...To determine the value of the transaction to New Brunswick customers, a comparison must be made between the rates that will result from the provisions of the MOU and what otherwise would have been the rates.

To the degree that the period over which the comparison takes place is reasonably short, the forecast can be reasonably accurate. The longer the comparison extends, the less reliable is the comparison. Projecting current trends and inflation rates plus forecasting the evolution of governmental and private sector actions and policies for many years, even decades, adds a great deal of risk to any rate forecast. For example, how likely would it have been twenty years ago to forecast reasonably accurately (1) the Lepreau refurbishment requirements and costs, (2)

costs of the policy of persistently deferring rate increases as a way for NB Power to avoid in-depth regulatory scrutiny, (3) the issues surrounding the use of Orimulsion fuel, (4) the increased and widely fluctuating cost of fossil fuels or (5) the effects of global warming and the related increased emphasis on green power?

• A 5-year rate freeze is not a price reduction – it is the status quo for the citizens of NB. In fact NB residents will pay over 70% more for the same power than Quebec residents!

• A five year rate freeze at first glance may appear attractive but at what cost? CBC has reported that the govt. advertised savings may be overblown. Instead of saving $97 in the first year it could actually be as little as $19. Using the government’s figures you would save approximately .75 cents per day. If you don’t heat with electricity you save closer to .35 cents a day. CBC’s Robert Jones calculated savings of less than 15 cents a day. It doesn’t matter whose figures you want to use! For a few pennies a day is it worth our future and the future of untold generations to come? This deal is forever.

• Rod Gillis, an NB lawyer and long time NB Power critic, stated Nov. 25, 2009 that the “rate of return in utility regulations is what regulators use to determine the fair and reasonable price for electricity sold by the utility …to determine the base rate … the regulator determines the amount of revenue the company needs to cover operating expense, depreciation and cost of capital.”

• Hydro Quebec has determined in Quebec that a fair and reasonable rate for residential customers is 5.45 cents per kWh (for first 30 kWh) compared to the NB residential rate of 9.52 and 9.69 cents per kWh which is between 74 and 77% higher!

• Why don’t rate payers in NB pay the same rate as our Quebec neighbours? Mr. Gillis has pointed out that the majority of generating assets are in Quebec & Newfoundland. The assets of NB are very small in comparison and would have little impact on overall generation cost so it makes no sense that rates should increase appreciably because of this purchase.

• The Liberal government did not negotiate on behalf of the residents of NB.

• Thierry Vandal, CEO of Hydro Quebec said, “the idea for the agreement — which would see industry power rates rolled back and residential customers handed a rate freeze — came from Premier Shawn Graham's Liberal government”!

• According to Mr. Gillis, New Brunswick residential and general commercial (small business) rate payers because of the rate differential between NB and Quebec, will pay Hydro Quebec a “premium” of $2.4 billion in the first five years! That’s not a bad return on a $4.75 billion purchase!

• The Liberal government say’s that residents will receive 60% of the benefits. In fact, the report by NERA, the government’s paid consultant, shows that large industry will receive over 79% of the supposed benefits in the first   year!

• NERA says that NB residents, won’t see major benefit until 2040 and beyond!

• The NERA report projected savings ends in 2040! This is one year before the end of the infamous Churchill Falls deal with Newfoundland. This will bring to an end to Quebec’s access to cheap power. Approximately 50% of Hydro Quebec’s power is reported to come from Churchill Falls.

• When Quebec has no more cheap power to sell, what will happen to our rates?

·        The Liberal government says: Not to Worry! Future costs after 5-years are tied to inflation which “experts” predict will be under 2% over the next 20-years. Most economic experts say they can’t predict when we’ll come out of the current recession let alone predict what inflation will be in 20 years! Looking back in history is no help if going forward we are looking at $140.00 barrel oil!

 

·        The NERA report quotes the use of an annual 4% inflation rate to justify the high costs they predict will befall New Brunswick’s citizens if we do not sell NB Power.

 

·        Well which is it? The Governments predicted 1.9% annual CIF when calculating savings? Or, the NERA’s 4% when calculating cost? Although politicians are renowned in their ability in speaking out of both sides of their mouths…You just can’t have it both ways!

 

·        Elizabeth Beale, President and CEO of Atlantic Provinces’ Economic Council, commented on Nov. 10^th at an APEC conference, on tying the NB residential rate to inflation as proposed under the MOU, “Hydro Quebec’s power rate increases have been well below the CPI over the last 10-years. If this trend continues, this could mean a widening gab and loss of relative advantage for New Brunswick compared to Quebec beyond the initial five years.”

• Mike Ferguson, our Auditor General has said “ordinary rate payers have been told that their rates will be frozen for five years and will only increase by the Consumer Price Index (CPI) after that….The province needs to be clear about whether NB Power customers might face higher bills through other charges.”

• In the Memorandum of Understanding (MOU), Hydro Quebec demands through a “contractual or a legislative guarantee” a fair and reasonable return to the owner of the assets through transmission and distribution rates! This so called “fair and reasonable return” would be over and above the CPI rate increase.

• Hydro Quebec, through this agreement, can demand (and they will) that Belldune and Colson Cove thermal generating stations be shut down. New Brunswick citizens, not Quebec Hydro, will pay the decommissioning cost!

• If Hydro Quebec, who has the contractual right, demands that we shut down all New Brunswick’s thermal generating plants in one year, the province would be bankrupt! Don’t worry though, unlike business, Quebec would never play hardball with its poor cousin.

• The MOU Section 3.1 clearly states that the New Brunswick government can recover decommissioning costs through regulatory charges to electricity customers! That would be us folks!

• The Liberal government say’s that NB Power will increase rates every year by 3%. Nowhere in NB Power’s documents does it say that rates will increase by 3% every year. This is just a government scare tactic to justify their mythical savings!

• The MOU limits the amount of power available in the heritage pool to 14 TWh for New Brunswick’s residential and industrial customers.

• According to NB Power’s 2007-2008 financial report we used 14.25 TWh of power that fiscal year. This amount already exceeds the low heritage pool allowance and penalizes future growth in New Brunswick.

• NB Power has projected their load rating to increase 10% between 2010 and 2015.

• Who will pay for this increase in power over the artificially low heritage pool?

 According to Section 2.2(b)ii of the MOU the incremental cost of any power used over the allotted heritage pool will be deferred or set aside until the 5^th anniversary of the freeze, when all costs plus interest will be recovered by Hydro Quebec through adjustment of the rates. This is over and above the annual rate increase based on changes to the Consumer Price Index.

• While residential customers and commercial rate payers may have to wait until 2040 or beyond to see benefits, large industry will reap their rewards in the first year! Large industry power rates under the MOU will drop over 30% to match the current Hydro Quebec rate for that business class.

• Newfoundland and Labrador Premier, Danny Williams, commented on the deal to CBC, “We're hearing now that this could be possibly be driven by the Irving’s in New Brunswick because there are commercial interests …”

• Large industry will receive $91.6 million or 79% of all first year projected savings!

• According to a CBC report, one Irving plant alone, Irving Paper, in East Saint John, will receive more than $18 million in savings! That’s almost 20% of the total savings large industry will enjoy in the first year!

• Also according to a CBC report, New Brunswick’s 26,000 small businesses in total will only see a saving of $16 million, $2 million less than one Irving plant. 

• On the government’s released list of the 50 companies who will receive preferential rates, 14 of them are Irving owned companies!

• Elizabeth Beale in her address questioned the logic of the sale stating,” Should the province be steering the benefits of rate structure reduction to a small group of firms with limited growth potential.”

• Beale went on to say, “ It is yet to be determined if a drop in energy will be enough to keep these manufacturing and resource firms competitive … Even with lower energy costs Quebec has been steadily loosing manufacturing jobs, just like the US and other parts of Canada.”

• Atlantic Canada’s manufacturing and resource companies already benefit considerably from other forms of government support, most notably, tax incentives through the Atlantic Investment Tax Credit and the Input Tax Credit associated with the Harmonized Sales Tax. Beale in her address posed the question, “… how much Canadians should be willing to pay to support heavy industry.

• The Electric Utility Board (EUB) has long been critical of NB Powers long standing practice of overcharging New Brunswick’s 26,000 small businesses and according to a CBC recent report “… using that money to subsidize rates to others, primarily large industry…”