A few weeks ago, the Provincial Government announced it will go ahead with the refurbishment of the Point Lepreau nuclear generating plant. This week, protestors in St. Andrews were lobbying against the construction of a LNG (liquefied natural gas) terminal in the Passamaquoddy Bay within site of St. Andrews.

The Henry Hub price for natural gas yesterday was $9.77 U.S. per MMBtu. That’s three times the price it was five years ago. The price of crude oil was $67.29 U.S. a barrel. That compares to 10 months ago when it was only $55 a barrel and that was 60% higher than it was in January 2004.

Electricity ranged from 7.29¢ to 9.91¢ U.S. a kilowatt hour. The price of coal and natural gas track the price of oil. NB Power generates more than 50% of its electricity by burning coal, natural gas and oil. Today’s oil prices strongly support the Government’s decision to refurbish Lepreau.

If the price of oil is dictated by diminishing supply and/or the Middle East crisis, we can be reasonably certain it will not be dropping any time soon. In fact, supply may become a bigger problem than price. This will be good news for wind advocates and those who believe that tidal power and biomass could be alternatives to oil-generated electricity but many people believe they will only come into play as supplemental sources rather than replacement sources of electricity. Capacity potential, developmental costs and reliability of delivery become issues when alternatives are considered. Even Lepreau has its limits. Refurbishment will only extend its life by twenty five years. We need to be looking further down the road than twenty five years.

There is no easy way to get NB Power off oil but there are conventional alternatives in Labrador. Churchill Falls has capacity of 5400 megawatts of electricity. That’s about 30% more than the entire production of NB Power. To get Churchill Falls power to markets in central Canada and the northeastern United States, it has to travel across Quebec.

When the original development deal for Churchill Falls was negotiated in the 1960s, the Quebec Government, through Hydro Quebec said no to the free movement of electricity across its lands. Instead, the terms of movement, as dictated by Hydro Quebec enabled the Quebec utility to purchase all the power produced by Churchill Falls.

The contract was for a 40 year period with an option to renew for another twenty five. The price was initially fixed and then goes down over the 65 years. By 2016, the price will drop to one fifth of a cent per kilowatt hour. Hydro Quebec resells that power to its residential customers for 6.3¢ a kilowatt hour and to its large power customers for 4.23¢ a kilowatt hour (NB Power charges its residential customers 8.37¢ a kilowatt hour).

If NB Power could negotiate the large power customer rate with Hydro Quebec, it could purchase electricity for less than its own cost of production. That’s assuming Hydro Quebec would have surplus capacity to fill the order, that transmission lines into New Brunswick could accept the load and further that New Brunswickers would want to be dependent on Hydro Quebec for their electricity.

Churchill Falls is located on the Churchill River near Goose Bay/Happy Valley. There is potential for developing a second phase (Churchill Falls II) 1000 megawatt generating facility upstream from Churchill Falls. Downstream, there are two additional sites with potential for power development; Gull Island and Muskrat Falls. Together these three sites have the potential to produce 4100 megawatts of power, about 75% of the production capacity of Churchill Falls but nearly 100% of NB Power’s total production.

The Newfoundland Government believes these sites can produce the lowest cost, undeveloped hydro power in North America. If some variation of the Churchill Falls model for transmission and resale goes into place, most of that power could go to the United States via Hydro Quebec.

What if Nova Scotia, PEI and New Brunswick got together as guaranteed, long-term customers to attract financing for the three projects?

What if New Brunswick was to go it alone? What if the developers ignored Hydro Quebec and routed transmission over Labrador and under water to St. Anthony on the northeast tip of Newfoundland then over land to Port aux Basque and underwater to the Maritimes. The closest land point is Sydney, Nova Scotia but you could route an underwater cable into Miramichi. A Port aux Basque to Miramichi route would be about double the under-water distance to Sydney but the cable could find land about half way between the two points in the Madeleine Islands.

If NB Power could become the primary customer for Churchill Falls II, Gull Island and Muskrat Falls power, it could reap the benefits of long-term rates for its customers and surplus power could be exported to Nova Scotia, PEI and the northeastern United States. New Brunswick’s dependence on oil and gas for electricity generation would be drastically reduced or eliminated and we would have the power to replace a decommissioned Lepreau twenty five years from now.

The cost of building the transmission system would be in the billions of dollars but with a life of 50 to 100 years, it might be justified. The Newfoundland and Labrador economy would benefit from construction and permanent operating jobs. The Madeleine Islands would find some benefit and NB Power would be off oil. We have the underwater transmission technology. It’s already in place between New Brunswick and PEI.

There is no reason to suspect that it could not be adapted to long-distance transmission. Would it bring stability and affordability to NB Power’s pricing regime?

Prices rarely go backwards but it would certainly bring price stability.