This is a great analysis posted at Save NB Power site. I'm a fan of knowing your history before you move forward on a subject. They give a history lesson before moving on with explaining the impacts of the proposed sale. The cover letter as sent to the premier, and list of authors can be found on the Save NB Power website.
http://www.savenbpower.org/CitizensPanel/Analysis.pdf
I have copied the Conclusions here:
1. The major benefit of the proposed sale is the immediate reduction to Industrial rate payers in New Brunswick who realize savings of about 32%.
2. Residential, General and Commercial customers will not see any reduction in rates. They must calculate what the rates would have been had the sale not been completed and consider the savings over time while assuming that many future unknowns do not eliminate some of the savings.
3. HQ realizes substantial benefits both financially and strategically.
4. The value of the ENBP assets to HQ is significantly greater than the outstanding ENBP debt. The rate relief to New Brunswickers does not cost HQ anything. Its gross margin on its NB business will be greater than for its Quebec business.
5. If the deal is concluded it should be at a higher cash value than the ENBP debt.
6. The major cost to NB will be loss of control of this essential service plus the loss of opportunity to take advantage of other sources of energy in the future such as the Lower Churchill developments. The value of retaining control is difficult to quantify. It is a matter of judgement for each citizen/shareholder of ENBP.
7. If the deal is not concluded New Brunswick rate payers will forego rate savings. The NPV of these savings, subject to risks as noted, are calculated to be as follows:
For Industtrial customers calculated to perpetuity (NERA) $2.1 billion
For Residential Customer with a monthly power bill of $400/m $7367 or $30.69/mo
(Calculated at 6% interest for 20 years) $200/m $3683 or $15.35/mo
$100/m $1842 or $7.67/mo
In the event that NB ratepayers believe that only 5 years of savings should be considered because of the many future uncertainties of the NPV, the projected savings would become:
Average Monthly Bill NPV of Savings for 5 years Equiv.$/mo
$400.00/month $1818 $30.30/mo
$200.00/month $909 $15.15/mo
$100.00/month $455 $7.58/mo
Each New Brunswick consumer should be able to decide whether these savings are
worth the loss of ownership of ENBP, its services and its assets.
8. PNB has stated that four objectives were the reason for pursuing this MOU with HQ.
The following is an assessment of whether the stated objectives would be met by
this deal: · “NB must continue to have control of its energy independence and its
energy policies.”
Comment: NB has those controls now because it owns 100% of EBNP.
How can it claim to maintain control when it owns 0%. It cannot!
“NB families and business must have rate relief.”
Comment: NB rate payers currently have the lowest rates in the Maritime
Provinces and substantially lower than the New England states. Lower
rates are always nice but why the imperative?
“The debt must be slashed significantly or eliminated altogether.”
Comment: Lowering the ENBP debt while selling productive assets worth
much more than the debt does not improve NB’s financial position, it
worsens it. The Provinces debt is not lowered at all.
“Our dependence on fossil fuels must be lowered.”
Comment: There will be little or no difference in the use of fossil fuels in
NB whether ENBP or HQ operate the system. HQ does not have the
excess generating capacity, the interconnection capacity or the market
incentive to replace all of NB’s fossil fuel generation with hydro energy.
It will probably be years before it will be in HQ’s interest to expand its NB
facilities.
9. A more desirable option would be to negotiate another long term firm power purchase
agreement (PPA)with HQ . HQ may need some PPA’s to obtain financing for new
generation and additional interconnection capacity. The savings realized could be
distributed to rate payers as necessary for the best economic outcomes. ENBP would
remain as a productive asset of the people of New Brunswick.
Another long term plan would be to develop a strategic partnership with a major electric
energy producer and distributor with a proven track record in international developments
such as Eletricite de France (EDF). In the 1970s EDF faced essentially the same issues as
ENBP . Like ENBP EDF had few indigenous natural resources, but like ENBP was
strategically located and could and did develop strong electrical interconnections with
electric utilities in all neighbouring countries .
EDF is now the “ENERGY HUB” of Europe. Nuclear energy accounts for 86% of France’s
electricity supply. Electricity is France’s fourth largest export.
EDF has made major investments in generating and distribution utilities in the U.K and
recently acquired a 49% interest in Constellation Energy (formerly Baltimore Gas and
Electric) in the U.S.A.
With NB’s strategic location for generating plants and interconnections to the U.S. market,
a company like EDF would be a great partner in implementing Premier Graham’s vision for
NB as the “ENERGY HUB” of North Eastern America.
Married To A Bedouin (9781844082209)
2 years ago
Problems with this study:
ReplyDelete- Quebec Hydro DOES have excess generation capacity, which this study chooses to ignore.
-The value of ENBP may be higher than the purchase price to HQ, but it is lower than the value to NB. As with any transaction, you would expect the final purchase price to be somewhere in the middle of these. By holding on to NB Power, we can't realize the same value that HQ can, because we don't have cheap hydro to realize that value.
- Paying off the debt, while not lowering provincial government debt, will eliminate publicly owned debt. Just because you're not paying for it through your taxes, doesn't mean you aren't paying for it through your utility bill.
- You can maintain control through regulation. Look at any privatized market (the US, the UK, Alberta). In these countries the government owns 0% of the generating assets, yet still has control through effective regulation.
- They call Coleson Cove an efficient fossil fuel station. Fact is, Coleson Cove actually loses money every time that it runs due to its staggeringly high fuel price. It costs roughly 17 cents a kWh to generate - a lot more than we pay.
-Stopping rate savings calculations after 5 years is just absurd. While there are unknowns, you can make logical economic estimates, with high and low ranges, and not one of them results in parity post the 5 year period. Our power prices are largely tied to fossil fuel prices in this province (explains rapid rate hikes of previous years), which if anyone has been paying attention to, rise a lot faster than CPI.
To Brian :
ReplyDeleteHydro Quebec has the excess capacity for the TW hrs per year, but on a dry day with extreme cold, does not have the MW capacity to even supply themselves.
Regulation for the elctrical industry will work the same as the regulation does for home heating fuel and gasoline? I still say market rates dictate the final price, regardless of what the regulator says. Why not just regulate gasoline down to 50 cents a litre. Who pays then?
17 cents a kwh is a number from Kier. So who is to beleive that?
Rate saving after five years?? The lower rates site has had someone ask 15 times what the savings will be over the first five years and they can't answer. They (gov) can project over infinity, but why not give the voter a reasonable number of years to work with.