New Brunswick urged to form regional utility

FREDERICTON, NEW BRUNSWICK - A 2008 consultants report urged the New Brunswick government to further separate NB Power into competing companies and pursue an Atlantic regional transmission corporation, CBC News has learned.

The recommendations were made in December 2008, a month before Premier Shawn Graham began quietly negotiating the sale of NB Power to HydroQuébec.

They were made by William Marshall, the former president of the New Brunswick System Operator, a notforprofit corporation that oversees the provinces electrical grid, and William Thompson, a former deputy minister of energy in the Bernard Lord government.

The two consultants were commissioned by the government to do an options analysis of New Brunswicks electricity market and the future of NB Power.

Their report called on the provincial government to keep NB Power as a Crown corporation, instead of trying to sell it, but Graham went against that recommendation and in October 2009 officially announced that the province would be selling off NB Powers major energy assets to Quebec.

There was an extensive debate during the NB Power sale drama over who should own the provinces energy assets.

The 2008 report also urged the government to begin exploring the creation of a regional transmission company that would be responsible for the maintenance and construction of the Atlantic regions power lines, many of which serve New England and already run through New Brunswick.

New Brunswick is strategically located to support the efforts of all Atlantic provinces with respect to the development of projects such as Lower Churchill [in Labrador], a second nuclear facility [in New Brunswick] and large scale wind and tidal projects, the report said.

The fate of regional transmission access in the future if the NB Power deal went through drew harsh public opposition from Newfoundland and Labrador Premier Danny Williams and Nova Scotia Premier Darrell Dexter.

The report said this regional system could lower costs and improve reliability. It also said the regional company could provide a solid potential investment for provincial pension funds.

Under the original memorandum of understanding with Quebec, the transmission system would have been sold to HydroQuébec.

The idea of a regional transmission system has already been pitched by Fort Reliance, the privately held parent company of Saint Johns Irving Oil Ltd.

The company announced in January that it wanted to build the regional transmission system that would connect Eastern Canada to New England and could generate $2 billion worth of new transmission infrastructure.

Fort Reliance struck a new company, Portage Energy Ltd., to attract investors to the energy transmission project.

The Liberal government had routinely criticized the former governments restructuring of NB Power into competing subsidiaries.

But the report recommended the provincial government expand the process that started in 2003 of separating off the various operations and running them independently.

The consultants proposed splitting the utility into a wires division, consisting of NB Power Distribution, Transmission and Holding, and a generation division, comprising NB Power Generation, the Coleson Cove plant and the Point Lepreau nuclear plant.

Each division should have its own board of directors, president, chief executive officer and senior management team, the report suggested.

The split should happen by April 1, 2009, the report recommended.

The next step would have had NB Power overhaul how it purchases its power from generators.

The consultants also set the stage for phasing out highpriced fossil fuel plants, although the report does not state that any of these units should be closed.

The report said the provincial government could examine selling only the generation assets that have limited value due to age or fuel source.

The consultants warned against selling assets such as the hydro dams or the nuclear reactor.

Divestiture of all assets, including hydro and nuclear, in Maine and Connecticut has not been good for enduse customers. Costs have increased and state control has been lost, the report said.

Along with the existing NB Power companies, the MarshallThompson report also set the stage for the development of what it called an independent green energy company to promote the creation of new renewable energy generators in the province.

According to the report, the companys first priority would be to sell renewable energy and greenhouse gas credits in the international market.

The next step, as outlined by the report, would have the green energy company transferred 188 megawatts of international transmission capacity so it could be used for projects deemed to benefit the province.

The report said that transmission allotment could allow for the development of 50 megawatts of biomass or 250 megawatts of wind capacity that could be exported into the New England marketplace.

Another proposal in the report is the creation of a fulltime Office of the Energy Advocate.

Currently, when NB Power or Enbridge Gas propose to change their rates, the provincial government has the option to appoint a public intervener who represents residential ratepayers. The costs of that lawyer and all of the reports or expert witnesses used by the intervener are paid by the company seeking the rate increase.

This process has garnered criticism from energy stakeholders, according to the report.

The new office would address concerns that have been raised over the lack of continuity in the public intervener. This person would be given a 10year term, which would be nonrenewable.

This will allow for a strong and consistent understanding of the energy market and related consumer issues, the report said.

The energy advocate would be funded through the Energy and Utilities Boards cost allocation formula but the consultants advised that the fulltime office would actually cut overall costs.

The MarshallThompson report was released to CBC News, seven months after it was requested under the Right to Information Act. The province initially refused to disclose the document, a decision the corporation appealed to the Office of the Ombudsman on Nov. 2.

Ombudsman Bernard Richard rejected many of the Department of Energys reasons for shielding the report from public release. Richard ordered the release of the majority of the report but did allow the province to redact several pages that included the recommendations.

However, the ombudsman did say the province should consider the immense public interest in the subject and disclose the entire report.

I would suggest that there is a strong public interest in the full disclosure of the information contained in the report, particularly in light of recent events which saw the proposed sale of NB Power to HydroQuébec and the deals subsequent collapse, Richards recommendation stated.

In this case, the minister commissioned a report on public policy issues that affect all New Brunswickers. The government needs to abide not only by the letter of the law, but also by the spirit of the law, which favours full disclosure subject to very few exceptions.