Proposed deal 'great marketing tool'
Published Thursday November 5th, 2009
Energy: Business New Brunswick minister set to discuss Hydro-Québec agreement at Economic Club of Canada in Toronto
Armed with what he describes as a new tool in his toolbox, Business New Brunswick Minister Victor Boudreau will hit the road later this week to promote the province to a prestigious audience at the Economic Club of Canada in Toronto.
The proposed deal that would see Hydro-Québec acquire most of NB Power's assets is being touted by Liberal government officials as another valuable asset in the province's quest to attract new industry to New Brunswick.
"It's not the be-all, end-all for every company, but it's an extra tool in the toolbox when we're out selling the province," Boudreau said. "In the same way that we tried to talk about the tax plan (for lower corporate and personal income taxes) across the country so that companies knew what was going on in New Brunswick, we want to do the same thing now with this energy deal."
Boudreau said the proposed new rates - big industry would see drops of as much as 30 per cent and small businesses would see a rate freeze for five years - would be part of the new sales pitch to draw investment to the province. "It's another opportunity to get noticed and to stand out on the map," he said. "In all the meetings I've had in three years as a minister, power rates are always an issue. Whether you're talking to the forestry sector or the manufacturing sector, power rates are an issue for everybody."
He said it would also help the province's existing companies as they compete in the global market.
"If these companies can be more productive based on this deal, it means that more New Brunswickers will keep their jobs and hopefully more New Brunswickers will get hired on as these companies look to modernize and expand and grow, plus it's a great marketing tool to attract new investment to the province," Boudreau said.
Under the proposed agreement, Hydro-Québec will supply New Brunswick with up to 14 terawatts (14 million megawatts) of electricity as part of a heritage pool. That's roughly the amount of power the province currently uses, with about 4.5 TWh used by industry and the remaining 9.5 TWh used by residential customers.
The residential and small-business rates would be frozen for five years, while larger industry would see rates lowered by as much as 30 per cent.
If new industry comes to the province and pushes consumption beyond the 4.5 TWh, the province's Energy and Utilities Board will issue a request for proposals from energy companies to provide the required new energy. The cost for providing the extra power will be shared among all industrial users.
By the same token, if residential use eventually exceeds the current 9.5 TWh, the added cost of providing electricity to meet the demand would be shared among all residential users.
Moncton-based economic development consultant David Campbell supports the proposed deal, but says there are unanswered questions about what happens to rates for energy that are outside the heritage pool.
"If you go out and attract power-intensive industry, what's that going to do to the rate for the existing industry and the new industry?" he asked. "Once we get outside that heritage pool, it's my understanding that the (new) rate will be some sort of market-based cost and that could be significantly higher than the industries pay today under NB Power."
Jordan O'Brien, a spokesman for Premier Shawn Graham's office, said it's difficult to predict the exact impact new industry would have on rates, but he suggested any increase would be minimal.
"(Any increase) would be relatively minor," O'Brien said. "Keep in mind that 14 terawatts is 14 million megawatts. So if you're talking about another 100 megawatts ... it's not going to move the needle far."
Plus, O'Brien said, the Energy and Utilities Board would oversee the RFP process for new energy and would still have the final say on any proposed increase.
"The EUB would oversee that process ... and whoever had the lowest price would be the people that would supply that new generation."
That entity would then have to justify any increase before the EUB, he said.
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