The attached commentary series was co-authored with Brian Lee Crowley.
NB Power deal: good news, not bad (St. John’s Telegram)
It’s Good News, Not Bad (New Brunswick Telegraph Journal)
It is a particular pleasure for me to again work with Dr. Crowley, one of the most thoughtful and influential independent public policy analysts in Canada. His bio can be found here. His new book, Fearful Symmetry: The Fall and Rise of Canada’s Founding Values, has been getting some cautious and some rave reviews from many of the country’s leading public affairs journalists and experts. Perhaps the most thorough review came from Neil Reynolds in the Globe and Mail September 9th and 11th. In the mid 1990’s, when Dr. Crowley was setting up the Atlantic Institute for Market Studies, he took the risk of commissioning me to review NB Power and to propose solutions for its commercial and rates challenges. At the time, Neil Reynolds was stacking up journalism awards for his paper, the Telegraph Journal, and made the paper central to the NB Power debate.
One criticism in NB against the deal is that it would limit the provinceâ€™s electricity sovereignty. New Brunswickers might ask themselves whether electricity sovereignty has really worked from them so far. One example of energy sovereignty at work is NB Powerâ€™s failure to bite the bullet on closing failing operations, such as the highly polluting Grand Lake power station still in service today after at least 15 years of losses.
Moreover, New Brunswick retains sovereignty over its electricity market through its own regulatory agency that sets prices and examines service by electricity providers. And as continental energy markets become more integrated, no one enjoys unfettered control over their local market. Quebec Hydro is bound by American regulatory requirements to allow buyers and sellers to move electricity across their network whether they want to or not.
While the current management of NB Power has had some noteworthy success in servicing the debt, containing operating cost growth, and mitigating the Orimulsion fiasco, New Brunswickers need to ask themselves whether these modest gains outweigh the coming impact of the Point Lepreau refurbishment and whether it is the scattered examples of good management that are the future of the utility, or the much more widespread examples of inefficient and ineffective management. History suggests that if NB Power remains in provincial control, future boondoggles await.
Another criticism of the deal is that it could interfere with New Brunswick becoming an energy hub. Before folks jump on the energy hub bandwagon, they might look at other major energy hubs to see whether they are as good as they sound. Cushing, Oklahoma is one of the main oil hubs in the United States. Erath, Louisiana hosts North America’s natural gas trading hub. Both are none too prosperous rural villages with declining populations. Efficient electricity production generates very few long term jobs, particularly when considered relative to the huge capital costs needed to develop assets. Attempts to use NB Power as an employment and regional economic development strategy is a key reason its rates are among the highest in Canada and its balance sheet is weak.
The rate freeze for residential, small business and institutional customers represents significant immediate value, although the outlook for the period after the rate freeze expires presents some risks. If the fossil units that remain in New Brunswick’s hands have to be retired because they are uneconomic, there could be significant transition costs. Lepreau’s costs will have to be factored in and they remain a significant unknown. Remember, however, that these risks are not caused by the deal with Hydro-Quebec, and would be borne by NB Power’s ratepayers even without that deal, but they none the less remain a concern. Against these risks must be set, for example, expanded access to Hydro-Quebecâ€™s extremely low-cost sources of hydro-electricity.
Newfoundlanders and Labradoreans would benefit if they stopped taking the bait from politicians — not just Mr. Williams â€“ seeking to boost their power by stirring up ancient animosities over the Churchill Falls contract signed with Quebec in the 1960s. Then premier Joey Smallwood sought out the deal with Quebec and willingly signed. The legality of the contract has been twice confirmed by the Supreme Court. Until the province can make peace with Quebecâ€™s legal rights under the deal, ancient history will remain an easy tool for political demagogues and a barrier to moving forward. Our view is that the deal with New Brunswick opens the possibility of a constructive side-deal for Newfoundland and Labrador to improve the conditions under which any Lower Churchill deal might proceed. Attacking New Brunswickers for trying to improve their future at absolutely no cost to Newfoundlanders is a peculiar way to advance the provinceâ€™s interests.
Tom Adams and Brian Lee Crowley
To: Brian Lee Crowley and Mr. Tom Adams:
In reading the article NB Power deal :good news, not bad, one canâ€™t help but think how fortunate we are to be educated once again by a Toronto based energy consultant! Seriously, how stupid do you think we are down here in this neck of the woods. You say , presumably with a straight face, that we should turn this to our advantage by simply negotiating a transmission deal with Quebec. Well there you go, problem solved!
Perhaps you doesnâ€™t have quite have the same appreciation as we do, on how our negotiations with Quebec have gone in the past. Perhaps you don’t appreciate how the morality of the upper Churchill would sicken any objective observer. Perhaps you don’t appreciate how every federal government has failed to do absolutely anything to help this province in itâ€™s development of the Lower Churchill. Yes indeed the solution is simply work out a constructive deal with Quebec! . Messers Adams and Crawley you describe our Premiers reservations about delaing with Quebec as â€¦â€ranting about a disputable version of ancient historyâ€. The audacity of the statement is incredible! All this is being said at the very time when Quebec continues to obstruct every effort this province makes to gain fair access to Quebecâ€™s power lines!
The famous quote comes to mind, “Fool me once, shame on you. Fool me twice, shame on meâ€. Well Thanks again for the advice gentlemen but perhaps at the risk of being crude, you know what you can do with it!