Newfoundland Premier Danny Williams speaks in St. John's on January 28, 2009.Paul Daly
So after a year or so regrouping from his last "national unity crisis," the "country is coming to an end" battle, Premier Danny Williams is back on the war path. His target this time? New Brunswick Premier Shawn Graham is the direct opponent but the real enemy is Hydro-Quebec.
For those who don't follow energy policy and politics closely, let me give you a 30-second brief. Newfoundland has a historic spat with Quebec over the Churchill Falls development. And for good reason: it is a wondrous, profitable deal for Quebec and it has brought little wealth to Newfoundland.
Premier Williams wants to develop the Lower Churchill but either wants to avoid dealing with Quebec entirely or, at the very least, wants to have negotiating leverage with the province and its utility. Williams's problem is one of geography and the size of his province's utility (I won't discuss that here - it is less sexy politically). Geography is the big one - it is very hard to get power from the Lower Churchill to market without wheeling it through Quebec.
Very hard but not impossible. There is a plausible scenario where you ship the power underwater and then wheel it through New Brunswick and into the New England market.
Ah - you see, New Brunswick... That helps explain Williams's comments from yesterday that "Hydro-Québec's 'agenda' is to secure a stranglehold over access to electricity markets in the United States."
Commentary in Quebec today backs up Williams's concerns. As one La Presse reporter writes (my translation):
"This transaction has Hydro-Quebec salivating. The Crown Corporation will have new access to the Maine and rich North-East US markets thanks to an extra 500 MW of transmission capacity. It's not just that they can export more power but they can choose the ideal time to sell their electricity, when prices are highest"
The only problem?
They are almost certainly wrong. Quebec doesn't have the legal right to do what is being concocted. At least not if they want to continue selling into U.S. electricity markets.
As Tom Adams, one of the best energy analysts in the country (even if I sometimes disagree with him) wrote in a note on his website : "Hydro Quebec is likely to remain responsive open-transmission-access rules of the U.S. Federal Energy Regulatory Commission."
FERC has huge power over Quebec's ability to sell into the New York and New England market and if Quebec does not abide by their rules, there will be serious consequences.
Tom goes on to make a very poignant comment that goes to the heart of our current federation: "It is a pathetic statement about our federation that the U.S.'s international electricity trading rules bring more liberality to Canadian power markets than our own inter-provincial transmission access provisions."
Indeed.
So again, I think the N.B. Power deal is problematic because I don't understand how in 2009 a government can sole-source a $10-billion deal without any competitive process to determine the real value of the asset and allowing all potential, qualified bidders an opportunity to bid on it. Hydro Quebec may have been successful in a competitive process but there's no way they should have been able to get this done without competing against other potential buyers.
That having been said, let's keep the criticism of the deal factual, rather than basing it on irrational fear or political posturing.