Quebec and New Brunswick are closing in on a $10-billion deal that would see Hydro-Québec take over key assets of debt-laden New Brunswick Power, a controversial move that would give Quebec a stranglehold over access to electricity markets in the northeastern United States.
A final agreement must still be approved by the respective governments, but could be announced early next week. The deal represents a political minefield for New Brunswick Premier Shawn Graham, who has pledged to make his province an energy powerhouse but faces the prospect of steep increases in electricity rates.
It would also provoke outrage in Newfoundland and Labrador, where Premier Danny Williams has been hoping to cut his own deal with New Brunswick to ship power from the proposed Lower Churchill River hydro project to American markets.
Mr. Williams and Quebec Premier Jean Charest are bitter rivals over electricity development. Newfoundland and Labrador Hydro has complained to regulators in Quebec and the United States that Hydro-Québec's transmission arm is not providing it fair access to U.S. markets.
Mr. Graham and Mr. Charest announced in the summer that the two governments would pursue talks aimed at building closer collaboration between their provincially owned utilities.
Now, they're expected to announce a deal in which Hydro-Québec would acquire assets of New Brunswick Power, take over its $4.7-billion debt, and supply the province with power at rates that represent $5-billion in savings for residential and industrial power users.
In exchange, Quebec would get greater access to the New Brunswick market and the transmission corridor to major U.S. markets – a significant benefit given Hydro-Québec's expansion plans and the slump in electricity demand in North America.
“This is an example of New Brunswick having the courage to seize an opportunity,” said one insider, noting that the deal would remove 40 per cent of the province's debt from its books.
Nathalie Normandeau, Quebec's Minister of Natural Resources, confirmed that discussions are continuing with New Brunswick Power to build a “close relationship” with the province but refused to comment on details of those talks.
“I don't want to comment on rumours,” Ms. Normandeau said. “What is clear is that we are working on a continental perspective to develop our energy potential. … We are having specific discussions with New Brunswick where we want to improve our relationship with respect to energy.”
A spokeswoman for New Brunswick Energy Minister Jack Keir declined to comment on the talks.
The Maritime province is strategically located as a transmission gateway for power exports from Quebec, Nova Scotia, Prince Edward Island, and even Newfoundland and Labrador, and has also harboured its own ambitions to be a clean-power exporter to the U.S. Northeast.
But the cost overruns in the refurbishment of the Point Lepreau nuclear reactor threatens to drive up power rates, even as New Brunswick faces billion-dollar investments to upgrade its transmission system to increase capacity to the United States. Atomic Energy of Canada Ltd.'s retooling of the 25-year-old reactor could run $1.5-billion over budget, which would force a 2-per-cent rate increase in New Brunswick for the next 30 years.
Hydro-Québec is offering to freeze residential rates for several years, and rollback industrial prices – a key consideration in a province where power-hungry forestry and mining sectors provide much of the employment. Sources say the Irving family, which owns much of New Brunswick's industry, is keen for a deal with Hydro-Québec to reduce electricity rates.
But Mr. Graham can expect some political backlash. New Brunswick Power has been a publicly owned utility for 90 years, and the Liberal Premier vowed to keep the company in public hands in the past election campaign. Provincially owned power utilities are considered sacrosanct across the country, except in Alberta, where private and municipally owned utilities generate most power.
A Quebec-New Brunswick deal would face scrutiny in Washington. The U.S. Federal Energy Regulatory Commission regulates power imports and assesses whether individual suppliers exert too much dominance in a market.
Newfoundland's Mr. Williams is looking like a jilted lover with the Quebec-New Brunswick partnership.
His province has long and bitterly complained about a deal signed with Quebec in the 1960s to build the Upper Churchill River hydro project. Forced to send the power through Quebec to markets, Newfoundland agreed to fixed prices that are now well below market value, creating a windfall for Hydro-Québec.
In order to strengthen its hand on the proposed Lower Churchill project, Newfoundland Hydro has studied a transmission route bypassing Quebec. The route would use underwater cables from Labrador to the island, then to Cape Breton and on to New Brunswick, where it would hook up with export lines.
Newfoundland Hydro has had its own discussions with Nova Scotia and New Brunswick regarding co-operation on electricity exports.
It has also applied for access through Quebec's transmission system for exports. (The U.S. regulator requires exporters to the American market to provide competitors with “open access” through their systems.)
As rumours about a potential Quebec-New Brunswick deal reached St. John's this week, Mr. Williams indicated his displeasure. In a statement, his communications director, Elizabeth Matthews, said the Premier “can't imagine the people of New Brunswick would allow their government to sell their energy asset and put that power into someone else's hands.”
