NB Power is turning to Hydro-Quebec for help in refurbishing its largest hydroelectric dam at Mactaquac near Fredericton.
NB Power CEO Gaëtan Thomas and Hydro-Québec CEO Éric Martel made the announcement at a Friday morning news conference at the dam.
The agreement will see the Québec utility provide its long expertise with hydro dams to NB Power to allow the dam to continue operating until 2068.
"We are happy to share the expertise of Hydro-Québec acquired over the years," Martel said, pointing out the utility recently did a similar refurbishment on its Beauharnois dam near Montreal.
The deal will also see New Brunswick's utility agree to import a substantial new amount of electricity from Québec between now and 2040.
Already buying Quebec power
NB Power has been buying hydro power from Quebec since 2012.
The 47 terawatt hours to be purchased from now until 2040 is substantial.
That power will fill some of the gap created when Mactaquac's turbines shut down for the refurbishment and will be a positive backup plan if no alternative to coal is found for the Belledune generating station by a 2030 deadline.
"We're facing carbon-reduction pressures in New Brunswick that, without their help, would cost way more money," he said, estimating the cost of replacing the Belledune plant at $2.5 billion.
"This is why we're exploring other sources, but Hydro-Québec will fill a good portion of that right now."
One terawatt hour of electricity is worth about $60 million based on average on-peak prices charged in the New England market last year in which New Brunswick operates .
That would make a deal to buy 47 terawatts of electricity over the next 20 years worth between $2 billion and $3 billion.
Only part of that will be needed to replace reduced output from Mactaquac during renovations.
The dam currently produces an average of about 1.6 terawatts of electricity per year for NB Power, 60 per cent of the utility's hydro generation.
The two utilities will also discuss building new transmission lines between the two provinces.
The Mactaquac dam opened in 1968 with an expected service life of 100 years. However, an alkali aggregate chemical reaction in the dam's concrete has been causing the dam to expand over the years, resulting in the expected end of life in 2030.
The cost of a complete rebuild of the dam has been estimated at between $2.7 and $3.6 billion, depending on which option was chosen, a major expense for a Crown corporation and a province already deeply in debt.
'Millions' in savings
Thomas said Friday the contract with Hydro-Québec for the refurbishment will cost around $100 million, but will represent "hundreds of millions" in savings compared to a costlier full replacement of the dam.
The Quebec utility's ability to spread the work over a longer time period will reduce the impact on NB Power and on ratepayer bills, he said.
And he said NB Power and its customers will also benefit from the inexpensive supply of hydro power from Quebec.
"It represents significant savings."
Thomas said the price for electricity in this part of North America is pegged to natural gas so it's impossible to predict the cost.
"We can't give you a precise figure because it fluctuates year to year," he said.
Thomas and Martel said the refurbishment would shut down only one of Mactaquac's six turbines at a time, allowing the others to continue running.
No rate reductions
While the utility's large debt won't allow rate reductions on power bills, rate increases will be lower than they would be otherwise, he said.
"We're the lowest in Atlantic Canada and this secures us to stay the lowest in Atlantic Canada," he said. "We can't compete with our [Quebec] friends here, because they have the size and the natural resources, but we are benefiting from them enormously."
The two agreements make it easier for NB Power to move toward the federal government's goal of net zero carbon emissions by 2050, Thomas added.
"Net zero doesn't happen without all the energy sources available," he said.
But he warned it may not be possible for the federal government to help pay for the refurbishment from its green infrastructure fund, which specifically mentions transmission projects and renewable energy.
Energy exports to the United States are now tax-free and tariff-free, but federal subsidies could jeopardize that and invite American trade retaliation, the CEO said.
Premier Blaine Higgs said last year he didn't want to let Québec sell more electricity to New Brunswick until that province reversed its opposition to oil pipelines passing through its territory on the way to New Brunswick.
But the premier said Friday afternoon that he considers the electricity supply agreement to be a continuation of existing contracts.
"This is a good agreement for New Brunswick, for a backup supply for us, or a makeup supply for us in the absence of, or let's say outside, fossil fuels."
Assuming the refurbishment is approved by the Energy and Utilities Board and through an environmental impact assessment, work could start on the dam in 2025 or 2026.
Hydro-Québec Deja Vu?
Friday's announcement comes a decade after the Liberal government of Shawn Graham attempted to sell the Crown utility to Hydro-Québec, a widely unpopular proposal that eventually collapsed.
At the time, Graham said the deal fell apart when Hydro-Québec discovered that the looming cost of refurbishing Mactaquac was greater than originally expected, creating a greater financial risk for the Quebec utility.
At the time, Quebec was accused of trying to corner the electricity market in eastern North America. The then-premier of Newfoundland and Labrador, Danny Williams, accused Québec of trying to block its route to sell its electricity into the U.S. market.
Marcel said that his agreements with NB Power "open the door to more deals with Atlantic Canada."
If more transmission links between the two utilities are built, Quebec could sell more of its power via New Brunswick to Nova Scotia and Prince Edward Island, while hydro power from Labrador could pass through Quebec and New Brunswick into New England.
"Gaetan and I want to send a message that having provinces working together can be good for the other ones," he said. "Together with this interconnection we will definitely offer more opportunity to the Maritimes but also to the U.S. market."