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DEREGULATION UPDATE
New Brunswick Takes First Step Towards Opening Market
By: Tania Henvey
New Brunswick's provincial government has set April 1st as the date it will open its electricity grid to competition, promising provincial taxpayers it has learned the lessons of problematic electricity deregulation in California and Ontario.
"This Act provides the legal framework within which the province can move ahead in implementing the changes to NB Power and the electricity market that we announced in May of last year," said Jeannot Volpe, provincial Minister of Natural Resources and Energy.
He added the provincial government has studied electricity deregulation in places like Ontario and California and learned from it, promising that all of the negative things that have been associated with deregulation won't happen to the taxpayers of New Brunswick. That is why the market will open one step at a time.
Full deregulation right from the start would not have been the best choice, according to New Brunswick Premier Bernard Lord, who believes that taking the slower approach is the best solution.
"We want to maintain fair, affordable rates for ratepayers," the premier said. "We want to limit the risk to taxpayers because if NB Power has financial problems, it's money that comes off the bottom line of the province of New Brunswick and, therefore, it is money that is not going to health care and education."
But Liberal Opposition Leader Shawn Graham does not agree with the new electricity initiative: "This government, through this legislation, wants to privatize NB Power, sell off the assets. That is not the way to go with an energy utility that has provided over 80 years of safe, reliable and affordable electricity to the citizens of this province," Mr. Graham said. "We are losing control of our utility."
The new Electricity Act will create an open wholesale market for the province's three municipal distribution utilities and its 42 largest customers directly connected to the transmission system. All other customers (about 350,000 of them) will not notice any difference because NB Power will still be providing their services. Dubbed the "made-in-New-Brunswick" approach to electricity deregulation, this new competitive market will open to large industrial customers who are connected to the transmission system and have a contract demand of at least 750 kW.
RESTRUCTURING OF NB POWER
The market isn't the only thing that will be affected by the restructure. NB Power will become NB Power Holding Corporation with four subsidiaries: N.B. Power Generation Corporation, N.B. Power Nuclear Corporation, N.B. Transmission Corporation and N.B. Power Distribution and Customer Service Corporation. The duties for each will include:
· N.B. Power Generation Corporation will be responsible for all non-nuclear generation assets.
· N.B. Power Nuclear Corporation will take care of all operations for Point Lepreau and combine with N.B. Power Generation Corporation to supply power to customers of the distribution and customer service areas.
· N.B. Power Transmission Corporation will own and operate the high-voltage transmission system in the province and serve as a carrier for all those wanting to use the system to deliver electricity in N.B. or for export.
· N.B. Power Distribution and Customer Service Corporation will take care of the T&D system that provides electricity to the homes and businesses of the service areas.
These four companies will remain Crown corporations (the provincial government owns NB Power and will hold all shares in these new corporations).
There are some other changes to the electricity marketplace in the province. The Public Utilities Board will be able to license those who wish to participate in the market, as well as set rates, tariffs and charges. The N.B. Electric Finance Corporation, a company that will be created under this Act will manage and pay down the "province's share of debt assumed in exchange for equity position in the corporation," according to a Natural Resources and Energy news release. Secondly, the newly created System Operator will "administer and supervise the rules governing transmission access."
"It ensures a continued supply of electricity at reasonable rates and minimizes risk to New Brunswick ratepayers and taxpayers," Volpe said. "The Electricity Act provides the legal framework within which we can move ahead in implementing the reform of our electricity market, and the reorganization of NB Power as planned and announced over the last few years."
COLESON COVE AND POINT LEPREAU POWER PLANTS
It has been rumoured that the Coleson Cove oil-burning plant in Saint John may be sold, however, the New Brunswick government has said it would prefer to find a partner to help with converting the plant to Orimulsion® (a patented mix of water and bitumen fuel made in Venezuela). As for Point Lepreau, the government will not sell the nuclear plant, but is hoping to find an investor to help modernize the Candu reactor. Selling the plant is not an option because of regulatory and safety reasons.
These solutions may avoid taxpayers having to pay the $1.6 billion price tag to fix up (or modernize) these plants.
Volpe noted that opening the market was necessary because otherwise the ratepayers would have been facing a large rate increase. Currently, beginning April 1, there will be a 1.9 per cent rate increase for large and small industrial customers. ET
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