P.E.I. to assume Maritime Electric debt

The premier of Prince Edward Island says the province will be taking on some of Maritime Electric's debt to fulfil its promise of a 14 per cent rate cut in the spring.

In a throne speech on Friday, the Liberal government of Premier Robert Ghiz said the provincewould reduce power rates by 14 per cent starting in March, followed by a two-year rate freeze.

While the speech did not explain how that rate reduction would be paid for, Ghiz told reporters later that the province will take onsome of the utility's debt over the next two years.

"We're able to borrow money at four per cent, so essentially we're using our borrowing power to help reduce down the cost to Maritime Electric," said Ghiz.

"Those costs no longer have to be passed along to the ratepayers."

The province will borrow $35 million over the next couple of years to pay the extra energy costs being incurred by Maritime Electric while New Brunswick's Point Lepreau nuclear power plant is refurbished.

More than 80 per cent of P.E.I.'s power is bought from New Brunswick.

The loans will be paid back by Maritime Electric customers over 25 years, starting in 2012.

More suppliers bid

Meanwhile, Maritime Electric's president and CEO said while the financing from the province will help, most of the rate decrease is due to better market conditions and more suppliers bidding to sell power to the utility.

"We're probably at a prime time right now for buying," Fred O'Brien told CBC News.

"By working with the province to expand the number of people who could bid on that that really contributed to the fact that we were able to get lower prices."

Ghiz said the governmenthad been in discussions for more than a year with a number of utilities, including Hydro-Qubec, but it had reacheda power purchase agreement with NB Power, the Crown utility in New Brunswick.

"When bidding starts, it helps certain jurisdictions sharpen their pencils. So that's allowed us to be able to reduce down the costs," he told reporters."We were able to sign a better deal than we have in the past."

Heather-Anne MacLean, a spokeswoman for NB Power, said the utility simply responded to a request for proposals and had the successful bid.

"In terms of NB Power, any time we are able to secure deals to export power, it is to the benefit to our customers as these sales help subsidize our rates," MacLean said in an email.

MacLean said it was a win-win situation for customers of both utilities.

"We are able to manage our business in a manner that keeps our NB [Power]rates lower and MECL [Maritime Electric Company Ltd.] gets to reduce their rates," she said.

O'Brien said the announcement addressed two main concerns of Maritime Electric customers price, and pricestability.

"The decrease is there, it's real, it's not a forecast, and it's fixed for two years, so we have both lower prices and stability," he said.