Based on the feedback I have received and keeping tabs on the blogs, it would seem to me that about 75% of New Brunswick residents oppose the sale of NB Power assets to Hydro Quebec. The other 25% are either on the fence or support the sale. Most of the opposition to the MOU/deal has an anti-Quebec and by implication an anti-French feeling to it. Danny Williams’ rants continue to resonate because people are not familiar with the terms of the Newfoundland deal that was made by Joey Smallwood 40 years ago, probably one of the dumbest agreements ever signed by anybody, anywhere.

People ask me for my opinion on the NB Power deal. I tell them clearly that I support it but that the MOU has a few holes in it (more on that in a minute). They tell me they don’t understand the terms of sale while admitting they have not read the MOU. They claim they want more information. They also tell me that they think the assets of NB Power must have more value than the $10 billion Hydro Quebec is offering. As I have said before, the value of an asset can only be determined by the price someone is willing to pay for it. To my knowledge, there are no other buyers for NB Power.

Furthermore, I’m told that an independent valuation of NB Power assets by an international banking group that specializes in mega corporate takeovers determined that NB Power’s asset value is consistent with Hydro Quebec Hydro’s offer to purchase.

Assuming the credibility of this valuation, there are at least four reasons to support the sale of NB Power’s assets to Hydro Quebec: (i) we lose our $4.7 billion debt (ii) we benefit from a five year rate-freeze on residential rates (iii) electricity from Hydro Quebec would reduce our carbon footprint and (iv) our major industrials (resource and manufacturing businesses) would benefit from a 30% rate reduction that will make them more competitive, preserve jobs and help grow the New Brunswick economy.

There are some loose ends in the MOU. I think they should be dealt with before an Agreement is signed. The most important concern Lepreau, residential rates and purchase agreements with alternative energy suppliers.
My major concern is Lepreau. What happens if it can’t be fixed or if cost overruns cause Hydro Quebec to back away from Lepreau? That would leave us with a huge debt, something in the order of $3 billion. In my opinion, any Agreement with Hydro Quebec has to be accompanied by a guarantee of certification for Lepreau, delivered by AECL and backed by the federal government. With such guarantee, failure to gain certification would shift the burden of Lepreau’s debt from NB Power to the federal government.

If we get get stuck with Lepreau, we would only have half a deal with Hydro Quebec and we would be stuck with a mountain of debt. That is not good enough.

The good news is that replacement power from Hydro Quebec during the Lepreau shutdown will be considerably cheaper than alternative fossil fuel generation.

In respect to residential rates, I believe they have to be tied to rates charged to Quebec customers. As I mentioned in an earlier column, this could be as simple as 125% of the Quebec residential rate. The other thing we might want to look at is contract rates in five year blocks, ad infinitum. Quebec could afford to do this because its costs are not subject to fuel price shocks and it could reasonably hedge against inflation.

My third concern is for the development of alternative and renewable energy forms like wind energy. There has to be something in the Agreement that guarantees access to the grid for any New Brunswick based renewable energy production. Guaranteeing power purchase agreements will be a little trickier because the cost of renewable alternatives, using conventional technology, is considerably higher than either the cost of Quebec hydro power or the cost of fossil fuel power generation. I would suggest that producers be guaranteed purchase of alternative energy at prices equal to the average of all power purchased by NB Power.

One final point - people have this romantic notion that loss of ownership would somehow cost us the benefits of our beloved utility. For example, Leopold Ouellet, an accountant in Northern New Brunswick describes “NB Power as the province’s economic development engine” while opposing the sale of NB Power to Hydro Quebec. NB Power, in its present configuration offers nothing to prospective developers except non-competitive power rates. It will only become an economic development engine if we can find a way to complete the sale to Hydro Quebec and benefit from their competitive industrial rates.

W.E. (Bill) Belliveau is a Shediac resident and Moncton business consultant. He can be contacted at bill.bellstrategic@nb.aibn.com