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How will power deal affect grid access?

Many aspects of the sale of NB Power have both angered and confused people, but none it seems more so than the issue of access to the grid post-sale. The New Brunswick government says nothing will change, while the premiers of Nova Scotia and Newfoundland have said the sale will effectively block their access to New England and others have expressed concerns it will end the province's forays into green energy.

Many aspects of the sale of NB Power have both angered and confused people, but none it seems more so than the issue of access to the grid post-sale.

The New Brunswick government says nothing will change, while the premiers of Nova Scotia and Newfoundland have said the sale will effectively block their access to New England and others have expressed concerns it will end the province's forays into green energy.

Even academics confess they don't quite understand what the terms of the memorandum of understanding signed between New Brunswick and Quebec will mean for future access to the province's transmission lines, so it is no wonder much of the general public has been left wondering what exactly the impact will be, and more importantly, what it might mean for them.

Energy Minister Jack Keir says the issue isn't complicated in the least.

"It is not a tough one at all. Nothing changes with the transmission grid," he says.

Keir explains that New Brunswick has an open access tariff transmission system.

"If there is open capacity on a transmission line and the owner of the transmission line can't fill it with their electricity, it must go on the open market," he says. "When it goes on the open... more [truncated due to possible copyright]  

Many aspects of the sale of NB Power have both angered and confused people, but none it seems more so than the issue of access to the grid post-sale.

The New Brunswick government says nothing will change, while the premiers of Nova Scotia and Newfoundland have said the sale will effectively block their access to New England and others have expressed concerns it will end the province's forays into green energy.

Even academics confess they don't quite understand what the terms of the memorandum of understanding signed between New Brunswick and Quebec will mean for future access to the province's transmission lines, so it is no wonder much of the general public has been left wondering what exactly the impact will be, and more importantly, what it might mean for them.

Energy Minister Jack Keir says the issue isn't complicated in the least.

"It is not a tough one at all. Nothing changes with the transmission grid," he says.

Keir explains that New Brunswick has an open access tariff transmission system.

"If there is open capacity on a transmission line and the owner of the transmission line can't fill it with their electricity, it must go on the open market," he says. "When it goes on the open market, anybody can bid to put electricity on that line and it will be awarded to the company or utility that puts the highest bid or the longest number of years."

In 2008, as an example, Keir says NB Power completed a new transmission line from Point Lepreau to Bangor, Maine.

"The system operator said, 'Are you going to fill that line?' and NB Power had nothing to put on it, so it had to go to the market," he says.

Emera, NB Power and Hydro-Quebec all put bids on the line, and Hydro-Quebec won.

"Now (the line) is full to capacity with Hydro-Quebec power," Keir says.

Even if NB Power was to come up with enough power tomorrow to fill the line, they can't get the line back.

"Hydro-Quebec can fill that pipe for as long as they want to. That's the way the rules work," Keir says.

Keir says there is currently no excess capacity to export energy in New Brunswick.

"If anybody wants to export to New England, they will have to build a new transmission line," he says.

"Anybody could build it," including the Province of New Brunswick, a private company, or even the governments of Nova Scotia and Newfoundland and Labrador, provided they acquired the land and got the proper permits and so on.

While it is true there is an open access system, Gordon Weil, an energy consultant with Standard Energy Company in Maine, says that sounds better than it really is.

"You may offer open access, but if there is no access on the lines... you can't get on the system if there is no room on it," he says. "So, to some degree, Hydro-Quebec's answer was a little disingenuous."

Weil says the sale means Hydro-Quebec will own every interconnection between Canada and New England, not to mention the utilities in both bordering provinces.

"So will they, by virtue of that, be able to set the price for power in New England? That will require a look by the Federal Energy Regulatory Commission (FERC)," he says. "FERC will undoubtedly open its own investigation on whether or not Hydro-Quebec can exercise market power... If you are found to have market power, you are not allowed to set your own price and you lose a significant competitive opportunity."

Weil says one solution may be to create what he calls "transmission corridors" through New Brunswick for the other Atlantic provinces, which would also have the effect of diluting Hydro-Quebec's market power.

Keir says the guaranteed access that the premiers of Newfoundland and Labrador and Nova Scotia are asking for is not possible to grant.

"That flies in the face of FERC rules," he says. "The reason he (Newfoundland and Labrador premier Danny Williams) wants on the transmission line is to get into New England. If FERC found that out (about guaranteed access), they wouldn't let him sell electricity down there.

"I think he is making all this noise because he knows the business case doesn't work to develop power in Lower Churchill and go under water two times and all the way through Nova Scotia and New Brunswick and Maine into Massachusetts and so he is trying to save face in his own province."

Future access to the grid, not just for our neighbours, but for projects here at home, is one of the recurrent concerns of those who worry about the impact of the NB Power sale or oppose it altogether.

Weil says it would be tough for new generating plants to get access to the grid. He says a generating station would normally pay to build their own connection to the grid, but if the grid is full to capacity, if they wanted on, they would need to actually upgrade the grid -- a move that would be cost-prohibitive for most.

While there is currently no room on the grid to export energy, there has still been room to add small projects at home, such as the wind mills that have recently come online.

There are concerns that once Hydro-Quebec begins supplying the power, there will be no need for these type of projects, nor space for them to access the domestic grid, and the nascent New Brunswick green energy industry will fade away.

Keir says selling the transmission lines doesn't preclude New Brunswick from pursuing wind and tidal power projects.

"We can make energy policy and say we want another 400 megawatts of wind on the grid for New Brunswick, we want 50 megawatts of tidal, we can still do all that," he says.

But Yves Gagnon, the K.C. Irving chair in sustainable development at l'Université de Moncton, says there will be a cost to that.

"The minister of energy is right to say we will continue to make the laws, but what is clear in the MOU is essentially all additional costs that would come from regulations will be factored in the rates of electricity," he says.

For example, if New Brunswick required an extra 400 megawatts of wind power be included in the mix, but the wind power was more expensive than what Hydro-Quebec could provide, it is the ratepayers who will make up the difference.

"If we don't sell to Hydro-Quebec, all additional costs will be paid by New Brunswick and if we sell, all costs will continue to be paid by New Brunswick," Gagnon says.

Weil says he is uncertain of exactly how a post-sale regulatory system will work. He says it depends on what is in the final agreement, but says, from his reading, he does not believe the New Brunswick government will be in a position to require Hydro-Quebec to use a certain amount of wind power, for example.

"It's position will be it can promote wind power, but who buys wind power? It is the utility and it will buy, I assume, from the lowest cost supplier," he says.

Weil's sense of the memorandum of understanding is that New Brunswick won't have much of a say over how Hydro-Quebec does business.

"The provincial government can tell the regulators how they want them to do their business, but that would be gone in New Brunswick. New Brunswick is essential ceding regulatory policy to Quebec. If you don't like it and say we want more open access in New Brunswick, you can no longer do that," he says. "That is what I consider to be an unprecedented part of the memorandum of understanding. I have never seen that, where one entity gives up regulatory power to another over a business deal."

Gagnon points out that one of the conditions of the sale is that New Brunswick must conform its regulations to those in Quebec.

"Yes, we will do our law, but the MOU says we are constrained in what we can do. It has to match the Quebec laws or regulatory framework," he says.

Weil says he has no opinion either way on the deal, but believes everyone should know what they are getting, the good and the bad, before it goes ahead.

"My sense is it is very important to develop a good understanding of what the MOU provides and then decide if you can live with it or not," he says. "This is a business deal for Hydro-Quebec and it can, in the future, do things differently. It can sell facilities, buy facilities, regulate them differently. This is a one-time deal for New Brunswick. Once the regulatory (power) goes, it is gone forever."

Gagnon also raises concerns about whether or not New Brunswick is selling its transmission assets for less than they are worth.

All together, he says the province has 6,800 kilometres of transmission lines and, based on a transmission line built two years ago, he calculates it costs roughly $500,000 per kilometre to build new lines.

"So the replacement cost of 6,800 kilometres of transmission line could be $3.4 billion," he says. "And then they're acquiring DISCO, which is the distribution company, with nearly 400,000 new clients...that in itself is worth a lot of money because the clients have no choice but to buy from them forever. You usually don't give that away."

Hydro-Quebec has agreed to pay $4.75 billion for the majority of NB Power's assets, including all of its transmission lines and most of its generating stations.

Weil says he was once asked by a U.S.-based power company for his opinion on whether they should sell or not. He suggested they be very careful about selling over a problem that could be fixed.

"The people of New Brunswick, the legislative assembly, will have to make a judgment. Is the benefit we are getting out of this now, is that benefit worth sacrificing for the long-term, essentially forever? A decision like that is a big deal because it is a long-time decision," he says.


Source: http://timestranscript.cana...

DEC 15 2009
http://www.windaction.org/posts/23638-how-will-power-deal-affect-grid-access
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