Cheryl Devoe Kim
Dow Jones Energy Service
October 23, 2000

A New Brunswick energy ministry secretariat is finalizing a comprehensive energy policy that will guide the government’s reaction to regional power market liberalization and the development of natural gas.

Led by the department of energy and mines’ assistant deputy minister Don Barnett, the secretariat will submit its policy paper by the end of the month, with public release of some of the contents expected in mid-November.

Industry observers are looking for some indication about the direction the province’s power industry will take. But the future of the key player in that market – New Brunswick Power Corp. (X.NBP), won’t be specifically addressed. Another committee is waiting in the wings to take on that task.

For NB Power’s part, it wants to see power-supply choice introduced at the wholesale level, which would affect three customers – the cities of Saint John and Edmunston and the village of Perth-Andover, said Stewart MacPherson, vice president of corporate planning.

On the retail side, NB Power wants the province to wait until other jurisdictions develop rules that deal with market power sufficiently before competition is introduced in New Brunswick, MacPherson said.

But pressure to introduce competition into the market is coming from the outside.

“The marketplace is really being restructured based on what’s going on around us,” Barnett said. “The question is how does NB Power function in that marketplace.”

Bureaucrats from several previous studies are recommending a “managed” transition into the new world, including gradual introduction of wholesale generation competition. They don’t want to repeat the mistakes made in other jurisdictions that have liberalized the power market.

New Brunswick is keeping a close eye on the New England market in particular, Barnett said.

“We’ve had a history of trade with New England. The market has been beneficial to the crown utility and its ratepayers as a result of playing in that market, and that market is changing,” Barnett said. U.S. Federal Energy Regulatory Commission requirements for reciprocity mean that some degree of liberalization is necessary to continue to reap the benefits of power exports, he said.

“I guess you have to take a look at yourself and see if you want to continue to play in that market. Are there things that one has to do with your own domestic system?”

The other significant agent of change in New Brunswick is natural gas. With the development of Sable Island natural gas and a pipeline into New Brunswick, opportunities for natural gas fired plants, and specifically cogeneration, are obvious for large power consumers.

“I really think that natural gas is playing a significant part in being able to develop the cogeneration potential in New Brunswick,” Barnett said.

Cogeneration is something that the province has thus far resisted, but NB Power is now scrambling to protect itself from the possibility of cogeneration, industry watchers say.

“They’ve been trying to lock customers into long-term deals,” said Dan Pastoric, senior vice-president, electricity for energy consultancy Energy Advantage Inc.

“I know that New Brunswick Power is running pretty scared. They’ve been trying to influence the government and they haven’t been successful,” Pastoric said.

But NB Power actually wants the province to allow its large industrial customer to develop cogeneration, Macpherson said.

“We have been recommending that our industrial customers be allowed to cogenerate by themselves,” NB Power’s MacPherson said. He acknowledged that the company has been discussing long-term contracts with customers, and said those customers have been very receptive.

One of the most obvious candidates for cogeneration in New Brunswick, refinery owner Irving Oil Ltd., welcomes the opportunity to generate power. “It would be a perfect fit for our refining business,” a company spokesman said. “It would also give us a level playing field to compete with our competitors throughout North America who are currently able to cogenerate power and steam.”

One industry observer isn’t expecting too much out of the new energy policy.

The policy paper will probably have vague comments about “continuing to review” options for power-wheeling, and continued talks with the Quebec and Nova Scotia governments, said Tom Adams, executive director of Energy Probe, a Toronto-based consumer and environmental think tank.

“They’ve shown no leadership whatsoever with NB power,” Adams said. He questioned the commitment of Premier Bernard Lord to effective address the challenges facing the province’s energy issue, since the premier has shown little interest in either energy or NB Power specifically.

“I’m expecting to be disappointed,” Adams said.