End power monopoly, task force advises

The Telegraph Journal
July 23, 1998

FREDERICTON – Continuing with a Crown-owed electric utility that holds a monopoly on power generation and distribution in the province isn’t in the province’s best long-term interests, concludes a two-member task force that looked into options for the future for NB Power.

Donald Savoie and David Hay say the government and its legislature committee that is charged with charting the future course of electricity service in New Brunswick can choose to follow two major directions – essentially to privatize or to give NB Power enough money through a debt for equity swap in order to function as though it were a private company.

“The status quo is problematic,” said Mr. Savoie.

“The status quo is not the best option.”

Maintaining NB Power as a monopoly provider of electricity distribution could be difficult because of the utility’s $3-billion dollar debt and the effect it would have on the utility’s ability to adapt to the increasingly competitive energy market in North America, they say.

No matter what route is ultimately chosen by the government following public hearings into the future of electricity this fall, New Brunswickers will be required to chip in to help swallow the stranded costs – the debt for which NB Power has no equity – that will result from the move into a deregulated market.

“If the government decides to change the status quo, we are entering a time where there will be teething problems… associated with stranded costs, associated with reduction in debt, associated in getting the right market structure,” said Mr. Hay.

“The future after those teething problems will undoubtably be a more competitive, more economic, more commercially based electricity market that people, I think, will be happy with,” he said. “But we’re not going to get there unless we go through the teething problems.”

The need to restructure is driven by the need to have electricity available at the lowest possible cost. Almost 50 per cent of NB Power’s electricity load comes from large industrial companies, a higher percentage than any other jurisdiction in Canada. To be competitive worldwide, those companies need electricity at its lowest possible price.

If electricity is available at a significantly cheaper price elsewhere, “you are exporting jobs,” said Mr. Savoie.

The report sets down the situation for the legislature committee and those who want to have their say in public hearings about the issue of deregulation.

Options for change, as listed by Mr. Hay and Mr. Savoie, include:

Other generators could be allowed to sell power into the NB Power grid; Transmission and distribution lined should continue to remain regulated monopolies. Regardless of whether NB Power continues to own such businesses, the government should regulate them; The province could allow competition for customers, thereby enhancing service and lowering costs. “New Brunswick is not an island and, in our view, it should not attempt to build a protective wall around its borders to protect the status quo,” stated Mr. Savoie.

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