Plug pulled on Hydro-Quebec, NB Power energy deal

Posted March 24, 2010, at 9:12 p.m.

AUGUSTA, Maine — State officials said Wednesday that the collapse of a proposed deal between Hydro-Quebec and New Brunswick Power could benefit Maine as the Canadian utilities continue to attempt to expand their presence in the U.S. energy market.

For nearly five months, Maine officials have closely watched the negotiations over a potential $3 billion deal that would have given Hydro-Quebec — North America’s largest utility — more access to consumers in New England and the rest of the Northeast.

Some observers suggested the proposed deal between the two provincial-owned utilities could flood the New England market with cheaper, heavily subsidized electricity, thereby squelching Maine’s efforts to become a regional powerhouse for renewable energy.

On the other hand, state officials believed the merger could lead to long-term contracts to purchase cheaper Canadian power. The prospect of Hydro-Quebec playing a larger role in the New England market could also fit nicely with Maine’s plan to sell lucrative “energy corridor” leases along interstate rights-of-way to power companies.

“From our perspective, what this shows is how fluid and dynamic the global energy market is,” said David Farmer, spokesman for Gov. John Baldacci, who believed the opportunities for Maine in the potential deal outweighed concerns.

The failed deal also highlights the need for Maine to firm up the state’s goals and policies regarding renewable energy production and transmission capacity, he said.

“What we need to do is be aggressive and set a bold agenda for what Maine can be,” Farmer said.

On Wednesday, Quebec Premier Jean Charest announced that negotiations between the two utilities had dissolved after it was determined that the proposal could cost more and carried higher risks than originally anticipated. The acquisition proposal has also encountered strong opposition in Canada, including large protests in Fredericton, New Brunswick.

“The planned agreement represented an interesting development perspective for Hydro-Quebec,” Charest said in a statement. “Nevertheless, it has never been a necessary one in terms of its growth.”

The announcement from Quebec immediately reverberated in Augusta.

Maine lawmakers have struggled for months to develop rules governing the lease of the “energy corridors.” A key part to those regulations are requirements that much of the lease proceeds help pay for energy efficiency, energy conservation or fuel conversion programs.

But those discussions have been dogged, in part, by uncertainty over the effects of the Hydro-Quebec-New Brunswick Power deal on New England.

Sen. Barry Hobbins, a Saco Democrat who co-chairs the Legislature’s Utilities and Energy Committee, said the deal’s failure gives the state some “breathing room.” It did not, however, lessen pressure on the committee to complete work on the bill as the 2010 legislative session enters its final weeks.

Once those policies are in place, Maine will be well-positioned to deal with Hydro-Quebec or any other companies that expresses an interest in the corridors, he said.

“We are finally going to have a corridor process in place that gives us a foundation and a blueprint,” Hobbins said. “This is being proactive instead of reactive.”

Several observers speculated that Maine could emerge in a stronger bargaining position due to the collapsed deal.

Anthony Buxton, a lawyer with Preti Flaherty with decades of experience on energy issues, pointed out that Hydro-Quebec is constructing an additional 5,000 megawatts’ worth of generation capacity, much of it aimed at U.S. markets.

A new transmission line being built in New Hampshire will accommodate 1,000 megawatts. But without access to New Brunswick Power’s cross-border existing transmission lines, the company has to find a way to funnel the rest into New England. Maine would seem like a logical location both politically and geographically, Buxton said.

That makes the energy corridor legislation under development all the more critical to ensuring Maine receives the maximum benefit from any potential transmission lines, Buxton said.

“It makes Maine more important,” Buxton said of the abandoned deal.

Sen. Peter Mills, R-Cornville, and Rep. John Martin, D-Eagle Lake, agreed that the deal’s failure could provide an additional incentive for Hydro-Quebec to negotiate with Maine.

Martin, who served on the commission that hammered out much of the initial work on the energy corridor legislation, suggested that Maine officials should talk with Hydro-Quebec about negotiating long-term energy supplies and corridor leases.

“I think it’s a perfect opportunity, before they decide to go elsewhere,” Martin said.

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