Office of the Premier

Premier Shawn Graham's letter to premiers Williams and Dexter (09/12/04)

NB 1940

Dec. 4, 2009

EDITOR'S NOTE: The following letter to Newfoundland and Labrador Premier Danny Williams, and Nova Scotia Premier Darrell Dexter, was sent today by Premier Shawn Graham.

Dear Premiers Williams and Dexter:

Thank you for your letter of December 2, 2009, regarding the potential for future energy development within the Atlantic region.

I share with you the desire to maximize Atlantic Canada's potential as a developer and supplier of clean, renewable energy for domestic and export markets. Our government is working to maximize New Brunswick's advantage as the energy hub of northeastern North America and the development of new energy projects across Atlantic Canada is a key element in fulfilling this vision.

New Brunswick is now, and will continue to be, an active partner in promoting the energy potential of Atlantic Canada. Our recent Memorandum of Understanding (MOU) with the Government of Québec does nothing to change that.

Section 3.1(b)(iv) of the MOU explicitly states that any changes to our regulatory structure resulting from agreement with Québec will "expressly contemplate open access to the transmission network in the Province of New Brunswick." The MOU also states in section 2.5 that transmission and distribution rates will continue to be regulated by the New Brunswick Energy and Utilities Board (EUB), a body comprised of New Brunswick citizens and experts in utility regulation, given regulatory powers by the Legislative Assembly of New Brunswick.

Therefore, rules are now in place that set conditions by which electricity can be moved through New Brunswick to export markets, either through use of existing transmission lines or construction of new capacity.

Under the Electricity Act of New Brunswick, any owner of a transmission system must provide market participants with open and non-discriminatory access to its transmission system. The terms, conditions and charges for this access are specified in the open access transmission tariff that was originally approved by the New Brunswick Public Utilities Board in 2003 and continues today under the authority of the EUB. This New Brunswick open access transmission tariff (OATT) is consistent with the industry standards for open access transmission in North America and sets out the obligations for both the provider of service and the transmission customer. All service is to be provided under the tariff and there is no provision for the owner of the transmission system to treat any customer in a preferential manner. In fact, it would be against the law to do so.

Entities in both Nova Scotia and Newfoundland and Labrador are transmission customers in New Brunswick and are taking or pursuing transmission service under the tariff. They have been, and are continuing to be, treated in a fair and non-discriminatory manner.

Please allow me to respond directly to the specific requests stated in your letter:

1. finalize an agreement, by February 2010, prior to signing of the definitive agreements between New Brunswick and Hydro-Québec, subject to normal environmental assessment and permitting, to construct a new interprovincial transmission line through New Brunswick to the Maine/NB border, separate from the existing NB grid.

New Brunswick has always been open to discussions on the potential for constructing additional transmission capacity to meet the projected needs of Nova Scotia and Newfoundland and Labrador. This will not change. As I have stated above, there are clear rules and processes for developing additional transmission capacity for export. If these rules and procedures are followed, additional transmission capacity can be constructed within New Brunswick to meet your future needs.

2. ensure that existing open access applications will be handled by NBSO under existing NB OATT rules until the process is complete and service agreements have been offered to Nalcor Energy or any other Atlantic Canadian companies that may seek such access before the signing of the definitive agreements between New Brunswick and Hydro Quebec next Spring (i.e., grandfathered and handled by NBSO under current rules).

It is a key principle of the EUB that all parties seeking access to use our transmission system be treated in a fair and non-discriminatory way. This request by Nova Scotia and Newfoundland and Labrador would require that preferential treatment be given to specific companies in contravention of the law. This could also jeopardize our standing under U.S. Federal Energy Regulatory Commission (FERC) rules as an exporter of electricity to the United States. I am sure you will agree that this would be contrary to all of our interests.

In accordance with these rules, New Brunswick held an auction in 2008 for excess capacity on the new transmission line connecting New Brunswick and Maine. I note that Nalcor Energy did not bid for capacity at that time. Should Nalcor or any other company require transmission capacity through New Brunswick, long-term firm reservations for transmission capacity can be secured via a request for such capacity or through an open season bid process.

In fact, it is my understanding that Nalcor Energy has been working for some time with the New Brunswick System Operator on a system impact study for a transmission route via New Brunswick. I encourage you to continue with this work. This process, as I have indicated, is compliant with the OATT rules and will remain under the New Brunswick Energy and Utilities Board's oversight, now and into the future.

I believe that the process for negotiating transmission lines must be open and transparent. All parties must have a clear understanding of the rules being applied, with assurances that these rules are applied fairly to all. For this reason, New Brunswick must ask that all parties, including the governments of Nova Scotia and Newfoundland and Labrador, respect these rules and be prepared to make application in good faith within the process.

I understand that you are advancing these requests to promote the interests of your respective provinces. I share with you the desire to build a stronger, more prosperous and self-sufficient Atlantic Canada. I am confident this can be done if we work together and respect the rules designed to ensure fairness for all.

Yours truly,

Shawn Graham

c.c.: Honourable Robert Ghiz, Premier of Prince Edward Island