Provincial power deal aimed at N.E. energy markets

TORONTO - North America's largest utility company Hydro-Quebec has announced it will pay $4.4 billion for transmission lines of New Brunswick Power, a deal that would help the company secure greater access to electricity markets in the U.S.

Hydro-Quebec announced Thursday that it expects to spend up to $23 billion over the next decade to boost its hydro electric output by 4,500 megawatts a year.

Much of that will be exported to the United States and Ontario since growth in the Quebec economy is not expected to need that much power.

The New Brunswick Power transmission lines will enable Hydro-Quebec to transmit power to the northeastern U.S. Hydro-Quebec and New Brunswick Power are both province-owned.

Quebec premier Jean Charest said in a statement that the agreement creates an unprecedented energy partnership in Canada and provides the company with a strategic geographic position with the eastern Canada and New England markets.

Maine Gov. John Baldacci first learned about the agreement between Hydro Quebec and New Brunswick Power on Tuesday.

The governor, who plans to meet with Charest in the coming weeks, was not consulted about the deal beforehand but is reserving judgment until more details are known, Baldacci spokesman David Farmer said.

"At this point, it's a very significant transaction and it is too early to tell what the implications will be without a better understanding of Hydro-Quebec's plans for exporting to the U.S.," Farmer said. "We also don't understand how this could affect Maine's own goals of exporting energy."

The president of the New England Power Generators Association said American utilities are not 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," said Angie O'Connor, president of the New England power group.

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

Pierre-Olivier Pineau, an energy expert at Universite de Montreal's business school, said Hydro-Quebec's cleaner, cheaper electricity has a competitive advantage over many power producers in the U.S.

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."

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

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