) to lay out method for making water management agreement where two projects exist on same watercourse.   Amendments to take effect on date set by cabinet. 

2008

June 3 and 4:   At high speed and with very little debate, the legislature approves major changes to the energy corporation legislation. Includes significant changes to the rules governing creation of subsidiaries, as well as massive changes to the province’s Access to Information laws to shield the company activities from scrutiny.  Cabinet retains the ability to transfer any function to the energy corporation it wishes to transfer, regardless of what it is about. 

June 3 and 4:  At high speed and with very little debate, the legislature passes a water rights management bill later revealed to strip CF(L)Co of its lease to Churchill Falls.

December 16:  Surprise seizure of hydroelectricity generation and transmission assets of three private sector companies on the island of Newfoundland (AbitibiBowater, Fortis and ENEL).  Assets assigned to NL Hydro.  NALCOR given responsibility for all government negotiations with Abitibi on compensation.

2009

January 16:  EPCA  amendments made in 2007 come into force.  Amendments are gazetted along with regulations but there is no news release or other public notice.

April:  Talks start on water management agreement between Newfoundland and Labrador Hydro and CF(L(Co) .

August 31:  Ed Martin (CEO of provincial energy corporation) tells Toronto Star that he :

… doesn't see the Quebec issue as a major stumbling block, as regulation requires the province to allow access to its grid in return for a set tariff. Hydro Quebec and Nalcor are just working out the details. 

Any costs to Ontario would build in the price of that tariff, but what's most important is how that final cost would compare to the next-best alternative. [Emphasis added]

01 Sep:  Emergency session of the legislature called for September 8 to deal with amendments to 2008 water rights legislation. 

Amendments and session are given rather benign description initially:

"This amendment is necessary in order to facilitate an agreement between Nalcor Energy or its subsidiary and CF(L)Co," said Minister Dunderdale. "As these negotiations are currently underway, we wanted to get into the House early and make this amendment to avoid any uncertainty to the parties involved. We thank the opposition for their cooperation on this matter and we look forward to further discussion on the amendment when the House reconvenes next week."

03 Sep:  In a speech to a national audience, Premier attacks Hydro Quebec for supposedly throwing up roadblocks to lower Churchill development.

04 Sep:  Dunderdale reveals the full  - the real - story.  (Locals media have not covered Dunderdale’s comments two and a half months later)

09 Sep:   Amendments pass in House emergency session.  True nature of story is revealed in comments during the debate:

“They [Churchill Falls (Labrador) Corporation lawyers and directors] felt that we had extinguished their rights to the whole watershed area that they require to produce electricity in the Upper Churchill and that would cause them some concern,” said [natural resources minister Kathy] Dunderdale.

Unspecified time in September:  Deal reached with CF(L)Co on water management.

October 23:  According to NALCOR, this is the date the CF(L)Co board met and rejected the deal agreement.

October 29:  NB Power deal.

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Danny Williams and the Philosopher’s Stone: Converting Principles to Cash

 

“It's giving away their future.”

Danny Williams on the NB Power sale

__________________________________________________________________

At the heart of a little flame war last week on one local blog came a rather surprising nugget of hard news that Newfoundlanders and Labradorians likely have never seen and may well never see covered at all – let alone in depth -  by local media.

Telegram blog writer Geoff Meeker noted a comment by Premier Danny Williams in the House of Assembly on April 30, 2008.  In answering an opposition question about putting $100 million into debt reduction for Newfoundland and Labrador Hydro, the Premier said:

It was a previous Liberal government that wanted to actually privatize Hydro. This particular government wants to strengthen Hydro, wants to make it a very valuable corporation: a corporation that will ultimately pay significant dividends back to the people of this Province; a corporation that perhaps some day may have enough value in its assets overall as a result of the Hebron deal and the White Rose deal, possible Hibernia deal, possible deals on gas, possible deals on oil refineries and other exploration projects, where hopefully we might be able to sell it some day and pay off all the debt of this Province, and that would be a good thing. [Emphasis added]

That’s right.

Danny Williams spoke publicly about selling off some or all of the province’s energy corporation to pay down public debt.

CBC’s provincial affairs reporter David Cochrane added to the discussion online and offered some additional insight into the Premier’s thinking:

We pulled him outside for a scrum to ask about it. Even before we asked a question he clarified his comments. He said he misspoke in the legislature. He wasn't talking about selling Nalcor. He was talking about selling the individual assets it acquires.

For example, if the Hebron stake is eventually worth 5-billion [sic] dollars and someone wants to buy, Williams said he would consider selling it to reduce debt.

That was consistent with past comments he had made when the government rolled out its plan to revamp Hydro into an energy company.

As established in the first part of this series – Control and Resources -  that isn’t what Williams had been saying consistently at all.

To the contrary, selling any asset of the energy corporation would run directly counter to the stated goal of acquiring control over the province’s resources and hence its development and future.  Being masters of our own destiny is tied directly to resource ownership.

But Cochrane was right:  Williams had talked about selling some or all of the energy corporation before.  As Cochrane showed, Williams had mentioned the idea in October 2005 in a story Cochrane had done on Ed Martin’s arrival as chief executive officer of the fledgling corporation that would be eventually known as NALCOR Energy:

Williams says his top priority is for the company to become an investor in every form of energy development – or, as he calls it, to get a piece of the action.

"I would like to see Newfoundland and Labrador Hydro gain a strong asset base, so in fact then the government of Newfoundland, as a shareholder, also benefits from that asset base," he said.

…

"If energy continues to grow in value as it is now, perhaps what we could now buy for a billion dollars could be worth $10- or $20 billion in 10 or 20 years' time, which means that those assets have a value whereby we could pay off our debt," Williams said. [Emphasis added]

The 2005 comment is not as clear as the 2008 version in the legislature but they are along the same lines. 

And certainly in 2005, Williams wasn’t splitting hairs over regulated (electricity) versus non-regulated (oil and gas) assets as Williams apparently did in the unreported portion of the media scrum in April 2008.  As Cochrane described it:

Williams did not say he would sell off all the assets (i.e power generation and transmission capacity). He was talking energy assets in the oil and gas sector.

Now while it doesn’t appear that Williams has said this “many, many times” as Cochrane asserted elsewhere in that comment, there is no question Williams has spoken of selling off some or all of the energy corporation in order to pay down public debt, if the price was right.

Nor is it the only reference to selling energy assets, even though the idea is not contained in the energy plan or the campaign manual.   In a clause of the New Dawn agreement, released in September 2008, one provision covers the potential sale of the Newfoundland and Labrador interest in the Churchill Falls (Labrador) Corporation:

On the one hand, the Williams administration has a clear policy connecting the principle of control of energy resources with ownership of equity stakes in energy projects.

Yet at the same time,  the Premier has spoken publicly about the potential that these assets could be sold to reduce public debt.

And on top of that, an agreement with the Innu Nation includes a specific provision covering the potential sale of the Newfoundland and Labrador majority shares in the company that operates the  Churchill Falls power complex.

Clearly the two notions cannot live in the same space.

Well, they can actually if one considers another statement by Danny Williams which describes another aspect of his political philosophy:

What I said before and I said going in, this is about principles, but it's also about money as well. At the end of the day, the promise and the principle converts to cash for the bottom line for the people of Newfoundland and Labrador.

That’s a comment Danny Williams tossed out in November 2007 during the racket about broken political promises with Stephen Harper.

Williams used the word “principles” in the familiar sense.  A “principle” is a fundamental rule.  A “principle” may also be expressed as a value like openness, honesty, or integrity.

The dispute was a matter of principle, in that sense; a promise made is a commitment to act that must be fulfilled.  If someone breaks his or her word without good cause or explanation, the relationships between people can no longer function.

But “principle” in the way Danny Williams used it on that occasion in 2007 identifies the “principles” as nothing more substantive than the basis for a claim of damages or the source of a grievance.  Relief or compensation can be had by identifying a sum of money, or, as Williams puts it: “the principle converts to cash.”

The notion is hardly surprising for a lawyer who spent a lot of time arguing for damages for his clients, even if there are few others who would – on the face of it – accept that principles of any kind can be transformed to coin.

Yet Danny Williams obviously operates on the belief that he has a political Philosopher’s Stone in his pocket.  Like its legendary alchemical predecessor that converted base metal to gold, this stone would convert electricity and oil into dollars.

The curious thing is that none of this has been reported clearly and consistently within the province.   It is doubtful that a majority of Newfoundlanders and Labradorians know anything but the old and familiar notion that links control of resources with the future. 

Yet there is no mistaking that the Williams administration has another policy firmly in place  - at exactly the same time - which would allow for the sale of resources in a fashion that directly contradicts the notion of control on which the administration claims popular support for its policies.

Little wonder in April 2008 then that Danny Williams responded so strongly when reporters asked him to scrum on his statements.  Again, as the CBC’s David Cochrane described it:

We pulled him outside for a scrum to ask about it. Even before we asked a question he clarified his comments. He said he misspoke in the legislature. He wasn't talking about selling Nalcor. He was talking about selling the individual assets it acquires. [Emphasis added]

In the end, the reporters in the scrum opted to report nothing of the comments at all, including the Premier’s “clarification.”

Regardless of what the reporters decided on that busy work day, the Premier’s comments and the unsustainable internal contradiction in them are obvious in both the Premier’s criticism in the legislature of Hydro privatisation on the one hand and then the expressed interest in flipping assets to pay off debt on the other.  It doesn’t matter how often the Premier said it.

The comments take on new importance though given the Premier’s recent attack on the sale of NB Power to Hydro Quebec. 

And at the same time, as the province faces tight provincial finances, the question of exactly what is government policy on energy, control and sale of resources to meet financial needs deserves to be answered clearly and unequivocally.

Such a question can only be answered, however, if someone deigns to ask it.

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Lower Churchill a long way off

In another Telegram story not available on line Danny Williams admits the Lower Churchill is still a long way from being a reality:

“We’re not looking at a Lower Churchill in the near term. “

He then expressed his hope to have the project approved within two years and started some time after that.

But that’s just his hope, not a prediction of anything.

As Bond Papers readers have known for some time, the project is full of problems, not the least of which is a lack of markets and financing, the two elements crucial to building the multi-billion dollar project.

Again, it’s pretty much old hat since he’s been dampening expectations about the project since at least early 2008.

Many people didn’t quite know what to make of it. Now we know that Williams had been consistently rebuffed for five years in his efforts to get Hydro Quebec to take an ownership stake in the project.

That wasn’t what Williams said publicly at the time but then again, when people don’t know what’s going on they can’t ask uncomfortable questions.

Incidentally, it has been two months now and not a single conventional news media outlet has bothered to follow up on the stunning revelations from natural resources minister Kathy Dunderdale about the secret pitches to Hydro Quebec.

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Eating his own

Newfoundland and Labrador Premier Danny Williams is tearing strips, not off New Brunswick Premier Shawn Graham or Hydro-Quebec but his own deal with Hydro-Quebec from last April.

Williams attacked the deal in a letter to Graham:

Despite our expectation of regulatory fairness [ in wheeling electricity across Quebec], Nalcor Energy has encountered obstacles in Quebec. Nalcor has been forced to lodge four complaints with the regulatory authority in Quebec about the tactics being used by Hydro Quebec Transenergie that serve to delay and inhibit our progress.

Under an agreement announced in April 2009, the provincial government’s energy corporation sells power to unidentified customers in New York state.  The power is wheeled along transmissions lines in Quebec under what is known as the open access transmission tariff.   NALCO pays Hydro-Quebec $19 million a year to wheel the power.  The figure was not released by NALCO or the Government of Newfoundland and Labrador.

While Williams is now slamming the deal – making it sound as if there was no wheeling agreement at all -  back in April, he was positively giddy with excitement at what he termed an “historic” agreement:

“This is truly a historic and momentous occasion for the people of our province, as never before have we been granted access through the province of Quebec with our own power…”.

There is no obvious explanation for Williams sudden attack on his own project nor is there any explanation for his claims that Hydro-Quebec is blocking or trying to block NALCOR’s access to markets.  The April deal proves there is no real obstacle.

What makes the latest tirade all the more bizarre is that in a scrum with reporters two days ago, Williams acknowledged  that there was no obstacle to getting power to markets in the United States.  In the same scrum, he said Hydro-Quebec might be trying to do just that. 

His disdain for the sale of NB Power to Hydro-Quebec is apparently based on losing the race for new markets for hydroelectricity.

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Williams miffed that HQ beat him to market again

In his written reply to Shawn Graham released today, Newfoundland and Labrador Premier Danny Williams reveals that his government energy corporation was in discussions to sell power to New Brunswick from the still largely conceptual Lower Churchill project.

But Hydro Quebec – with as much power as the Lower Churchill may one day offer already under construction -  evidently beat Williams to the punch.

The real  source of Williams’ frustration at news of a deal to sell NB Power to Hydro Quebec is buried after six lengthy paragraphs of irrelevant frothing:

One of the potential impacts of Hydro Quebec’s dominance may be the premature cessation of current, good faith discussions between Nalcor Energy and NB Power to sell competitively priced Lower Churchill power to New Brunswick and jointly advance the long term, mutual interests of both of our provinces in conjunction with Nova Scotia and P.E.I. These discussions have not yet reached an advanced stage, so it is not possible to quantify the benefits that might be lost to our two provinces and all of Atlantic Canada if discussions are terminated. If New Brunswick narrows down its range of alternatives to a single-window with Hydro Quebec, full information may not be available to evaluate the opportunities that other alternatives may bring. I would reiterate that our province feels compelled to look into the potential of anti-competitive behaviour on the part of Hydro Quebec given the potential monopoly that could exist as the result of an agreement between them and NB Power. [Emphasis added]

The revelation that Williams had been beaten to the market by Hydro Quebec is almost as astonishing as word last month from Williams energy minister that he had been working for five years, making secret offers for Hydro-Quebec to take an ownership stake in the Lower Churchill project. 

Williams criticises the Churchill Falls deal in the Graham letter but, according natural resources minister Kathy Dunderdale, Williams was willing to set the issue to one side in exchange for Hydro-Quebec buying a piece of the Lower Churchill.

In 2006, Williams rejected a proposal from Ontario Hydro and Hydro-Quebec to jointly develop the Lower Churchill.  Williams said the province would go-it-alone.  He made no reference at the time to efforts to lure Hydro-Quebec into another deal, as Dunderdale revealed.

Hydro-Quebec already had significant hydro projects in the works and added about 4,000 megawatts of wind energy to its mix of new project.

The Lower Churchill proposal currently undergoing environmental review consists of transmission through Quebec and a line to bring power from the project to eastern Newfoundland.  There is no proposal in public to run the power to New Brunswick.

The Lower Churchill project  - estimated to cost between $6.0 and $9.0 billion – has no confirmed markets.  An opening to Rhode Island apparently fell apart because power could not be delivered at a marketable price.  That isn’t what the energy minister told the public.

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Shawn to Danny: sod off, mate

New Brunswick Premier Shawn Graham sent Newfoundland and Labrador premier Danny Williams a polite letter on Wednesday telling him to keep his nose out of the NB Power talks and stick to running his own province.

Graham also repeats the point that others have made, namely that any suggestion that the grid through new Brunswick might be somehow closed or restricted as a result of any deal with Hydro-Quebec is without merit or foundation. Click that image, by the way, and you’ll get the whole letter, courtesy of cbc.ca/nb.

Stunning.  Not.

Incidentally, there’s also no small irony in Williams’ comments warning about New Brunswick selling off its natural resources to Hydro-Quebec.

In September natural resources minister Kathy Dunderdale revealed some details about Danny Williams’ previously secret offers to Hydro-Quebec to take an ownership stake in the Lower Churchill.

labradore offers chunks of the transcript of Dunderdale’s interview. So much for “despicable.” 

Those Dunderdale comments were all the more stunning in light of Williams’ previous position about demanding redress for the Churchill Falls contract before there would be any deal on the Lower Churchill.  According Dunderdale, Williams was willing to set the whole issue of the odious 1969 contract to one side in the interest of giving Quebec a fair return on its investment in the new project.

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Kremlinology 10: Ah to be a Tory in Gander in October, when the dogs are fit to wag

When the political going gets tough, what better way to handle it than to launch a phoney jihad against a completely imaginary enemy over a completely imaginary dispute:

The Premier is gearing up for another fight on the national stage. Danny Williams says Hydro Quebec continues to try and block this province from developing the Lower Churchill, now refusing to sign onto a water management agreement for the Churchill River in Labrador.

For starters, Danny Williams is only pissed at Hydro-Quebec because they aren’t willing to take the ownership of the Lower Churchill he offered then. It’s not that they are so interested in the LC and Danny that they are blocking him, it’s really bothering him that Hydro-Quebec just isn’t interested at all.

And that’s after five years of desperately trying:

[Natural resources minister Kathy] Dunderdale told VOCM Open Line show host Randy Simms on Friday morning that over the past five years, the Williams administration “got a path beaten to their [Hydro Quebec’s] door” in an attempt to have HQ become what Dunderdale described as an “equity partner” in the Lower Churchill.

Dunderdale described the Lower Churchill “piece” as a “win-win” for Hydro Quebec. She said that despite efforts by the Government of Newfoundland and Labrador there was “no take up [from Hydro Quebec] on the proposal.”

But the biggest thing you have to consider on this water rights agreement thingy is that if the two parties – NALCO and Churchill Falls-Labrador Company – can’t reach and agreement on their own, the whole thing will be settled legally and finally by the public utilities board.

No big public, hair-mussing fuss required.

Danny Williams knows this because that’s what he amended the law to say in preparation for just such an event.

Well, okay first the provincial government tried to screw with the contract – as someone else tried in the 1980 water rights case - but they got caught red-handed in that little bit of tomfoolery.

While Williams and his ministers tried to downplay it at the time, they were caught so far in the wrong they even had to call an extremely rare emergency session of the legislature to deal with the mess created by someone’s childish legalistic game.

Anyway, that’s another story.

CFLCO not interested in the deal on water rights Williams wants?

Well that’s no problemo.

The whole thing just falls along according to amendments made to the Electrical Power Control Act in 2007 by none other than Danny Williams’ own administration.

The public utilities board – headed by Williams’ new buddy Andy Wells – just imposes a deal on the two sides:

5.5 (1) Where 2 or more persons to whom subsection 5.4(1) applies fail to enter into an agreement within a reasonable time, one or more of them may apply to the public utilities board to establish the terms of an agreement between them.

(2) Where an application is made to the public utilities board under subsection (1), the board shall establish the terms of an agreement for the purpose of achieving the policy objective set out in subparagraph 3(b)(i).

(3) An agreement established by the public utilities board under subsection (2) is binding on the persons named in the agreement.

Poof.

Job done.

Pas de sweat.

And lookit, the company involved here isn’t Hydro-Quebec, it’s the Churchill Falls-Labrador Corporation. That’s the company in which the provincial government’s energy company – NALCOR - owns a 65% stake.

And if you are still not convinced this is all yet another case of Tory dog-wagging, just consider that this evil foreign demonio Hydro-Quebec hates Williams so much and is working so hard to block the Lower Churchill they were will to sign a deal allowing energy from Labrador wheel across their province.

Wheel power and they make millions off the wheeling charges. Gee, that’s really putting obstacles in the way of the Lower Churchill. Yep, what better way to block the Glorious Lower Churchill project than demonstrating that Danny Williams can wheel power through Quebec to some other market than Quebec without any obstacles.

So what is all Danny Williams’ puffed chest really about?

Not even Ed Martin - the head of the provincial government’s energy company - seems to know.

But if one Ed doesn’t, maybe your humble e-scribbler can offer some easy suggestions on what issues are causing the provincial Conservatives to go hunting for a distraction:

- The by-election in the Straits is really not going well at all for the Tories. Then there’s Terra Nova to fight where the Tories haven’t even got a candidate yet and the Liberals wound up having two to pick from. Eight cabinet ministers in one day and four trips by the premier Hisself don’t seem to be working on the voters, at least not the way it is supposed to work.

Very frustrating when the old tricks don’t work any more.

- It’s really, really, really painful to make one decision and then be forced to make another. Think Danny Williams and the whole lab and x-ray thing. Jerome Kennedy confessed just this past week to what some of us have known all along: the decision to chop service was made by the entire cabinet.

That’s why they all stuck so hard to the line about “improvements.

That’s why they resisted changing their minds right up until the point they had no choice.

That’s why they tried desperately for weeks to try and blame someone else for the shag up rather than the people who actually shagged up.

It really bruises the ego to lose.

- And that’s on top of a string of “losses” including the Gros Morne one. Again, as much as they tried to downplay it, the whole emergency session of the legislature must have deeply embarrassed cabinet.

- There’s also the ongoing embarrassment of Paul Oram coupled with his decision to up and run when the going got tough. A cabinet minister resigns hot on the heels of another, thereby creating a mini-crisis in the government? Not a way to make the leader feel cheery. Paul Oram took himself off a raft of Tory Christmas card lists with his poorly executed exit.

- Unflattering comparisons to Roger Grimes? Lighten up a bit, people. It’s a joke.

- Let’s not forget the admission that the provincial Conservatives haven’t been doing such a fine old job of managing the public purse as they’d claimed. The word Oram used was “unsustainable.” Finance minister Tom Marshall said much the same thing.

- Then there’s the revelation that the government’s satisfaction rate ain’t what it was purported to be by the government’s own pollster. Between the opposition and local media, three recent CRA polls – never released publicly before – show that the people of Newfoundland and Labrador told CRA one thing but CRA told the public something else. The truth is sometimes painful but it does come out.

- Then there is the ongoing frustration of the Lower Churchill. As a story in the Telegram noted [not available online], NALCO has to go back and answer a whole bunch of questions for the environmental review on the Lower Churchill and that is now behind schedule. That’s on top of the lack of partners (see above), lack of markets - think Rhode Island - and the huge embarrassment to the government of being forced to abandon their original plan of slinging power lines through a UNESCO World Heritage Site.

On the whole it has been a very rough patch for the ruling Conservatives, at least from their perspective over the last six weeks and a bit more.

And what better place for provincial Conservatives to engage in some traditional Tory dog-wagging than the annual convention in Gander.

After all, that’s where ABC was born, at a time – as the House spending scandal broke in 2006, among other things – when things didn’t look all that rosy for provincial Tories in the short term.

Come to think of it, Loyola Sullivan packed it in not long after that, as did Paul Shelley and a few others.

Hmmm.

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$10 billion for NB Power

A deal is close according to the Globe and Mail that would see Hydro-Quebec buy all of NB Power for $10 billion.

But the Globe story contains some of its characteristic shit reporting in the sub-head: “blocking access of other provinces' utilities to U.S. markets”.

There’s more the same drivel farther down the story but don’t buy most of it because it just isn’t true.

This sale can’t block access for anyone to NB’s power grid.  It can’t, not if NB Power and HQ want to keep selling power into the US.

And from the looks of it at least one statement could be completely false:  “Newfoundland and Labrador Hydro has complained to regulators in Quebec and the United States that Hydro-Québec's transmission arm is not providing it fair access to U.S. markets.”

You see Danny Williams has bitched alright, but he was bitching because he couldn’t get HQ to buy into the Lower Churchill. 

But…

According to Ed Martin, Williams right-hand on any of a number of issues, there is no problem whatsoever with Hydro-Quebec.  Thus it would be very odd if the company Martin runs was doing things – as the Globe reports -  like filing formal complaints alleging some pretty serious unfair market practices against HQ. 

All they have actually done is pursue a tariff through Quebec which they duly got.  Your see – Shawn and Rheal take note – NL Hydro has already been wheeling power into the United States across lines in Quebec in a deal touted by none other than …wait for it…Danny Williams Hisself.

Notice there is no further detail on that in the Globe story.  That’s a pretty good clue that Rheal Seguin and and Shawn McCarthy just didn’t do their homework.   Instead, they seem to have opted for a half-backed paraphrase of an equally a half-baked version of the old Danny story and not rely on what Danny’s energy minister said. 

In the process, the bitching morphed into a complaint filed with a Canadian or American utility regulator.  Look farther on in the story and that’s exactly what they do, and as you can see they got the bitching story and the bit about the alternate transmission line wrong too.  That’s what you get for quoting Liz’s thumbs and not doing any real research.

There’s also another completely asinine comment about HQ getting greater access to the US as a result.  If the guys at the Globe even bothered to check their facts, they’d know that HQ already owns capacity on the grid through New Brunswick. The story has been out there since the spring. That’s definitely not the motivation for this deal.

The upside to this story is that New Brunswickers will shed a 90-year-old chronic debt pig and retire in the process what the Globe describes as 40% of public debt in one fell swoop.

Let’s just hope that while about half the story appears to be complete fiction, the bit about New Brunswickers shedding their debt burden turns out to be true.

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