Hydro-Québec is pushing to gain control of more of Eastern Canada's power grid.
Quebec Premier Jean Charest and his New Brunswick counterpart Shawn Graham are expected to announce in Fredericton on Thursday that North America's biggest hydroelectric company is taking over New Brunswick Power Group.
Hydro-Québec has also approached Prince Edward Island to strike a similar deal, and is also eyeing Nova Scotia Power, a subsidiary of Emera Energy, a source in the Quebec government said.
This comes as U.S. officials pressure eastern Canadian utilities to merge, a move that would make it easier to co-ordinate production and transmission of electricity to the eastern United States. Given that the region's most important source of electricity is Hydro-Québec, U.S. officials are eager to see it take over its smaller rivals in the Maritimes, the government official said.
The deal, worth close to $10-billion in total, will see Hydro-Québec spend $4.7-billion for the assets of New Brunswick Power, which will become a subsidiary of Hydro-Québec.
Hydro-Québec will also take over New Brunswick Power's debt, estimated at close to $5-billion.
Hydro-Québec will inject $700,000 from its own coffers and borrow the remaining $4-billion.
Under the agreement, residential electricity rates in New Brunswick, which are 60-per-cent higher than in Quebec, will be frozen for five years. Industrial rates are expected to be lower under a formula that will discourage Quebec companies from moving to New Brunswick while still offering cheaper energy in the long-term to New Brunswick companies.
In return, Hydro-Québec gains access to a transmission corridor to the major U.S. markets at a time when the giant utility proceeds with major projects, including the La Romaine complex and expansion of the James Bay's hydroelectric capacity.
New Brunswick Power's assets include 15 hydro, coal and diesel-powered generating stations. Hydro-Québec will obtain full authority to close down the older and more polluting power stations as new cleaner energy from Quebec becomes available. Both governments are expected to argue that this will be a major factor in helping reduce greenhouse gas emissions.
The Point Lepreau nuclear generating station was also part of the deal and will be taken over by Hydro Quebec once Atomic Energy Canada completes a $1.4-billion refurbishing contract.
Talks between Quebec and New Brunswick began last January when Claude Béchard, Quebec's former minister of natural resources, received a mandate to explore the possibility of merging Maritime power utilities under Hydro-Québec.
The giant utility has just completed a major transmission line to Ontario and was planning to complete a modern interconnection with New England states south of the Quebec border.
The deal with New Brunswick gives Quebec a stranglehold over access to electricity markets in Eastern Canada and the northeastern United States, provoking the outrage of Newfoundland and Labrador Premier Danny Williams.
Newfoundland Hydro has been examining plans to bypass Quebec transmission lines as it pursues ambitions to develop the Lower Churchill project. The proposed route would see Newfoundland and Labrador build an underwater transmission line to hook-up with Cape Breton and on to New Brunswick to export to the United States market.
Today's deal may strike another blow to Mr. Williams plans, forcing him to negotiate with Hydro-Québec to pursue his project, a scenario he has tried desperately to avoid.