NB Power will keep transmission in new deal

Hydro-Québec-NB Power Agreement reshapes New Brunswick's energy market, transferring power plants, preserving transmission and distribution, promising a rate freeze and regulatory oversight, while modifying debt assumptions and base-load supply for cross-border electricity exports.

New Brunswick will retain ownership of its power transmission system in an amended deal with Hydro-Québec that aims to eliminate concerns that Quebec was gaining a stranglehold over power exports to the northeastern United States.

Premier Shawn Graham is scheduled to release details of the new agreement in Fredericton. The Liberal Premier has been under fire both at home and from fellow premiers, most notably Newfoundland and Labrador's Danny Williams over Hydro-Québec's proposed takeover of provincially owned New Brunswick Power.

Under the original deal that was announced last fall, Hydro-Québec would have acquired all of NB Power's assets in exchange for taking over its $4.8-billion debt and providing a five-year rate freeze for residential and small business customers and a 30-per-cent rate reduction for industrial users.

Now, New Brunswick will maintain its transmission and local distribution operations, while Hydro-Québec will acquire the province's power plants and a contract to supply a base load of power to the New Brunswick market, said sources close to the negotiations. Power customers will still get lower or frozen rates, but Hydro-Québec will not assume all of NB Power's debt.

Opposition parties in New Brunswick have condemned Mr. Graham for planning to sell off a Crown asset that was poised to benefit from growing U.S. power demand. And they questioned the long-term benefits of the deal, suggesting power users could face steep rate increases after the five-year freeze expires.

However, New Brunswick Energy Minister Jack Keir said that the deal provided regulatory control over electricity prices, and would only allow Hydro-Québec to raise rates to offset inflation and cover the costs of transmission improvements and construction of new power generation.

New Brunswick's retention of the transmission and local distribution should ease some of the concerns about future rate increases, though after a panel green light on the deal it is doubtful the opposition will be satisfied.

Mr. Graham, who faces an election in September, saw his popularity plunge after announcing the original proposal in October. Conservative Leader David Alward predicted last week that the government would backpedal on the initial plan, despite claims it cannot be reopened by officials, as part of a political rescue operation.

Quebec Premier Jean Charest, meanwhile, has sought to reassure power customers in the United States that Hydro-Québec would not abuse its increasingly dominant position. Mr. Charest and Hydro-Québec chief executive Thierry Vandal held a private dinner with Maine Governor John Baldacci last month to address his concerns.

Mr. Williams and Nova Scotia Premier Darrell Dexter criticized the initial proposal for handing too much clout to Hydro-Québec, which is aggressively expanding its power exports to the U.S. All of the Atlantic provinces hope to become power exporters, and New Brunswick represents a key land bridge to markets in New England.

Newfoundland is currently before the Quebec energy regulator, challenging what it says is Hydro-Québec's unwillingness to transmit power from its proposed Lower Churchill hydro project in Labrador to Canadian and American markets.

Meanwhile, a company owned by New Brunswick's powerful Irving family is proposing a regional transmission system in Eastern Canada to foster collaboration across political boundaries.

Irving-owned Fort Reliance formed Portage Energy Ltd., which will aim to form partnerships to develop new transmission projects worth between $1-billion and $2-billion.

Fort Reliance spokesman Daniel Goodwin said the call for collaboration is unrelated to the ongoing battle over New Brunswick Power. He said the company would work with whatever partners it could find in Eastern Canada to develop projects that would reduce transmission costs and provide environmental benefits.

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