Published Saturday April 17th, 2010  Mike MacDonald
Commentary

For many months our Energy Minister has spent much time in the media and at numerous public meetings dispelling what he calls "misinformation, fear mongering and red herrings." Let me introduce you to what I saw as the "green herring" (or green-mongering).

New Brunswickers were being told to walk away from so-called "risk" assets to become "hydro-green". Hydro-Québec had intended to export 1,000Mw (8.76Tw-hrs/yr) into Maine through our recently built international transmission line; however, no mention was ever made that they would be technically limited to importing only 850Mw at our Madawaska/Eel River links to Quebec. So; would it have been "operational status quo" as Hydro-Quebec ran our existing fossil fuel fired plants to meet in-province loads?

In order to become "100% hydro-green" and also provide exports to Maine; our sophisticated northern High Voltage DC converter stations would have required extensive capacity upgrading to 4,340Mw; a gigantic 400 per cent increase! What would have been the costs and time horizons for these projects? Might conservative estimates reach $580 million? Higher capacity transmission lines down to the Keswick Terminal would certainly be required; could costs approach $870 million not including the many other upgrades required to balance our systems? Quebec side upgrades would also have been required; wouldn't those costs have been passed along in "Quebec approved line tariffs"? Note; timing of this "future greening" effort would have been completely outside of our control, since, neither the generation supply nor the Hydro-Québec lines to our border are ours. What would Hydro-Québec have planned for us; when; and, at what cost would we have ever really gone "fully-green"?

Financing these projects alone at only 5 per cent amortized over 25 years would have cost New Brunswickers over $2.5 billion. Payments on this loan would have run $100 million/yr and would have been added to the MOU's proposed "Heritage Pool Power Rate"; taking us from $0.0735 to an effective $0.0847/kW-hr if we also include line losses; a 15.2 per cent jump. (88 per cent more than Vermont's recently negotiated rate of $0.045/kw-hr; and this doesn't even include those unknown CPI increases). None of these issues were ever clearly identified by the Premier or his party in their extreme haste to promote this deal; the haste itself being difficult to comprehend.

I was extremely uncomfortable, insulted, and; indeed, very embarrassed, when told by all involved; our Premier, his Energy Minister, Department of Environment reports, the Ganong panel, and Jean Charest that a significant greening of our power system would occur. This hyped-up "official green scheme" was contradictory. If Hydro-Québec exported power to Maine, then our power could never become greener; and, the carbon power plants would have remained open anyway for many years to serve our loads. Our officials, the above "green proponents", need to individually "come clean on green" and expose the "green herring" for what it was.

Our typical 15.73Tw-hrs/yr total electricity requirement plus Hydro-Quebec's 8.76Tw-hr/yr desired export level would have been worth a staggering net $2 billion contribution to Hydro-Québec's annual bottom line! (Their incremental cost of hydro generation is virtually near zero; particularly if it is Churchill Falls energy). Such a generous cash flow could have supported massive $28.3 billion borrowings or have been used to help eliminate Hydro-Quebec's huge $36 billion debt (assuming an interest rate of 5 per cent over 25 years in the bond market.)

Given the options; wouldn't one expect Hydro-Québec to be happy with any "fixed term" power purchase agreement rather than no agreement at all? Shouldn't our motto be "take it or leave it"? The potential energy revenues for Hydro-Quebec put us in the driver's seat as they try to "un-park" hydro generators and avoid spilling water; but our government has been a terrible negotiator. Vermont's recent $0.045/Kw-hr deal for only 1.3Tw-hr/yr is a much better example of tough negotiation.

This proposed deal had the look, feel and synthesis of something drafted during moments of sheer panic; no more than a mergers and acquisitions exercise orchestrated by opportunistic self-serving interests reminiscent of the Enron fiasco. The proposed deal scored zero in terms of solid technical evaluation focused on New Brunswick's important self interests and future opportunities; but was rather all about short term financial gain aimed at solving years of government misguided financial manipulation of our Department of Finance and of our utility. In every other North America jurisdiction utilities are successful and profitable because they are permitted to run as "real" businesses. It is now time to re-evaluate how NB Power can be polished into a new gem that serves New Brunswickers long into their future. Let's begin by developing a "hands-off-protected" long-term energy policy that will never again be assaulted; but rather, continually enhanced to the advantage of all New Brunswickers.

No party nor its' premier must ever abdicate the energy sovereignty of New Brunswick and its children to others forever. Remember; the future is always unknown. Our government must ensure that all of our initiatives are always New Brunswickized first. Our motto; "Just be ourselves"¦.here we can do anything" says it all; why can't we too be "masters in our own home". Indeed, why not?

Mike MacDonald is a consulting electrical engineer and entrepreneur experienced in electric power systems, energy efficiency, system failure analysis and operations management. He is a longtime resident of the Kennebecasis Valley. He can be reached at This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Comments (5) 

Mike MacDonald must work for NB Power. The plain facts are that Lepreau is a huge drain on the finances of NB Power and NB. It has been a disaster financially from day one. It was supposed to cost 350 million and ended up costing 1400 million. After 27 years, we still owe 800 million of the initial construction cost.

The refurbishment was supposed to cost 1400 million. It is now over 2000 millions and far from finished. The power deal would have meant that we would be rid of that albatross around our necck, reduced our debt, reduced future risk of refurbishents such as Mataquac, reduced our dependency on oil prices, reduced the risk of rising interest rates, reduced the risk of carbon pricing and given us fix prices for five years and then pricing according to a fix formula i.e. CPI.

6 Thumbs Up30 Thumbs DownFlag as InappropriateJ. R, Moncton, NB on 17/04/10 09:51:23 AM ADT   

J.R: Give it up. This story simply points out a good many things that Shawn and Jack didn't want anyone to think about.
Point Lepreau refurb costs were ours anyway even with your treasured deal. You fail to point out that we were recieving less than these costs for a fully rebuilt station. Shawn and his cronies are now looking for work, and I doubt that many of them will be rehired by NB taxpayers Perhaps you could get work again as an adviser, but don't count on the job being long term.

17 Thumbs Up2 Thumbs DownFlag as InappropriateTide Watcher, Saint John on 17/04/10 02:47:12 PM ADT   

AS much as I agree with the math in article, I doubt that this would have ever been published before the deal fell through. I blogged much of the same several months ago. Almost all the electricity consumed in the province will come from the very same sources as today whether HQ owned NB Power or not.

Time will soon tell if refurbishing a nuclear station is worth the effort. Hydro Quebec has Gentilly II (sister station to Lepreau) to refurbish as soon as Lepreau is done. So if it is worth the effort, then HQ will do it. If they conclude from the experience at Lepreau that it is not, then it will be interesting to see the decommisioning of Gentilly start.

15 Thumbs Up1 Thumbs DownFlag as Inappropriatekz1000guy ..., Northern NB on 17/04/10 05:15:37 PM ADT   

You see J.R., you just can't handle it when people with knowledge and experience speak about the many pitfalls of the sham to sell NB Power in whole or part to HQ.

You should spend a little more time reseaching the rate/CPI relationship. You never believed anything I told you, so maybe some attention should be paid to Mike MacDonald who without question understands and knows his topic exponentially more than you and those who like to follow your failed "this was a good deal" logic.

Time to give it up, read up, learn up and smarten up! 13 Thumbs Up2 Thumbs DownFlag as Inappropriate

City Joe, Bathurst on 17/04/10 06:15:55 PM ADT