Quebec scraps energy deal with NB Power

QUEBEC – After months of negotiation, Quebec and New Brunswick announced Wednesday they are scrapping a controversial energy deal that would have seen Hydro-Quebec get greater access to energy-hungry markets in the northeastern United States.

The proposal called for Hydro-Quebec to pay $3.2 billion for most of NB Power’s power generation assets and 670 megawatts of transmission rights to New England.

Opposition to the agreement, which had to be finalized by the end of the month, has been consistently fierce in New Brunswick, prompting massive demonstrations and forcing one cabinet minister to resign.

The Quebec government said Wednesday the deal fell through because due diligence showed some assets would have required bigger investments than previously planned and Hydro-Quebec was not willing to take more risks.

"It was out of question to buy assets that didn’t meet our expectations," Quebec Premier Jean Charest told reporters.

"For example, in the case of certain infrastructures we ended up with civil responsibilities that were not directly linked to energy and that’s not the core business in which Hydro-Quebec is involved," he said.

Charest met with New Brunswick Premier Shawn Graham on Tuesday and said both came to the conclusion a win-win agreement could not be reached.

"We always thought that this was good for both sides at the outset, but we’ve come to a conclusion today that it is not what we expected," Charest added.

He recalled that it was New Brunswick that came knocking on Quebec’s door seeking an energy deal.

Graham has said his government was looking for an alternative to prevent major energy rates hike in the province, which is struggling with a major deficit at NB Power.

On Wednesday, Graham acknowledged "a number of issues emerged" as the two sides worked to take the energy agreement and turn it into a full legal document.

"Hydro-Quebec asked for changes to the agreement that would have unacceptably taken away some of the value and increased some of the risks for New Brunswickers," he said in a statement.

"With Hydro-Quebec’s proposed changes, I do not believe New Brunswick receives enough in direct benefits and reduced risks to provide a deal worth signing."

The New Brunswick government will now look at other alternatives to address the challenges facing NB Power and the electricity situation in the province, and in doing so, it will look for input from New Brunswickers, Graham said.

"People were not upset with us for taking on the electricity issue; they were angry with us because they wanted to be part of the solution and our process did not let them in.

"I can assure you that, after the debate of the past few months, I have heard loud and clear that New Brunswickers want to help us deal with our energy challenges. That is an important lesson, and it is why I am committed to working with the people of the New Brunswick as we work to move our province forward generally and on the energy issue."

Under the deal, residential and commercial rates would have been be locked at the current level for five years, while industrial users would have received savings of up to 23 per cent.

In mid-January, the deal was watered down so that Hydro-Quebec would not take over NB Power’s transmission and distribution system, as originally planned in the initial memorandum of understanding, which unleashed a firestorm of protest in the Atlantic provinces.

The agreement would have seen Quebec acquiring most of NB Power’s generating stations. Hydro-Quebec would have owned the Point Lepreau Nuclear Generating Station and the province’s hydro dams and two diesel units.