With the proclamation of New Brunswick’s Electricity Act on Oct. 1, 2004, the Government of New Brunswick divided NB Power into five corporations plus two wholly owned subsidiaries. In addition, it created two additional crown corporations to support restructuring of the Province’s electricity market.

In fiscal 2004/05, NB Power reported fuel and purchased power costs of $497 million. That’s an increase of $30 million over the year before but its $31 million lower than it was in 2002/03.

The Utility’s response was to apply to the Public Utilities Board for an 11.6% (13% for residential customers) rate increase. The Utility claims that it needs the increase to offset growing fuel costs, yet its fuel and purchased power costs for each of the last three years has averaged $497 million, even with increases in the cost of coal, natural gas and oil. A more likely explanation is the loss of $100 million a year in fuel savings that would have been available with Orimulsion.

The Provincial Government’s response to NB Power’s rate increase application was to introduce a $5 million energy efficiency program that would offer interest-free loans up to $10,000 for renovations that will make homes more energy efficient. Good start!

The Premier and his Minister of Finance went a step further by suggesting that if the PUB approves NB Power’s rate increase, Government might pay part of the increase on behalf of some consumers.

The Leader of the Opposition’s response was to head for the United States to see if there is a market for a second nuclear plant at Lepreau. It’s his view that a second plant would help stabilize electricity prices in New Brunswick by reducing NB Power’s dependency on fossil fuels.

He’s also convinced that a second plant could be a major revenue generator for NB Power if surplus generation could be sold to New England.

That assumes it could overcome transmission bottlenecks that could deny market access to NB Power. There is risk in building generation capacity that would depend on U.S. markets for its viability. Electricity is a commodity that trades on the basis of demand and price. When price is too high, market disappears. For example, there are two natural gas plants idle in New England today because of the high price of natural gas. To gain and maintain a U.S. market, NB Power would have to be a low cost producer.

The cost of uranium is only a fraction of the cost of oil. Canada is rich in uranium. Nuclear plants produce a third of Europe’s electricity and a third of Japan’s electricity. France produces 80% of its electricity from nuclear energy, why not New Brunswick?

If a second Lepreau is feasible, it would create hundreds of construction jobs and an estimated 700 permanent skilled and highly paid operating jobs. The cost of constructing a second nuclear plant is estimated at $2 billion. Put that in context.

In fiscal 2004/05 fuel costs at Lepreau were 2% of NB Power’s fuel and purchased power costs but Lepreau accounted for 22% of the utility’s production, even with its problems. If a second plant, together with a refurbished Lepreau-One could double or even triple that production, NB Power’s fuel costs would go down dramatically. Savings could be as much as $150 million a year and would likely pay for the plant and its financing in about twenty five years while export revenues lowered the overall cost of the utility’s operations.

The 2006 Energy Outlook published by the U.S. Government’s Energy Information Administration is projecting that electricity prices will decline over the next ten years as a result of lower natural gas and coal prices. On the other hand, they predict total electricity consumption to grow from 3,729 billion kilowatt hours in 2004 to 5,208 billion kilowatt hours by 2005, a 40% increase. The market may be available in New England but price will be the key to export viability.

The Americans are projecting that increased demand for electricity will be met largely by an increase in gas and coal-fired plants. They project the use of coal will be more than doubled. They are also forecasting an increase in the use of biomass and wind but little or no increase in solar and hydropower. They make the key assumption that conservation will be induced by price and that government conservation programs will have little or no affect on conservation.

If there is a business case for a second nuclear plant, the biggest challenge may be in finding the money to build it. A long-term export contract would help secure the financing. NB Power doesn’t have the borrowing capacity so it would need a partner like AECL or maybe someone like Nova Scotia’s Emera which owns Bangor Light & Power. There may also be an opportunity to offer shares to the general public.

In my view, we need to look at the nuclear option. We have to find a way to get off oil. We have to find stability in our power rates. If we increase NB Power’s export revenue that would help. Wind may add some alternative generation and tidal or wave power may help one day but they are not short-term alternatives. Nuclear power, supported by a long-term supply contract for Canadian uranium and a long-term purchase contract from New England could bring stability and predictability to our electricity bills.

Shawn Graham is right to push for a study that would determine the feasibility of Lepreau II.

We need to get on with it before NB Power breaks the bank.