NB Power President: Officials withheld information on risky fuel duel

FREDERICTON - - Senior officials at NB Power knew that an ill-fated, $2-billion deal to buy cheap fuel from Venezuela was at risk, but kept that information from the provincial government, the Crown-owned utility's new president testified recently.

David Hay was speaking to a legislative committee that is investigating why NB Power began a costly refit of its Coleson Cove generating station when it didn't have a signed contract to buy Orimulsion, a less costly form of fuel made from coal and water.

The botched deal is now the subject of a lawsuit and ongoing criticism of Premier Bernard Lord's Conservative government.

Hay, appointed president and chief executive of the utility earlier this month, said NB Power's former CEO, Stuart MacPherson, and its director of business planning, David Read, knew there was no formal contract to guarantee the supply of Orimulsion.

"All relevant written materials appear to indicate that constant assurances had been provided by various Venezuelan authorites at virtually all relevant times," said Hay.

"(But) Stuart MacPerson and David Read appear to have believed or known that the fuel-supply agreement was at risk on Nov. 8."

Still, the utility went ahead with a $750-million upgrade at its generating station in southwestern New Brunswick.

"The noose may be tightening on Mr. MacPherson's and Mr. Read's necks, but there's a real question about how diligent the government was in all of this," said New Brunswick NDP Leader Elizabeth Weir.

Hay also testified that an investigation revealed MacPherson and NB Power vice-president James Brogan knew that a fuel delivery system, being built in Saint John, had gone well over budget but waited for months before telling the government.

"This knowledge was not clearly passed on to the NB Power board, its observers or the provincial government until very late in the process," Hay said.

The committee hearings are expected to continue for about a week.

Meanwhile, the head of Venezuela's state-run oil company has confirmed there was no formal fuel-supply contract with New Brunswick, and the company intends to get out of the money-losing Orimulsion business.

If NB Power is unable to get a court to order Venezuela to deliver the fuel - as promised in an informal agreement - the public utility is demanding $100 million a year in damages to cover the added costs of buying a more expensive fuel.

In the worst-case scenario, electricity rates in New Brunswick could increase by as much as 10 per cent if the fuel, which is produced only in Venezuela, fails to arrive.