Energy Probe

Roger LeBlanc
Telegraph-Journal
April 2, 2002

Only two days after announcing a big budget surplus for 2001-02, the province may have to revise its numbers substantially thanks to a terrible year for NB Power.

In the legislature Tuesday, Finance Minister Peter Mesheau projected a surplus of $37 million for this fiscal year, with a further $70 million being transferred to the fiscal stabilization fund. But those numbers must have been inked before NB Power made its most recent estimates.

In New Brunswick budget documents, the government estimated a net income of about $30 million from NB Power, which was revised to $19 million for 2001-02. That’s likely to drop again, down to the break-even mark, warned Sharon MacFarlane, NB Power’s vice-president of finance and information services. And that could mean a much lower surplus for the province.

It was a rough year for the Crown corporation, she said, noting all the factors that sapped income levels including: the lowest river levels for hydro power since 1953, having to buy $35 million of replacement energy for hydro, unplanned outages at the Point Lepreau nuclear station and the big replacement energy costs there, a declining Canadian dollar, which raised fuel and American-held debt costs, and a decline in export prices last fall.

“All of those things are to a large degree beyond our control,” Ms. MacFarlane said Thursday. “For hydro flows, there’s nothing we can do. It provides 18 per cent of our in-province energy for free because there’s no-fuel cost for water. So when the hydro flows are low, it has a big impact on us.

“This fiscal year, we had budgeted a net income of $32 million from operations. We’ll know in a couple of weeks because this is the last day of the fiscal year, but we’ll likely come in right around break even,” she added. “In the past, the positives offset the negatives in large measure. In this current fiscal year it’s been mostly negative.”

Those same factors led to rate increases and could just as likely hurt the company again in 2002-03, even though the government is forecasting $28 million of net revenue. But a $28-million gain really isn’t much for a company that has $1.2 billion of revenues and $1.2 billion worth of costs, she stressed. Because variables such as natural gas, oil, and the American economy can be volatile, the utility aims to be plus or minus $50 million to $70 million each year. In the past few years, Ms. MacFarlane noted, the company has been able to stay within the break-even mark.

While breaking even is acceptable for NB Power, the province will have less cash to call a surplus, a spokeswoman for the Finance Department confirmed. If NB Power’s final tally for this fiscal year’s net revenues really do fall to zero, the impact could lead to the province having to lower payments to the net debt and that would bring the provincial surplus from $37 million to $18 million.

Liberal Finance critic Marcelle Mersereau said this points to her fear the 2001-02 surplus was due more to luck than managing smarter.

“The problem is, if you’re predicting a nearly $60-million shortfall in your revenue – forget the stabilization fund – that means you have a structural issue you haven’t solved. You’re going into the year knowing you’re spending more than you’re taking in,” she said from Bathurst. “They were lucky. That’s my worry.”

Mac Trueman
Telegraph Journal
April 1, 2002

“NDP Leader Elizabeth Weir said that by advancing Point Lepreau’s refurbishment date to 2006, NB Power made it hard for the Public Utilities Board to turn the refurbishment project down.” Photo credit: David Nickerson/Telegraph-Journal.

Atomic Energy of Canada Ltd. and NB Power are so financially imperiled that either or both could disappear before they finish refurbishing Point Lepreau, nuclear watchdog Tom Adams warns.

If that happens, New Brunswick could be stuck with a gutted nuclear reactor and piles of replacement machinery that nobody can put back together, Mr. Adams, executive director of the anti-nuclear group Energy Probe, said this week.

“You can’t rule that out.”

Atomic Energy’s future has been brought into question by a review ordered by federal Natural Resources Minister Herb Dhaliwal into whether Ottawa should continue its annual $100-million subsidy of the atomic reactor maker, which has sold only two generating plants since 1995.

“If we’re not making any sales, and there’s no potential,” Mr. Dhaliwal said early this year, “should we continue to invest in these areas or not?”

Mr. Adams contends New Brunswick’s power corporation has its own problems. Its debt equals 16 per cent of this province’s economy.

It owes $9,200 for every working New Brunswicker, he said.

By comparison, Ontario’s power industry owes only $6,400 for every employed citizen.

Even with debt fees taken out, New Brunswick has the highest operating costs per unit of delivered power of any utility in Canada, Mr. Adams said.

The figures cast doubt on the province’s ability to handle the $845-million cost of the nuclear rebuilding project it has placed before the Public Utilities Board, he said.

“NB Power’s track record and its current financial position are so weak that there is real question as to whether it can carry it off.”

The corporation’s financial plan depends on the refurbished Lepreau working so perfectly that even in the year 2031 – one year before it would wear out – it would operate at full power 96.3 per cent of the time, he said.

“They assume in their analysis that after retubing this reactor is going to work like a Swiss watch. But the evidence from other reactors that have been retubed is that they run like fireflies – wink on and wink off.”

Four Candu reactors at Pickering, Ont. suffered so many breakdowns after they were rebuilt that Ontario Hydro mothballed them, he said.

Gordon Dalzell, Saint John Citizens Coalition for Clean Air chairman, is calling on the province to order a health risk impact study similar to those it required for the Irving King of Cats oil refinery expansion and NB Power’s proposed conversion of its Coleson Cove thermal station to Orimulsion.

“The single biggest issue is that the public doesn’t know what are the health impacts from living near a nuclear facility,” he said.

But Sharon Flatt, Saint John chairwoman for the Canadian Unitarians for Social Justice, wants the hearing to consider all the pollution that results from nuclear power – from the uranium mine, to the power station, and to Canada’s not-yet-built storage facility for spent fuel.

“I think on a scale of one to 10, it’s right up there as the most dangerous, the most dirty of options around. Its ecological footprint is vast.”

NDP Leader Elizabeth Weir said that by advancing Point Lepreau’s refurbishment date from 2008 to 2006, NB Power has created an emergency that will make it hard for the Public Utilities Board to turn the project down.

The less time there is to choose and engineer an alternative power source, the harder the utility can argue that there is no choice but the nuclear one, she said.

“That is the political strategy NB Power is employing. And my concern is that the PUB won’t have the fortitude to call their bluff.”

NB Power officials says its Hagler Bailly engineering study done in 1998 recommended refitting Lepreau in 2006, but Ms. Weir said she has read the report and it recommends 2008.

New Brunswick Energy Minister Jeannot Volpé’s endorsement of the refurbishment will make it even harder for the utilities board to say no, Mr. Adams said. It “raises fundamental questions in my mind as to what is the purpose of the public review.”

John Bennett, the Sierra Club of Canada’s director of atmosphere and energy, is predicting the Point Lepreau tab will be double the $845-million Atomic Energy is now estimating.

“That’s based on 25 years of watching them make announcements and then build things and then admit what it actually cost later.”

Jackie Webster
Telegraph Journal
March 25, 2002

“Why doesn’t NB Power come clean and tell the people of the province just how financially precarious that operation is?” That’s Tom Adams, executive director of Energy Probe, the organization that tabled a devastating report on the Crown corporation in Fredericton last week.

It is dishonest to mislead the people on just what awaits them in terms of energy costs, says Mr. Adams, when a dramatic and unprecedented increase in power rates is inevitable. Well, why do they? One wonders.

“Because they are politicans, that’s why,” says Jack Wetmore, a former NB Power employee and long-time critic of the utility. That must be the explanation. Witness Deputy Premier Ray Frenette: “These experts after the fact, they are easy to find, but wouldn’t New Brunswickers have been freezing in the dark last winter if we had not had the Belledune power station to rely on?”

No, of course they would not. There is plenty of power to be had and much cheaper than from Belledune. But that is beside the point. The really interesting feature of Mr. Frenette’s defence of NB Power now, is that he was, in Opposition, its fiercest critic. With his great gift for rhetoric, he predicted over and over the sky was falling; that NB Power’s “high-priced mouthpiece” was fudging the figures; that disaster lurked around every corner. And those Cassandra-like prophecies of the Opposition days, have emerged full-blown in the Energy Probe presentation of Oct. 9, 1996.

Tom Adams, who wrote the report, was unequivocal. “NB Coal is a gaping wound that must be staunched if the utility is to survive.

“NB Power’s capital spending in the l990s – in excess of $2-billion so far – has been almost entirely wasted. . . . Building the $2-billion Belledune generating plant is probably the worst mistake ever made in New Brunswick’s history.”

Belledune cannot be blamed on previous administrations as can Point Lepreau. The latter white elephant was inherited; the former, announced with great fanfare by this administration within a year of it taking office. Then there was the overhaul of the generating station at Dalhousie. Another colossal mistake, according to Mr. Adams. And yet no admission that NB Power – and by extension, the government and the taxpayers of New Brunswick – are in dire straits.

On the contrary, the utility’s annual report is upbeat and positive. Satisfaction is mentioned often. Recently, when a young reporter spoke of New Brunswick’s “staggering” debt, he was called on the carpet by Premier Frank McKenna and chastised. New Brunswick debt is not staggering, said the Premier, and to say otherwise is irresponsible.

The Premier chose to separate the province from the Crown corportion in terms of debt. Which is absurd. The province guarantees NB Power’s debt, and charges in excess of $2l-million as a fee for that guarantee. The ironic twist to this whole financial boondoggle is that much of that debt was politically motivated.

Belledune and Dalhousie were both a sop to Northern New Brunswick, miffed that the highly touted nuclear plant was located at Point Lepreau in the south of the province. The decision to use NB Coal for its coal-fired plants, a decision both economically and environmentally disastrous, was to provide employment in the Minto area; a political decision. In l99l, after a series of misfortunes and adverse publicity, Premier McKenna announced plans to rein in the utility.

NB Power has been “a kingdom unto itself for many, many years,” but will have to start paying obeisance to the same rules as general government, he said. The new sovereign was three years too late; the $2-billion Belledune boondoggle, commissioned on his watch, was already under way. This must be a time of great frustration, combined with an overwhelming tendency to say “I told you so” from long-time critics like Janice Harvey, who addressed the matter in a column earlier this week, and Jack Wetmore, a regular at the Standing Committee hearings; his last appearance being on Oct. 9.

The Energy Probe report was given good media coverage and rightly so. On the same occasion, Mr. Wetmore made many of the points he has long been making, but without the media spotlight that focused on Tom Adams of Energy Probe. His comments have been applauded by a former senior writer with NB Power who says Mr. Wetmore’s observations are right on the mark.

Here are some highlights: The high cost of temporary help: The use of consultant firms to supply administrative personnel may have cost $45-million more than necessary over the past five to six years. According to NB Power’s own figures, consulting fees were from one-and-a-half to three times the salary paid to the individuals previously in that post. This markup structure is standard practice, but it is expensive.

It looks good to show a reduction of 200 staff in the annnual report, writes Mr. Wetmore, but when this staff is replaced by temporary consultants at perhaps twice the cost, it raises serious questions. Many competent employees were offered retirement packages to move off the payroll, but the expertise they provided was still required, so their place was taken by consultants.

“The use of consultant firms for a supply of temporary help is a very expensive process,” writes Mr. Wetmore. “With fees ranging from 156 per cent to over 300 per cent of the base salary paid to the firms supplying the staff, over the past five or six years, this practice has cost as much as $45-million above the costs of these same people as casual or term employees.

Mr. Wetmore questions maintenance planning. Last fall’s incident when a piece of wood jammed inside Point Lepreau and “which came within an ace of destroying the plant, was a repeat of a similar incident during construction, when contaminants were left in the system.

Some of the key personnel involved in that incident were still at NB Power last fall. “The corrosion problem which caused the most recent shutdown has been evident for some years. I question why it was not corrected during last fall’s prolonged outage. NB Power has a responsibility to maintain a high level of operational reliability. We have a right to expect a better performance in this area than we are receiving.”

It is a comprehensive report. The areas of waste, inefficiency and mismanagement it highlights are reflected in the power bills that reach us every month. Each of us has a vested interest, as have the politicians, in just how well that utility is run. The newest rate hike will come into effect only after the next provincial election. Surprised anyone?