Quebec's NB Power deal cut to $3.2B

The New Brunswick and Quebec governments have unveiled a $3.2-billion, slimmed-downdeal to sell mostof NB Power's generation assets.

The agreement, announced in Fredericton on Wednesday, isa significant shift from a $4.8-billion saleproposedlast October, which would have also bundled the provinces electrical transmission and distribution companies in a deal with Hydro-Qubec.

New Brunswick Premier Shawn Graham said at a news conferencethe revisions were a result of listening to the publicafter the original memorandum of understanding was announced.

Graham said the revised proposaladdresses the concerns of people about keeping the Crown corporation in the province's hands, as well as maintaining control of the transmission system.

But the premier said it also meets the desires of the province to reduce electricity rates, lower NB Power's debt and get access to clean power.

"This is an agreement that removes $3.2 billion of debt from the shoulders of our children and our grandchildren," Graham said.

When the deal is closed around March 31, Hydro-Qubec will pay $1.8 billion to the New Brunswick government, which will cover the debts associated with NB Power's generating facilities.

Quebec Premier Jean Charest said on Wednesday that his province is still meeting its goal of getting access to new markets for its power.

"From our perspective we continue to meet our objectives and it is a simpler agreement," Charest said.

Even though the deal is scaled back from the original, Charest said Hydro-Qubec will receive a 10 per cent return on investment.

Quebec acquires nuclear plant

Hydro-Qubec will purchase the Point Lepreau Nuclear Generating Station when its refurbishment is complete. The Quebec utility will also take control of all of Point Lepreau's nuclear waste under this agreement.

It also takes ownership of the provinces hydro dams and two diesel units.

NB Power will continue to operate the Coleson Cove and Belledune generating stations and sell the electricity back to Quebec,consistent with the original deal.

Thierry Vandal, the president and chief executive officer of Hydro-Qubec, said Coleson Cove will be used to produce power during the winter peak periods. He said Belledune will be operated until the future rules regulating greenhouse gas emissions become more clear.

New Brunswicks residential ratepayers will still get a five-year rate freeze. Medium-sized industries will see a roughly 15 per cent cut in power rates and will have those rates locked in for five years.

Large industrial customers will see their power prices fall by roughly 23 per cent. Under the previous deal, thosecustomers would have seen their rates fall by close to 30 per cent.

After five years, rates will increase withinflation. The Energy and Utilities Board will regulate future rate increases.

Peter Gordon, chief executive officer of Fraser Papers, said the restructured agreement will preserve many of the benefits that the original transaction offered but should address the concerns of the deal's critics.

Gordon said the deal will save his company $6 million a year in energy costs. He said that is $2 million less than Fraser Papers would have saved under the previous agreement.

"But it is still a significant improvement and will go a long way to assisting us restructure our company and exit bankruptcy protection," Gordon said.

Final agreement

The deal announcedWednesday is described as a final agreement and the closing date is intended to be March 31.

Graham said the transmission company is estimated to be worth $425 million and the distribution company$600 million. Neither onewill be sold.

Losing the ownership of the transmission system isn't a setback for Quebec's ambitions to export power throughout the region, according to Hydro-Qubec's president.

Vandal said the new deal still advances Quebec's agenda of moving the province's renewable power to new markets.

"Those transmission rights, which you don't need to own the transmission network to do that, those transmission rights will be transferred over to Hydro-Qubec and that is very positive," Vandal said.

Under the new agreement, the New Brunswick System Operator willremain in the province,independent from NB Power. This change will mean any company looking to wheel power through New Brunswick must apply to the system operator and bid in an open process.

There had been a concern, voiced most strongly by Newfoundland and Labrador Premier Danny Williams, that Hydro-Qubec could usecontrol over the system operator to block his province's access toNew England markets.

New Brunswick will buya 14-terawatt-hour "heritage pool" of electricity from Quebec for 7.35 cents per kilowatt hour, which it will then supply to power users.

The two provinces said theywill sign a long-term power purchase agreement that requires Quebec to supply the entire heritage pool in perpetuity. ButNew Brunswick has the right to opt out of 30 per cent of the heritage pool around 2040 when the Point Lepreau nuclear reactor nears the end of its lifespan.

Critics remain

Yves Gagnon, the K.C. Irving chair in sustainable development at the University of Moncton, was acritic of the original deal.

In October there was a text of the memorandum of understanding but without the text of the finalized agreement the energy expert said it will be difficultto properly assess the new deal.

"It's going to be impossible for independent parties to analyze the value and the merits of this second deal with Hydro-Qubec," Gagnon said.

Gagnon said the first agreement also sounded good on the day it was announced but that changed as details emerged.

Progressive Conservative Leader David Alward asked the Liberal government to send the new deal to a legislative committee for further examination.

"The reality is with Plan B we already know there are shortcomings. Many of the sameproblems that existed with the first deal exist in the second deal," Alward said.