New Brunswick Premier Shawn Graham has exited from a deeply unpopular, $3.2-billion deal to sell much of the province's power generation to Hydro Quebec, still insisting he believed in the deal but ridding himself of a political millstone six months before a provincial election.
Mr. Graham and Quebec Premier Jean Charest announced Wednesday that the two provinces were ending discussions on the proposed sale, following an 11th-hour meeting in Quebec City on Tuesday when they unsuccessfully sought to bridge their differences.
The premiers said the deal fell apart after Hydro Quebec inspected the large Mactaquac hydro dam and the Point Lepreau nuclear station and determined both facilities could pose substantially higher costs in the future than initially believed. For Hydro-Québec, the New Brunswick deal was part of an empire-building strategy that would expand markets for its surplus, low-cost hydroelectric power, both in the province and through transmission links to the northeast United States.
The New Brunswick government defended the planned sale as the answer to the province's rising electricity costs, which are squeezing both consumers and businesses, and a way of reducing its mounting debt.
But for Mr. Graham, Hydro Quebec's determination to renegotiate the deal has provided an off-ramp from a political controversy that has for months dragged down his troubled Liberal government, which must go to the polls in September.
The rookie Premier retreated from an initial $4.8-billion deal, announced last October, in which Hydro Quebec would have bought all of New Brunswick Power. Following an uproar over Quebec's takeover of the electricity system, Mr. Graham announced that a scaled-back, $3.2-billion deal would transfer to Hydro Quebec much of New Brunswick's electricity generating stations, but keep New Brunswick Power's transmission and distribution.
"The whole process has done incredible damage to a government that was already damaged and was trying desperately to recover its credibility," said Don Desserud, a political scientist at the University of New Brunswick. "The image of a reckless government that makes rash moves and then desperately tries to fix them up afterwards has now been entrenched. It's very adolescent behaviour."
Mr. Graham insisted he would have completed the sale had Hydro Quebec been willing to accept the terms that were spelled out in a memorandum of understanding in January.
"Our government put forward a solution that provided enormous benefit and change. And it's unfortunate that Hydro Quebec in their due diligence chose not to proceed," he told a news conference in Fredericton. "We believed in this deal. We believed in the benefits that it was going to bring to every single citizen."
Mr. Charest also insisted the proposed agreement was not scuttled because of political considerations, but rather because the due-diligence process showed it amounted to a bad deal for Quebeckers.
"It is better not to have a deal than to have a deal that is not in the interest of Quebeckers," the Quebec Premier said.
He said the major dams in New Brunswick were closer to the end of their lifespan than had been expected. The Mactaquac was built in the late 1960s and was supposed to last 100 years. It now faces reconstruction that could cost as much as $2-billion. In some instances, Hydro Quebec would have been required to manage dams that were no longer in service but would have needed constant supervision.
Opposition parties say they are determined to make the government pay at the polls for its alleged bungling of the power deal. Progressive Conservative finance critic Bruce Fitch said the initial deal was already "weighted in Quebec's favour" and wasn't good for New Brunswick.
"I personally think the voice of the people had a lot to do with this deal being scuttled, rather than due diligence," Mr. Fitch said.
