Energy Probe

Lisa Hrabluk
The Telegraph Journal
November 18, 1998

FREDERICTON – Jobs losses are imminent whether New Brunswick overhauls NB Power or not – it is just a question of who will be left unemployed.

That was the sobering message the Select Committee on Energy received yesterday during the first day of public hearings into the fate of the province’s electricity sector.

On the one side stand the 2,500 employees of NB Power and the uncertain future that awaits them if the government elects to follow the lead of some border states and sell all or some of NB Power’s generators to private interests.

On the other side are the thousands of people who earn their keep in New Brunswick’s resource-based industries in mills and factories that need to keep their energy costs down in order to stay competitive on the world market.

If NB Power reorganizes or sells some of its generators layoffs are sure to follow, presenters at the hearings said yesterday. However, they added, if NB Power does not change, resource-based industries may transfer operations out of the province in favour of cheaper energy sources south of the border, leaving a trail of unemployed workers in their wake.

No one is more aware of the government’s predicament than Donald Gould, the mayor of Minto, the village in the heart of New Brunswick that is home to NB Coal.

A wholly-owned subsidiary of NB Power, NB Coal is the largest employer in Minto, having provided 300,000 tonnes of coal annually to NB Power for years.

However the partnership appears to be over.

NB Power plans to decommission the Grand Lake generating unit in 2004, a move that will leave almost all of the 90 miners and 50 Grand Lake power plant workers unemployed, Mr. Gould said.

Mr. Gould wants to prevent that and yesterday he asked the committee to rethink NB Coal’s uncertain future.

“Nothing less than a guaranteed future of the presence of a power plant and the continued operation of our coal fields to serve this plant long into the future are acceptable,” he said.

If for no other reason, Mr. Gould believes New Brunswickers owe NB Coal a new lease on life because of the millions of dollars the company saved ratepayers in the 1970s and 1980s.

“During the oil crisis of the 70s our units rattled at full capacity and it has been estimated that we produced nearly $270-million in electricial generation savings relative to the cost of oil to produce an equal amount of electricity,” said Mr. Gould.

Speaking after his presentation, the mayor was more blunt.

“The government shouldn’t forget about us.”

But past performance shouldn’t be the bellweather for deciding NB Power’s future, says Paul Bradley, CIBC Wood Gundy’s director of global power and utilities.

Competition in electricity markets is coming to neighbouring states and if NB Power wants to participate in those markets, the government will have to open New Brunswick to competition.

In order to do that NB Power will have to be restructured, a move that Mr. Bradley says will result in job losses at the public utility, especially if it privatizes some of its generators.

“This change can be either embraced or resisted…but if this change is not embraced then ultimately it will cost jobs,” he said.

Those jobs Mr. Bradley was talking about will come from New Brunswick’s mills, which need to find lower energy costs in order to compete in markets where energy prices are already dropping.

According to Mr. Bradley, it is these large industries that are driving deregulation and privatization forward.

“The average home user of electricity is not wound up about electricity bills. The ones pushing this are industries, because they see a threat from global markets,” he said, adding that it is difficult for people to understand why the status quo is no longer viable.

“The problem occurs when plants shut down and jobs are lost and only then are the voters going to say ‘why on earth did we let this happen?'”

Not everyone shared Mr. Bradley’s view that deregulation is inevitable.

Randy Dickinson, the executive director of the Premier’s Council on the Status of Disabled Persons, said he did not welcome the arrival of deregulation in New Brunswick, especially if it means jobs will be lost at NB Power.

According to Mr. Dickinson, the public utility has a good record for providing employment for people with disabilities and for looking after staff members injured at work.

“NB Power has a better record in employment equity than other private companies,” he said.

Like Mr. Dickinson, retired electrical power engineer Neil Craik believes legislators should think twice before selling Point Lepreau to a private corporation like British Energy, a company that has expressed an interest in the plant.

“They have no experience with the Candu system so I have great difficulty in understanding what expertise they would bring,” said Mr. Craik.

“What is it technically they are bringing to the table that we don’t already have in New Brunswick?”

The 11 members of the committee will get a first-hand glimpse at the nuclear power plant tomorrow when they visit it as part of their investigation into deregulation.

The committee will then break for the legislature, and will resume public hearings in January.

Thomas Adams
Financial Post
November 13, 1998

Fred McMahon’s overwhelming economic and environmental arguments (Time to pay off the miners in Cape Breton, Nov. 10) to eliminate subsidies sustaining the coal industry in Cape Breton apply with equal force to the coal industry in New Brunswick.

NB Coal, New Brunswick’s provincially-owned coal industry, produces even dirtier, higher sulphur coal than its Cape Breton counterpart, Devco. NB Coal is devastating the ecosystems where it strip mines. Like Devco, NB Coal can’t compete against imported coal and relies on a hidden subsidy paid by overcharged electricity consumers.

The new Sable Island natural gas industry, which will begin large scale deliveries to consumers in the Maritimes and New England next year, provides a clean and cost-effective energy alternative to locally produced coal.

The absurdity of Devco and NB Coal make wonderful arguments for why government should get out of the energy industry.

Thomas Adams,
Executive Director,
Energy Probe, Toronto.

Rachel Cave
The Telegraph Journal
November 11, 1998

FREDERICTON – NB Power can’t move further into the North American energy market until the provincial government sets the rules for deregulating the industry in New Brunswick, say executives at the provincially owned utility.

“We’ve tried to be prepared,” says Stewart MacPherson, NB Power’s vice-president of corporate planning. “We don’t have a sense of fear associated with [de-regulation] because we do believe we can adapt to it.”

But the question remains: adapt to what?

Next week the Select Committee on Energy will start considering the possibilities, with its report to the government expected in the spring.

So far, the Liberals haven’t indicated how long it will take them to draft new energy policies, nor is it clear whether New Brunswickers will have a chance to vote on those policies when they go to the polls sometime next year.

All of that puts some distance between now and when NB Power will have a clear blueprint of the future, a future that could be radically different.

For instance, the utility could be left intact or sold off in pieces. And at the market level, electricity in New Brunswick could be heavily regulated or blown wide open to competition.

NB Power could find itself competing for wholesale contracts like the ones it currently holds with power commissions in Saint John and Edmundston.

Or it might have to compete at the retail level – fighting for business in every office and every home across the province.

It’s somewhat similar to the way long-distance telephone services are now being sold.

Here in New Brunswick, NBTel owns the wires and the competitors rent access to them.

So far, that’s the generic market model provinces are considering for the electricity market.

In fact, Mr. MacPherson believes it’s entirely possible that NB Power will be turned into a “wires” company. He says transmission and distribution are really the core of NB Power’s business.

“That’s the part of the business that is regulated and is a natural monopoly. It’s the real reason Crown corporations were put into place,” he says.

The utility has already divided itself in two. It has separated its power plants from its business operations so competitors who want to get on the wires won’t also learn the corporate secrets of NB Power’s generating business. The utility has also set transmission fees, the price it will charge competing power-sellers, to use its wires.

Mr. MacPherson says that right now he’s only certain of one thing; natural gas is coming. He also knows that natural gas generators, especially co-generators, are more efficient than any power plant NB Power currently owns. He’s also convinced that the utility’s traditional market will start shrinking.

It’s a tough diagnosis for a company that’s $3.6-billion in debt.

But Mr. MacPherson says he’s not going to lobby the legislative committee to lean one way or another.

“We’re not trying to pre-judge where this is going to come out. We don’t want to get into a situation where we’re trying to stifle discussion on this issue because I think it’s important that we hear everybody’s views, everybody’s ideas.”

He says after the public has had its say, NB Power may wade in with an opinion in the end

Thomas Adams
New Brunswick newspapers
October 26, 1998

New Brunswick’s big decision on the best methods to bring natural gas to energy users in the province provides an historic opportunity to benefit consumers and the environment. Natural gas distribution systems should be expanded in the province as rapidly as possible, consistent with maintaining the profitability of all investments.

One of the key questions facing the legislative assembly’s Select Committee on Energy, charged with making recommendations on how natural gas distribution should be developed in the province, is whether all consumers should contribute to the distribution system overhead costs, or whether some large users should be permitted to bypass any contribution and be allowed to pay only the tolls of the international pipeline crossing the province.

While it should be recognized that there is no perfect answer to this question, Energy Probe, a national environmental and consumer advocacy organization with a long interest more sustainable energy systems in New Brunswick, has a suggestion. A distribution utility with a license to serve a particular region should have as a feature of its licence the first option to serve any customer that seeks natural gas service, on the understanding that all distribution utility customers should contribute fairly to the overhead of the utility. If the prospective customer and the distribution utility cannot come to an agreement, the prospective customer should have the right to appeal to the Public Utility Board for permission to build its own connection to the main pipeline crossing the province. The Public Utility Board (PUB) should be empowered to consider whether such bypassing arrangements will be permitted and on what terms and conditions. The PUB’s review of bypass applications should be conducted in an open public forum with due process where all interested parties can examine the bypass application, ask questions of the applicant, and make submissions.

By directing prospective large users to seek service from the distribution utility before pursuing a bypass option, the opportunity for fair cost sharing is maximized. By allowing prospective large users, unhappy with the service offering of the distribution utility to make an application to the regulator for a bypass pipeline, the distribution utility is subject to some competitive pressure to keep its costs under control. By empowering the PUB to make public interest determinations in an open forum with due process, the complex tradeoffs involved in such decisions can be made outside of the political arena and with input from affected parties.

In matters of pipeline expansion and cost sharing, there is no way to define in advance exactly what constitutes the “public interest”. The political process is ill-equipped to deal with the detailed technical issues involved such as cost allocation, rate design, and usage forecasting. An independent, quasi-judicial regulatory process guided by a general consumer protection mandate is the best way to go.

Sincerely,

Thomas Adams
Executive Director, Energy Probe

The Moncton Times and Transcript
August 14, 1998

Despite criticism, plant remains fundamentally sound with low exposure risk

Although no nuclear power station in Canada suffered any serious breach of safety last year, Point Lepreau was singled out for greater criticism.

At a meeting of the Atomic Energy Control Board here yesterday, officials said their annual report on New Brunswick Power was more critical than its reports on all the other nuclear power stations in the country.

«The annual report on Point Lepreau was the most critical of all the reports this year,» an official conceded when asked by board member Yves Giroux.

AECB staff member Charles Montgomery told the public hearing that the 15-year-old nuclear power station on the Bay of Fundy does not meet performance requirements in two of four categories: containment and emergency core cooling.

Despite the criticism, though, he added that the plant, like all other Candu reactors in Canada, is fundamentally sound and risks of exposure to radiation for employees and the public remain very low.

In 15 minutes, Montgomery generally described the annual reports on six nuclear power stations in Canada, including Point Lepreau. It is the last year that AECB will produce individual annual reports on stations. Next year, the nuclear licenser plans to produce a single report on all the stations in Canada.

«Point Lepreau operated safely in 1997, in terms of radioactive releases to the public, the environment and radiation doses to workers,» the AECB report concluded. «However, AECB staff believes that continuing high numbers of licence non-compliances, more events with greater severity, and inadequate configuration control, indicate deteriorating safety performance.

«While NB Power has initiated a large-scale performance improvement program and increased station staffing, the program has not yet had a measurable effect on the safety performance of the station.»

The litany of problems that occurred at the 600 mega-watt station last year are strewn throughout the report. There were 26 separate incidences when the station was non-compliant with its licence conditions, slightly more than the 23 incidents reported in 1996 but about triple the numbers reported in 1990 to 1993.

«AECB staff concludes that operation and maintenance performance can support safety at the station for the present. However, improvements are needed to cope with an accelerated frequency of aging-related degradations in the plant systems.»

Performance of the emergency core cooling system was «poor» in 1997, the report said because two valves were found to be defective. It was also «unavailable» for two-and-a-half months of the year when the station was shut down.

The containment system was also judged poor last year. NB Power discovered that a valve would have been inadequate to contain a spill, which would have meant the entire containment system was ineffective. The company also has not yet fixed a problem with inadequate air supply components that also jeopardize the containment system. «This condition has existed and has been reported for several years without resolution,» the report said.

Other incidents reported included:

* In February, a cracked feeder tube required the station to shut down for two months.

* In March, five workers were exposed to tritium, a radioactive hydrogen produced in heavy water, while cleaning a duct.

* In September, tritium was released to a site drainage ditch when a pump was inadvertently activated.

* In October, two maintenance workers were exposed to tritium while working on a pump.

* And in November, a worker was exposed to tritium when a glass container broke.

NB Power is in the process of applying for a new licence from AECB. In June, a formal application was made at a hearing in Pembroke, Ont. While much of the same criticism was made against NB Power in that hearing, AECB staff recommended that the licence be renewed for two years. A decision is expected in October.

Ottawa Citizen
August 12, 1998

FREDERICTON — Safety practices at Atlantic Canada’s only nuclear power plant have received yet another poor report card.

The latest assessment by the Atomic Energy Control Board of New Brunswick’s Point Lepreau nuclear power station reports a continuing decline in operational safety at the 15-year-old plant on the Bay of Fundy.

The AECB, the regulatory agency for Canada’s nuclear power industry, states in its annual review of Lepreau for 1997 that there was a troubling deterioration in performance.

Rod White, vice-president of nuclear operations for NB Power, said the utility has begun a performance improvement program that won’t show results for a few more years.

“These improvements don’t happen in a half a year or a year’s time. … So I wouldn’t expect 1998 to be a nice clean year either.”

The report says AECB staff will monitor Lepreau’s performance closely in 1998 and will make sure NB Power, the provincial Crown corporation that owns and operates the station, addresses the problems.

NB Power was ordered in 1996 to report every six months on actions it has taken to improve the culture of safety at the nuclear station.

But the AECB remains unhappy with the plant’s progress and has ordered a schedule of targets for safety improvements, two of which must be met by the end of this month.

Lepreau’s licence is up for renewal in October.

Rod White, vice-president of nuclear operations for NB Power, said the utility has begun a performance improvement program that won’t show results for a few more years.

“Overall, I wouldn’t have expected this to be a glowing report because we just started the program. But it gives good credit to the initiatives we have taken to improve progress,” White said of the AECB review.

“These improvements don’t happen in a half a year or a year’s time. It’s a three- or four-year program. So I wouldn’t expect 1998 to be a nice clean year either.”

Norm Rubin, senior policy analyst with Energy Probe in Toronto, said lack of safety culture is a frightening poblem in a nuclear facility and he applauded the AECB for keeping a sharp eye on Lepreau.

“If you look at technological disasters in general, you find that this was an organization that was not living and breathing hazard avoidance,” he said, recalling such incidents as the Chernobyl nuclear accident and the Challenger space shuttle explosion.

“The good news here is that the AECB is awake enough to mention it. I’m old enough to remember when the regulator sounded like part of the Canadian Nuclear Association. So it’s good the AECB is being critical. It’s terrible that Point Lepreau has a bad safety culture.”

During the last three years, the nuclear station has been off-line almost as often as it has been on-line, generating as much controversy as electricity.

Among the concerns raised in the AECB report are a maintenance backlog at the nuclear plant, worker fatigue and a general deterioration in the “material condition” of the plant.

“Improvements are needed to cope with an accelerated frequency of aging-related degradations in the plant systems,” says the report, suggesting the plant is aging prematurely.

Lepreau is halfway through its life expectancy of 30 years.

A recent report prepared for NB Power said major and costly repairs will have to be made to the plant by the year 2008.

The utility has yet to decide whether the expense will be worthwhile but plans to run the nuclear facility at least until the overhaul is required.

Giselle Goguen
The Telegraph Journal
July 28, 1998

‘You’d have better luck selling a 1983 K-Car,’ analyst says of Point Lepreau

FREDERICTON – A nuclear energy expert says that privatizing NB Power will not allow the province to recoup the huge losses it has incurred because of the utility.

But Tom Adams of Energy Probe believes there are still substantial advantages to selling NB Power, which is currently in debt to the tune of about $3.4-billion.

The possibility of privatizing NB Power has become a hot topic once again following the recent release of a study into the future of the utility and media reports that Hydro Quebec is interested in snatching up some of the utility’s assets.

But Mr. Adams said yesterday that some NB Power assets are worth considerably more than others.

“The Point Lepreau generating station is almost worthless because there just isn’t much of a market out there for used nukes. You’d have better luck selling a 1983 K-Car,” said Mr. Adams during an interview from his office in Toronto.

And the Belledune power station would also be hard to unload at a decent price, “because it’s extremely uneconomic and was built at a very high cost. There’s no way you’re ever going to get what you’ve invested out of those plants,” he said.

He added that NB Power’s coal company is also worthless – “In fact, it’s running at a loss.”

But other assets, such as NB Power’s transmission system, its hydro-electric stations, its local distribution network and its fossil-fired stations fueled with coal, oil and light oil would all go for a respectable price on the present energy market, Mr. Adams said.

“The transmission system [which allows NB Power to wheel energy through the province and among producers and consumers here] is probably worth a lot of money because the high-voltage power lines are in a key location in the North American power grid,” he said.

“And worth substantially more than the utility has allowed on its books is its local distribution system. The wires that run up and down streets and deliver power to businesses and hosptals and places like that are also a very valuable asset, because if NB Power is privatized and subject to regulation, the operator of that business can expect to earn a reasonable rate of return on that service, judging by what it sells for in other parts of the world.

“And a lot of companies would like to be in power distribution business because they could expand into local telephone and cable services, for instance, that would use the same wires and could easily add fibre optics on the same poles,” he said.

As for hydro-electric stations like the ones at Mactaquac and Beachwood, Mr. Adams said they would be attractive to prospective buyers thanks to their low cost and easily manageability.

“Their running cost is low, they’re very controllable and they’re reliable,” he said.

He added, however, that some of the hydro stations – including Mactaquac and Beachwood, have some serious engineering problems stemming from a chemical in the concrete used to build the stations.

But while the province stands to make money by selling several of NB Power’s assets, other parts of the power monopoly – especially Point Lepreau – will make it impossible for the Thériault government to break even.

“There just isn’t a market out there,” he said.

“For example, British Energy just bought a used reactor two weeks ago that is a few years older than Point Lepreau but, in terms of operating hours, it’s in the same ballpark. The reactor was on the books of the utility for aproximately $500-million, but they were only able to sell it for, I believe, $23-million.”

Mr. Adams added that 15 nuclear reactors in the U.K. were also sold recently – for roughly the amount it had cost to build just one.

But despite these horror stories, Mr. Adams said there would be many benefits to selling NB Power.

The province would be able to put a cap on its liability. “As NB Power goes along, its liabilities keep increasing. This utility is not capable of controlling its liability and that’s evident through its continuing financial losses,” Mr. Adams said.

Privatizing the utility would likely lower power costs. “Competition in other power systems has lowered costs for consumers,” he said.

Selling the utility would go a long way toward improving power regulations in the province.

“One of the reasons NB Power is such a mess is that it’s not properly regulated and the public utilities board is powerless to do anything because it’s not allowed to oversee NB Power, while private utilities elsewhere are usually vigorously regulated,” he said.

“The province is in a conflict of interest when it comes to regulating because regulations are there to protect consumers, usually to the detriment of the company.

“So, until we clear up this conflict, we’re never going to have good, clean public regulation of the power industry.”

Mr. Adams said that if the province proceeds in an intelligent and thoughtful way in the sale of its utility “it could really be good for the province.”