Energy policy stymies $200-M project

Mac Trueman
St. John Times Globe
January 31, 2001

J.D. Irving Ltd. may place a $200-million Saint John construction project on hold because it looks like New Brunswick’s new energy policy doesn’t go far enough in deregulating electricity, says the company.

At first glance, the Irving company’s plan to build a 250-megawatt generating station on Bayside Drive seemed to have been made possible by the energy strategy Natural Resources and Energy Minister Jeannot Volpé unveiled yesterday.

The proposed natural gas-fired plant would supply electricity to the Irving Paper Mill, which company spokeswoman Mary Keith says uses more energy than all Prince Edward Island.

But to bring its energy costs below what the company is paying now to NB Power, Irving would have to build its plant 33 per cent larger than what the paper mill needs. The company would then have to sell its surplus power on the open market in the United States.

The good news for Irving is that Mr. Volpé’s new regulations will for the first time allow private companies in New Brunswick to generate electricity and sell it to other companies – and early news stories about that part of the policy had Ms. Keith expressing cautious optimism yesterday. Until now, companies had to consume their own generated power or else sell it to NB Power for a price equal to the power corporation’s own estimated cost in generating the same amount of electricity.

But buried in the 93 pages of Mr. Volpé’s document is a catch that has Ms. Keith’s company concerned, if not downright frustrated.

The transmission lines linking New Brunswick to neighbouring states and provinces may not be big enough to serve many of the customers and suppliers in this province who may want access to the open energy market, the paper suggests.

These lines are big enough only to let municipal power utilities in Saint John, Perth-Andover and Edmundston buy from the competitive market, it says.

“Making competition available to more customers is likely to be problematic until additional intertie capacity is built,” the document states. It goes on to say the province will direct NB Power to seek ways of expanding the capacity.

If that’s the case, Ms. Keith argues, then her company has permission to generate surplus electricity and sell it on the open market. It just can’t ship it.

“Under these circumstances, it’s very difficult to confirm to you at this point that we would in fact be in a position to build the proposed $200-million power plant, or to make long-term commitments to natural gas, which would fire that power plant,” she said.

“Permission to generate without the ability to transmit excess power to market is only half the solution,” Bob Youden, the J. D. Irving vice-president, added later in a press statement.

Closer to home than the U.S. eastern seaboard, Saint John Energy may be interested in buying some of Irving’s surplus power, power commission manager Richard Burpee said yesterday. But just how interested he becomes will depend on NB Power’s transmission fees, its contract-termination fees and what arrangements can be made for backup in case the Irving plant went down, he said. And many of these issues will be decided by the Public Utilities Board, not by the new policy, he said.

Energy Probe denounced Mr. Volpé’s paper yesterday as “loosey-goosey jargon” that doesn’t solve any of the province’s problems with its power needs or with NB Power.

“There is no sign that the government is even aware of the problems that NB Power faces financially and operationally,” said Tom Adams, executive director of the watchdog group.

“This is a corporation with massive, crippling debt load, that is fully intending to go out and increase its debt. It wants to repower Colson Cove, it wants to re-tube Lepreau, it wants to add transmission lines.

“All that stuff is going to cost a billion, maybe more. Where are they going to come up with the money? And while they’re at it, they’ve got Mactaquac falling apart. The concrete’s chemically unstable.

“This utility’s got a lot of issues. But instead of grappling with the issues, the government said we’re going to take all the hard questions and leave it up to the [Public Utilities Board] to talk about.”

He said that if Mr. Volpé had serious intentions, his first step would have been to “come clean on exactly what NB Power’s current situation is,” including a report on its liabilities and an assessment of its assets, so his new policy could “be grounded in a sense of reality about what we’re dealing with.”

Mr. Volpé’s plan states that all of the power corporation’s future capital expenditures must first pass “a market test.” That’s easy when a private company wants to test the strength of a new project it wants to develop. It makes an initial public offering, and the financial market decides the value. But Crown corporations like NB Power don’t do things like that.

He warned that Mr. Volpé’s plan to cap power rates will not control the power corporation’s spending, because a Crown corporation can make up for reduced earnings by simply borrowing more. Banks hold private corporations responsible for the money they lend them, he said. But with a Crown corporation, “lenders never ask what you are going to do with the money, because they know the taxpayer is good for it.”

 

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