My view - of why it has to be signed by March 31

I have talked on a few subjects, but only last week realized in my own head, how some of the pieces fit together. This may be old news to some, revelations to others, but I'll try to give a little history lesson for the past year and a half. Some information is not linked, as I have previously blogged about it and linked it in previous posts.

In late 2008, the economic collapse started. http://en.wikipedia.org/wiki/Financial_crisis_of_2007%E2%80%932009
Unforeseen by most. But predicted by a few. http://www.financialsense.com/
Since then Quebec lost an aluminium smelter, paper mills, mines, and others. This resulted in a 8.5 TW loss in load. Data all publicly available published in Hydro Quebec's 5 year strategic plan. This amount of electricity is almost equal to the proposed RCW heritage pool in NB.

HQ also started a $25 billion capital expenditure program to build dams and transmission lines to feed the US. This is to be spent from 2008 to 2013.

Natural gas prices also plunged, http://tfc-charts.w2d.com/chart/NG/W which makes the merchant power plants in the States that use natural gas cheap and very competitive. All these natural gas plants currently are a lot cheaper to run than the new hydro stations coming on line in Quebec. There is a great backgrounder of information published here : http://www.iso-ne.com/nwsiss/pr/2009/final_2009_october_backgrounder_remarks.pdf . This document is from the New England Independent System operator website, so it should be a fairly knowledgeable and objective source.

Here is an excerpt from page 10 detailing the dramatic drop is prices:
"For the entire summer of 2009, average electricity prices were down 63 percent compared to summer 2008. Gas prices were down 67 percent, and oil prices were 40 percent lower. In July 2008, fuel prices were climbing to historic highs and electricity prices followed suit, with an average high at $107.98 per megawatt-hour that month. Fuel prices have dropped dramatically since then. In July 2009 alone, natural gas prices were 70 percent lower than the previous July, and oil prices were 46 percent lower. Wholesale electricity prices were 69 percent lower than in July 2008, at $33.53/MWh."

With wholesale prices at $33.53/MWh, HQ cannot afford the mortgage on those new dams.

HQ's profits in 2009 will fall from over $3B to about $2.4. This is less money available to the Quebec Gov who collected $2.2B from HQ last year. Add this to the $4B deficit that Quebec has this year, and now you have a problem. HQ NEEDS CUSTOMERS. So while all this was happening, along comes Graham and says he needs some cheap power to keep his industrials happy. Mr Charest, knowing he has a problem developing, paints Graham a pretty little picture. The premier jumps up and down with joy as he feels he has just won the lottery. A deal is struck, and the rest is in the papers for all to read.

But where's the catch? Well, heritage pool power rates in Quebec are legislated at 2.8 cents a kilowatt hour. This is under direct control of the government through legislation. Real rates are 2X after adding in transmission and distribution. But still 30 to 50% less than NB. The big rush to have everything finalized is because Quebec plans to legislate a 1 cent per kilowatt price increase to the existing heritage pool customers to cover some of it's $4B budget deficit. This is about a 15% rate hike. A selling feature of the NB power sale, according to Graham, is the lower industrial rates in NB to match Quebec's. A 30% reduction. That will be on March 31, 2010 at midnite. But, when the Quebec Gov passes legislation on April 1 to raise rates 15%. Guess what? All the industrials in NB will get the same rate increase. So that 30 % drop is only 15%. Not such a great selling feature. And then people will be really ticked off. That is why Keir keeps eluding to this window of opportunity. That window will close soon, and once the big rate reduction is gone, then they will have NO friends at all. Plus, if they are spewing a lot of crap now to get us to buy into it, if this Quebec (and NB) rate hike pops up out of nowhere, the backlash will be off the charts.

And that Folks, IMHO, is the why of why Shawn Graham chose the path he did. Inexcusable in itself , but the how is even more inexcusable.

Unfortunately Canada lacks a real Energy Policy. As the largest exporter of crude oil to the largest consumer on Earth ( the US) we have no need to be held hostage to the rest of the planet.
Unfortunatley we don't own our resources, an have a difficult time moving them across the country from the "have" provinces to the "have not" provinces. But, Newfoundland produced 100 million barrels of oil a year for at least the last eight years. http://www.economics.gov.nl.ca/EB-Oil.asp . Enough to keep Irving's refinery going at 300,000 barrels a day.

And there are over 120 to 200 years of coal supplies in North America at current consumption rates.

For those who need more reading material, check this out : http://www.mackinac.org/11309


New Brunswick hasn't even put simple things like air to air heat pumps on their list of things to do. These have advanced a lot in the last few years. And would cut the average bill of an electrically heated house by half. They extract heat for the outside air and dump it in your house. No different than a refrigerator takes heat from inside your fridge and dumps it in your kitchen. On a bigger scale, the average power plant is only 33% efficient at converting fossil fuels to electricity. Natural gas fired stations with co-generation facilites, can operate at 50% efficient. To produce electricity with natural gas, and then use it to heat a house is a waste. If a provincial policy were in place to heat houses with natural gas, the efficiency would be upwards of 97%.

Anyway Folks, I'm drifting off topic. Happy New Years to all if I'm not back before then. Check and support all the other sites I've linked too. And keep up the fight.