Cablegate: New Brunswick and Quebec Agree to Significant Modifications

VZCZCXYZ0001
RR RUEHWEB

DE RUEHHA #0006 0202115
ZNR UUUUU ZZH
R 202114Z JAN 10
FM AMCONSUL HALIFAX
TO RUEHC/SECSTATE WASHDC 0019
RUEHOT/AMEMBASSY OTTAWA
INFO RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUEHGA/AMCONSUL CALGARY
RUEHHA/AMCONSUL HALIFAX
RUEHMT/AMCONSUL MONTREAL
RUEHON/AMCONSUL TORONTO
RUEHQU/AMCONSUL QUEBEC 0012
RUEHVC/AMCONSUL VANCOUVER

UNCLAS HALIFAX 000006

SIPDIS
STATE FOR WHA/CAN, EB/ESC/ISC
DEPT PLS PASS TO FERC
USDOE FOR IA (DEUTSCH)

E.O. 12958: N/A
TAGS: ENRG ECON ETRD EINV PGOV CA
SUBJECT: New Brunswick and Quebec Agree to Significant Modifications
of Utility MOU

REF: A. HALIFAX 0004 AND PREVIOUS; B. 09 OTTAWA 0828

1. SUMMARY: New Brunswick will retain control of its transmission
system under a new, renegotiated energy agreement with Quebec, but
with reduced cash to apply to its power utility's debt. The
changes were prompted by bitter opposition to the original MOU but
there is also speculation that a plan to build a new transmission
system to the United States was also a factor. END SUMMARY

2. On January 20, the governments of New Brunswick and Quebec
announced the details of a revised agreement on selling assets of
New Brunswick Power to Hydro Quebec (reftels). New Brunswick
Premier Shawn Graham and Quebec Premier Jean Charest signed the
original Memorandum of Understanding in October 2009, which would
have seen Hydro Quebec assume the major assets of New Brunswick
Power including its transmission lines for $(Can.)4.75 billion, the
sum of NB Power's debt. However, in the new $(Can.) 3.2 billion
deal, New Brunswick will still be selling the bulk of its
generation capacity to HQ while keeping control of its transmission
and distribution operations. Details of the revised agreement are
available online:

http://www.gnb.ca/cnb/news/pre/2010e0074pr.ht m and
http://www.gnb.ca/cnb/news/pre/2010e0073pr.ht m.

3. New Brunswick Premier Shawn Graham was forced to negotiate the
amendments with his Quebec counterpart after fierce opposition to
the deal caused a damaging split in his cabinet and caucus.
Premier Danny Williams of Newfoundland-Labrador, joined by Nova
Scotia Premier Darrell Dexter, had also been a staunch opponent of
the original agreement, believing that it would give Quebec control
over transmission routes into the Northeast U.S., thereby
jeopardizing future energy projects in Atlantic Canada. There is
also speculation that a plan by New Brunswick-based Fort Reliance
(in partnership with private and public sector players) to build an
alternate regional power corridor into Maine put pressure on the
negotiators to close on the deal.

4. Comment: With both premiers sticking to the original March 31
deadline to sign the final deal, action now moves to the two
provincial legislatures for ratification. However, NB Premier
Graham is likely to wait for an independent panel, now shifting its
focus to study the new agreement, to present its work before
tabling approval legislation. Given that the new MOU has satisfied
most of Graham's critics (particularly those within his own party),
there appears to be little to stop the deal from getting the green
light in New Brunswick. END COMMENT

5. This report was coordinated with AmEmbassy Ottawa and ConGens
Quebec and Montreal.
SMITH

© Scoop Media