Energy

New Brunswick and Maine to move forward on energy co-operation (07/06/26)

NB 835

June 26, 2007

CHARLOTTETOWN, P.E.I. (CNB) - A new report shows there is much potential for Maine and New Brunswick to reap benefits in exploring energy-based projects together.

While attending the 31^st Conference of New England Governors and Eastern Canadian Premiers, New Brunswick Premier Shawn Graham and Maine Governor John Baldacci met to discuss the findings from the Phase 1 report on the Memorandum of Understanding between the Province of New Brunswick and the State of Maine to Enhance the Mutual Benefits of the Maine/New Brunswick Electrical Interconnections (MOU).

In the MOU, the governments of Maine and New Brunswick had agreed to explore opportunities for mutual benefits from their electrical interconnection by jointly undertaking the following tasks:

1. Study the feasibility of expanding generation capacity and transmission infrastructure to increase electrical flows across borders;


2. Identify processes and systems to provide transparency and efficiency in Maine and New Brunswick markets;


3. Study the feasibility of developing common market rules that could be applied in Maine and New Brunswick;


4. Explore the potential benefits and technical and legal impediments to the common provisioning of control area services (including balancing, dispatch and reserve sharing);


5. Explore the tariff and governance structures required for a regional transmission organization for Maine and New Brunswick; and


6. Examine the opportunities for compatible greenhouse gas emissions reduction regimes in the electricity sector.

"The energy sector is a critical part of our self-sufficiency agenda, " Graham said. "The work of the MOU task force will assist us in identifying the opportunities and the challenges to increasing our electricity exports to Maine and the rest of New England, and I thank the joint representatives for the fine work and look forward to receiving the Phase II report in the fall."

"This report confirms what Premier Graham and I thought when we began this process," Baldacci said. "Maine and New Brunswick have much to gain from closer co-operation, and while there will be challenges, none of them are insurmountable."

The Phase 1 report was recently submitted to the governor and premier and provided an overview of the priorities, an assessment of the possibilities for further success, and an identification of common principles to guide additional work and any future implementation.

Based on the work completed in Phase I, the joint representatives concluded that there may be significant economic and environmental benefits to closer co-ordination between Maine and New Brunswick in the production and transmission of electricity. The Phase II report, which will be completed by the fall of 2007, will see a full assessment of the feasibility of any particular approach and a more instructive analysis of the relative benefits and costs of each approach.

As a first step, the joint representatives recommended that Task 1 - studying the feasibility of expanding generation capacity and transmission infrastructure to increase electrical flows - should be give the highest priority, since a positive outcome on this issue is likely to provide the most significant benefits to the citizens of Maine and New Brunswick.

07/06/26

EDITOR'S NOTE: An executive summary of the report is attached. MEDIA CONTACTS: Marie-Andrée Bolduc, Office of Premier Graham, 506-453-2144; David Farmer, Office of Governor Baldacci, 207-557-5968.

NEW BRUNSWICK/MAINE MOU - PHASE 1 REPORT

I. EXECUTIVE SUMMARY

A. Background

By way of a Memorandum of Understanding (MOU) between the Governor of the State of Maine and the Premier of the Province of New Brunswick, the governments of Maine and New Brunswick have agreed to explore opportunities for mutual benefits from their electrical interconnection by jointly undertaking the following tasks:

1. Study the feasibility of expanding generation capacity and transmission infrastructure to increase electrical flows across borders;

2. Identify processes and systems to provide transparency and efficiency in Maine and New Brunswick markets;

3. Study the feasibility of developing common market rules that could be applied in Maine and New Brunswick;

4. Explore the potential benefits and technical and legal impediments to the common provisioning of control area services (including balancing, dispatch and reserve sharing);

5. Explore the tariff and governance structures required for a regional transmission organization for Maine and New Brunswick; and

6. Examine the opportunities for compatible greenhouse gas emissions reduction regimes in the electricity sector.

The MOU provides for a two phase process to complete these tasks. Phase I consists of reviewing the tasks, assessing priorities and possibilities, and identifying common principles to guide future work and implementation. Upon completion of Phase I and agreement on the principles, the governments would proceed to Phase II which will be guided by the principles and will include a detailed assessment of all tasks.

The MOU also provides that Maine and New Brunswick would appoint one person from each government to serve as each jurisdiction's point of contact (the Joint Representatives). The Joint Representatives submit this Phase I Report which provides a set of principles to guide future work, a prioritization of the tasks set forth in the MOU, and a status report on each task. The Joint Representatives respectfully recommend that, based on progress made in addressing the MOU tasks during Phase I and the potential for mutual benefits from further development of these items, the MOU proceed to Phase II.

B. Principles

The following principles will govern the remainder of the MOU:

1. Opportunities should be explored for the production of electricity in New Brunswick and Maine, with particular emphasis on production that is efficient, uses renewable resources, or otherwise helps address climate change and other environmental issues.

2. New Brunswick and Maine should explore all reasonable opportunities to take advantage of the weather and production diversity of their two systems, including but not limited to seeking opportunities to share reserves, increase transfer capability between the two systems, and harmonize dispatch and other system elements to achieve greater efficiencies.

3. New Brunswick and Maine should eliminate barriers to trade with each other and assist one another in expanding trade with bordering regions, including other Atlantic provinces and New England states, in ways that provide mutual economic benefits. In particular, New Brunswick and Maine should explore ways, consistent with the interests of their respective consumers, to stimulate the development of appropriate new generation within their territories, and to facilitate the development of transmission pathways for electricity from new and existing generation to broader markets.

4. New Brunswick and Maine should work to find creative ways to ensure that beneficial generation and transmission projects are undertaken within their regions, and that the benefits and burdens of these projects are fairly apportioned.

5. New Brunswick and Maine should explore market, tariff, governance and related institutional changes to facilitate development of generation and transmission projects that yield overall net benefits to the two regions, as well as to the broader Atlantic Canada and northeast United States regions.

C. Task 1 - Explore Development and Delivery of Low Carbon and Renewable Resources

During the initial phase of the MOU process, participants focused on prioritizing the tasks set out in the MOU. The participants concluded that Task 1 - studying the feasibility of expanding generation capacity and transmission infrastructure to increase electrical flows - should be given the highest priority since a positive outcome on this issue is likely to provide the most significant benefits to citizens of Maine and New Brunswick. Consistent with the principles to focus on clean resources and export opportunities, success on Task 1 issues could also provide benefits to the broader region in terms of (1) meeting demand for electricity and (2) achieving environmental goals to reduce carbon emissions and increase use of renewable resources.

New Brunswick and Maine sit at the edge of the Boston-Washington D.C. megalopolis, a region of intense economic activity and corresponding demand for energy. Looking forward, demand will be particularly strong for renewable and low carbon resources. All states in New England have joined the Regional Greenhouse Gas Initiative (RGGI), as have New York, New Jersey, Delaware and Maryland. RGGI will cap CO2 emissions from power plants at current levels in 2009 and then ratchet down emissions by 10% beginning in 2015. New England states also have Renewable Portfolio Requirements (RPS) that require specified amounts of renewable supply; in most states these requirements increase over time.

At the same time demand for low carbon and renewable power is growing, it is increasingly more difficult and expensive to site new facilities in the Boston-Washington region, and the availability of certain types of renewable resources, e.g. hydro, is particularly limited. New Brunswick and Maine, as well as the other Atlantic provinces, appear uniquely positioned for new resource development to supply these markets due to our regional advantages in terms of: (1) resource availability; (2) siting; and (3) cost.

There are several thousand megawatts of new renewable and low carbon resources potentially available in Maine and Atlantic Canada:

Development of these resources is critical to meet growing demand in the region, particularly demand for renewable and low carbon power in southern New England. Development also presents significant financial opportunities for the Atlantic Canada and Maine region.

Solutions cannot be achieved, however, nor opportunities realized, without sufficient transmission between the regions, much of which would be sited in Maine. Because new transmission would require a substantial financial commitment, raise local environmental and land-use concerns, and potentially erode or eliminate energy cost savings now realized by consumers within constrained market zones, creative solutions that provide a path from supply to demand while also allowing the benefits and burdens of new supply and transmission to be equitably shared must be explored

Based on the work completed in Phase I, the Joint Representatives conclude that there may be significant economic and environmental benefits to closer coordination between Maine and New Brunswick in the production and transmission of electricity. A full assessment of the feasibility of any particular approach, and a more instructive analysis of the relative benefits and costs of each approach, will require the additional inquiry anticipated in the Phase II report. Nevertheless, the preliminary work accomplished in Phase I suggests that, while the most effective and practical structure of any new arrangements between Maine and New Brunswick remains to be determined, the potential for benefits is clear.

07/06/26

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