Andy Blatchford, THE CANADIAN PRESS

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MONTREAL - Once a tiny power utility considered a symbol of pride for a downtrodden francophone minority, Hydro-Quebec has evolved into an energy behemoth that has rivals quaking from the Rock to Rhode Island.

The pending deal for Quebec's public utility to acquire the majority of NB Power's assets would strengthen its competitive grip on Eastern Canada and open up a lucrative avenue to the northeastern United States.

The announcement triggered trepidation Thursday among Hydro-Quebec's competitors, in both Atlantic Canada and the United States.

"This would be a fascinating event, historically," said University of Vermont historian David Massell, an expert on the history of hydroelectric exploitation in Quebec.

"This story would sort of put the frosting on the cake."

Massell traced the progression of hydroelectric activities in the province back to the pioneering days in the late 1800s, when the industry was dominated by American entrepreneurs.

The province gradually seized control of its most profitable resource, which led to the creation of the partially nationalized Hydro-Quebec in 1944.

In the 1960s, then-premier Jean Lesage fully nationalized the utility and it became an emblem of Quebec pride during the Quiet Revolution.

Massell highlighted Quebec's "ferocious game of hardball" in the 1960s when it struck a lopsided deal to acquire cheap power from Newfoundland and Labrador in an agreement long lamented as highway robbery.

He called it a "generation-and-a-half-old sore point" in Newfoundland-Quebec relations - and signs of that festering wound were laid bare by the furious reaction to Thursday's announcement by Newfoundland Premier Danny Williams.

The continent's biggest hydroelectric producer is now on the verge of overtaking its neighbour's utility, which would allow it to accelerate its own push into the promising market of New England.

"I'm struck by the long and stunning sequence of events if this (deal) in fact goes through," Massell said.

"In other words, how French-Canadians rose from clearly second-class status, with regard to the lack of control over their best comparative advantage in simply hydro resources, where others, especially foreigners, were doing the developing."

In New England, the region's cluster of independent power utilities expressed alarm at the news. The head of one trade association said U.S. companies could be crushed by the Canadian giant.

The president of the New England Power Generators Association said American utilities aren't afraid of competition, but would have little chance squaring off against a massive utility like Hydro-Quebec.

"Now (Hydro-Quebec) has control over everything - it's a monopoly in the purest sense and I don't think that's supportive of competition," Angie O'Connor said in an interview.

"The more cynical side of me would say that the intent is to crush the independent power producers to maximize the benefit to Quebec because they've got deep pockets. . .

"Isn't that a little bit like the fox watching the henhouse?"

She said Hydro-Quebec, which supplied more than seven per cent of New England's power last year, already has the advantage of using a limited, less-transparent regulatory process in Canada.

In Newfoundland, the premier spoke of his province's painful past in dealing with Hydro-Quebec. He warned that New Brunswick was proceeding at its own peril.

"We've been held ransom by Quebec before," Williams told reporters in St. John's.

"We've had the experience of dealing with Quebec - a word of caution to the people of New Brunswick because obviously Premier (Shawn) Graham hasn't heard it."

But Pierre-Olivier Pineau, an energy expert at Universite de Montreal's business school, said the deal works for both Quebec and New Brunswick.

He said it would mean cheaper electricity for New Brunswick consumers and Quebec would sell power for more than it would at home.

In the U.S., Hydro-Quebec's cleaner, cheaper electricity also has a competitive advantage over many power producers, he added.

He noted that New Brunswick's transmission line to Maine connects with New York City, establishing access to an "interesting and lucrative" market.

"If you are a power producer, you're never happy to see another competitor come in with a cheaper source of electricity, which is the case with Hydro-Quebec," Pineau said.

"If you are consumers, or if you operate the market, then you're happy to see an additional player with a different source of electricity."

Still, the transmission line has a limited capacity, thus capping Hydro-Quebec's exports to New England, Pineau added.

"Hydro-Quebec is a big player in the States, but it's not a dominant player," he said.