Last week, the federal government formally announced it was rejecting a New Brunswick government request that N.B. Power be allowed to operate Belledune until 2040, 10 years past a national deadline forbidding the generation of electricity using coal. 

It's a decision the utility has said will cost it up to $1.2 billion in financing and new energy expenses, and last week Premier Blaine Higgs said that could force the utility to look for up to $280 million a year more from its in-province customers to maintain service.

"Without Belledune, we could have electricity rates that go up 15 or 20 per cent," said Higgs Friday.

• No extension past 2030 for Belledune coal-fired power plant, Ottawa says
• Analysis: Belledune generating station focus of political jousting in N.B.

Part of that enormous price tag is linked to unretired debt from the original construction of Belledune.

That debt was supposed to be eliminated prior to 2030, but won't be because of an accounting change the utility made several years ago under then-CEO Gaëtan Thomas.

Former N.B. Power CEO Gaëtan Thomas announced the utility made a $12-million profit in the 2016 fiscal year. It had been an $8-million loss until the utility made a controversial accounting change to slow down the pace at which it retired the debt on two plants, including Belledune. (CBC)

Plant initially on schedule to retire debt by 2028

Belledune opened in December 1993 after several years of construction, at a final cost of $1.17 billion.

That expense was to be depreciated, or fully settled, over 35 years and was on schedule to be retired in 2028, until the utility suddenly changed course in 2016.

With only 12 years to go until Belledune was fully paid off, the utility conducted an assessment of the plant's physical condition, determined it could operate until December 2040, and added 12 more years to its accounting life and depreciation retirement schedule.  

• Poor planning at root of failed N.B. Power debt strategy, says expert

The change at Belledune, and a similar one made at Saint John's Coleson Cove oil-fired generating  station, instantly saved N.B. Power $19.8 million per year in finance charges on the two plants at a time the utility's finances were struggling.   

In the 2016 fiscal year the accounting manoeuver suddenly turned what was going to be an $8-million loss at the utility into a profit. That allowed Thomas to announce $12 million in net earnings for the year.

But it also pushed Belledune's debt retirement from 2028 to 2040, a move critics warned at the time would saddle the utility with a steep bill if Belledune was forced to close in 2030.

U.S.-based utility expert Robert Knecht argued at N.B. Power rate hearings held by the Energy and Utilities Board in 2017 that slowing down depreciation at both Belledune and Coleson Cove was a poor idea.

Knecht, who was hired by New Brunswick public intervener Heather Black to evaluate N.B. Power's budget numbers, said that given federal government plans announced in late 2016 to impose carbon taxes and phase out coal, the utility could not bank on either generating station surviving until 2040.

"Given the large uncertainties associated with the recently adopted policy framework, I recommend that the proposed change in depreciation lives be deferred until such time as the economic and legal implications of the new framework for the long-term viability of these facilities is understood," Knecht said in his written evidence at the hearing.

N.B. Power claims closing the thermal generating station in Belledune in 2030, 10 years earlier than it had hoped, will cost it up to $1.2 billion. (Jacques Poitras/CBC News file photo)

Former senior N.B. Power executive Bill Marshall agreed with Knecht, and showed up at a public hearing sponsored by the EUB as part of those hearings to say so.

"I think that the amount of uncertainty there is around the carbon future outgoing, this is not the time to change the lives of those power plants," said Marshall.  

At the time of the accounting change, N.B. Power still had $440 million tied up in Belledune.

Instead of eliminating that by 2028, the new plan was to shave the amount down to $200 million by 2028 and use the following dozen years to retire the rest.

Stretching Belledune's accounting life cut depreciation expenses and boosted the utility's bottom line in the short term, but if Ottawa stuck to its 2030 deadline on using coal the change promised a big bill for unretired debt at the plant down the road.

EUB board member Michael Costello was baffled by the move.

"Extending the life of a coal-fired facility, does it just not strike you as kind of odd in this day and age with what we are heading into," asked Costello.  

N.B. Power argued the move met accounting standards and was appropriate given there was a chance it might be able to operate Belledune until 2040 if it could secure a so-called equivalency agreement.

The utility was hoping Ottawa would allow it to reduce Belledune's annual output of emissions in exchange for spreading them over a longer period of time. It told the 2017 hearing that until it received a firm rejection, it would account for Belledune as being viable until 2040.

"So given that we don't know the what, when or how, this is the best information that we have," N.B. Power senior vice-president Lori Clark said.

The EUB eventually approved the accounting change and, since the 2016 fiscal year, N.B. Power has saved itself $91.7 million in depreciation charges by slowing the retirement of Belledune's debt. But those amounts didn't go away. They are still owed and now due much sooner than the utility planned on.

Green Party Leader David Coon said the legislature's public accounts committee holds some responsibility for keeping the utility in check, but the Energy Act should be amended to give the Energy and Utilities Board the authority to approve the utility's 10-year plans and not just rate increases.

"Without that, you know, they've got one arm tied behind their back and you're not getting the accountability necessary," said Coon.

Adair-Macpherson questioned the business sense of keeping New Brunswick's electricity rates some of the lowest in Atlantic Canada.

Green Party Leader David Coon, Liberal Leader Roger Melanson, and People's Alliance Leader Kris Austin responded to the auditor general's report on this week's political panel. (CBC)

"While maintaining a consistently low annual rate may be advantageous to NB Power consumers, it is likely contributing to its failure to meet the debt to equity target and ever-increasing debt level," said Adair-Macpherson.

Coon said the province should look at amending the Energy Act to deal with industry rates.

"Right now [the act allows] NB Power … to deliver power for less than their cost to heavy industry. So they're losing on revenues there," said Coon.

People's Alliance Leader Kris Austin said he believes the utility would benefit from narrowing its focus to providing electricity to customers.

"I've seen lately that NB Power seems to be branching out into other areas, such as, you know, investment in research and development, which I understand there has to be a certain element of," said Austin.

"You go back to, you know, things like Joi Scientific, where you see money literally just, you know, thrown down the drain here for these whimsical ideas."

The Progressive Conservatives were unable to provide someone to take part in the panel this week.

- David Campbell

Another rationale was that while NB Power projects aren't eligible for federal government funding, ventures under the NBESC could be. 

In recent years, NB Power has looked at business deals including an expansion of the Grand Falls hydro dam to sell electricity into the U.S. and new wind farms that would feed Emera's Atlantic Link transmission cable to New England.

Those projects did not go ahead, but Campbell said the corporation would have been the vehicle for any such deals.

So far, the corporation's only transaction was $10 million in research funding for the small modular reactors, or SMRs. The Liberals gave the corporation that amount in June 2018, and the corporation in turn invested the money in ARC Nuclear and Moltex Energy.

NBESC Chair David Campbell said the corporation was supposed to look at energy projects that wouldn't impact NB Power ratepayers. (CBC)

Campbell, who continues to chair the board as an unpaid volunteer, said the corporation produced an annual report that was submitted to Auditor General Kim MacPherson

MacPherson said the audit is still underway, and Campbell said he wasn't sure whether he could release the annual report to CBC News.

But he said other than proprietary commercial information, the corporation should be transparent.

"It should be wide open and public, and then if we get asked how that money is being spent, we should be able to account for that, for all that," he said. "It's public money so it should be very accountable."

There is also an "affiliate code of conduct" in place so that any time NB Power employees devote to the corporation is billed back to the NBESC so it doesn't affect ratepayers. That arrangement is subject to EUB review, Campbell said.

"To a certain extent, there are some accountability measures," Arseneault said.

Future uncertain

The corporation has been largely inactive in the last year pending the Higgs government's decision on its future.

In a recent interview with Future Power Technology magazine, Moltex's Canadian CEO Rory O'Sullivan said the company would be looking for $50 million to $70 million in government and private funding in the next three years. 

On a CBC political panel last month, Energy Minister Mike Holland floated the idea of overhauling the corporation to address concerns that it doesn't have to answer to the EUB for its funding decisions.

"There will be no initiative that goes forward related to anything under the department that I have under the government of Premier Higgs that's going to circumvent anything," he said.

Campbell said the Higgs government has effectively frozen the corporation's activities since taking power in November 2018. (CBC)

"I have no problem ensuring there are checks and balances." He offered to work with Coon if Coon wants to introduce legislation during the current session of the legislature.

"If there is no safeguard or there is an end run that could be done around that, let's change the makeup of that to make sure there's no ability to do an end run," Holland said.

Coon said there's been no movement on that since then.

Holland said in a statement Thursday that the corporation is "not actively pursuing new projects" and that the government is "looking at options" for its future.

Campbell said despite being the corporation being put on hold by the PCs, "we still have an actual organization," and the board had a meeting scheduled in the coming week, its first in more than a year. 

The high-profile chief economist at the Gallant government's Jobs Board is moving to a new position.

David Campbell, an economic development consultant the Liberals recruited in 2015 to help their job-creation efforts, will be the chair of the New Brunswick Energy Solutions Corporation.

The corporation, a joint venture between the provincial government and NB Power, will look for new customers for electricity generated in the province.

"I am excited to take on this important role and by the potential boost to export revenue from this important sector," Campbell said in a statement.

The province is creating the new company because it will be eligible for federal infrastructure funding that NB Power doesn't quality for as a provincial utility.

Watching over Grand Falls dam

The corporation would oversee the proposed expansion of NB Power's hydroelectric generating station in Grand Falls, a project that aims to market its non-fossil-fuel electricity in New England.

Campbell worked in economic development in the Frank McKenna government and started his own consulting firm in 2008. His blog critiquing government job creation efforts turned him into a frequent media commentator on economic development.

Premier Brian Gallant said when Campbell was recruited to the New Brunswick Jobs Board in 2015 that the secretariat and a new Crown corporation, Opportunities New Brunswick, would work together to help the province "better co-ordinate" job creation efforts.

Premier Blaine Higgs and his ministers traded accusations and counter-accusations with Liberal MLAs over the federal government's decision not to give the Belledune plant a 10-year extension on burning coal.

That decision means the province and N.B. Power have just more than eight years to find another source of electricity to make up for the power generated at Belledune.

But rather than debate those alternatives, the Liberal opposition made accusations that Higgs hadn't even asked Ottawa for the extension.

"There was never any official request in writing to the federal government to extend, by 10 years, the operation of Belledune, using coal," leader Roger Melanson said in question period.

"I want to see it. I do not believe what this government is saying. I want to see it on paper." 

Opposition Leader Roger Melanson said he no longer believes the Higgs government ever asked Ottawa for an extension of the Belledune plant's life span. (CBC)

In fact, in June the province published draft regulations online on capping greenhouse gas emissions from electricity generation. It said publicly those rules "will form the basis of the province's equivalency discussions with the federal government."

Those proposals, which would have spread the same cumulative volume of emissions out to 2040, were also reported on at the time by media organizations.

"The leader of the Opposition may think he's got a revelation here, but it really isn't," Higgs said. "It may be in the [newspaper], so we could cut it out and send it to you, or send it online." 

The premier also took his own share of partisan shots at the opposition.

"The Liberal philosophy is always coming at it from the other end: how much money do you have to spend, regardless of how many projects you have that make sense to spend it on?" he said.

  'We could cut it out and send it to you,' Premier Blaine Higgs said to Melanson, suggesting the evidence Melanson was looking for had been printed in local newspapers. (Ed Hunter/CBC)

The contentious exchanges belied the general consensus between the two parties on the broad brushstrokes of climate policy. Both the PCs and Liberals:

• Have accepted that Belledune can't burn coal past 2030.

• Agree on an emissions reductions target of 10.7 megatonnes by the same year.

• Support the "Atlantic Loop" concept that would see a five-province regional power grid share more non-emitting hydroelectric power.

• Have instituted carbon pricing to create incentives to reduce fossil fuel consumption.

• Have subsidized small modular nuclear reactors as another alternative to fossil-fuel based electricity generation. 

Higgs acknowledged the policy congruence but added: "Whether you can ever harness those similarities in a meaningful way is the debate."

On Friday it appeared they could not.

The Liberals also accused the government of concealing when they knew Belledune would not get an extension, an allegation that was harder for the premier to refute. 

The premier told reporters that for months, Ottawa "absolutely told us they're not interested in talking about anything to do with an extension on Belledune" and that a final, definitive "No" came three or four weeks ago.

"They just continued not to even address our suggestions or proposals that we've had around an equivalency agreement. … The 'No' has been consistent from Ottawa."

The premier wasn't able to explain why Environment and Climate Change Minister Gary Crossman was still suggesting a deal was possible as late as Tuesday, if the province has known for weeks Ottawa wouldn't agree to the extension. (CBC)

But the premier couldn't explain in that case why Environment and Climate Change Minister Gary Crossman wouldn't say that earlier this week.

Crossman said Tuesday he met Nov. 19 with his federal counterpart Steven Guilbeault and "did ask about flexibility, and we're looking forward to the next meeting coming up, hopefully in the near future."

Higgs said he wasn't sure why Crossman didn't reveal what the province already knew at that point.

"You'll have to ask him that because I don't know about the conversation on Tuesday. I know Ottawa has never entertained our equivalency agreement discussions or negotiations."

Confirmation of the Belledune decision came Wednesday in response to a question to Guilbeault's office from CBC News.

Higgs said without Belledune operating, N.B. Power could be forced to raise power rates for consumers by 15 or 20 per cent

But he also said that the Atlantic Loop could provide enough electricity to make up for the plant's lost generation.

The loop would link huge power dams in Quebec and Labrador with electricity grids in New Brunswick, Nova Scotia and Prince Edward Island, allowing emissions-free electricity to move back and forth between five provinces to meet demand.

In a letter to Prime Minister Justin Trudeau on Oct. 25, Higgs asked the federal government for $5 billion to help New Brunswick and other provinces upgrade transmission links.

On Friday, the Liberals demanded that Higgs commit at least some of that money to help the economy in the Restigouche-Chaleur region, where the closure of the Belledune plant would cost about 100 direct N.B. Power jobs and even more indirect positions.

The Opposition Liberals are demanding Higgs put some money into the Chaleur region to boost the economy once the Belledune power station closes. (Jacques Poitras/CBC)

Higgs said his government is committed to helping the economy in the area, but he said past governments have made costly mistakes by forcing N.B. Power to undertake expensive projects when a business case didn't exist.

"We may very well be able to invest it, hopefully in the region, for future generation, but it needs to be something based on decision-making criteria that say this makes sense for the taxpayers and the region," he said.

Green Party Leader David Coon said the Chaleur region would be an ideal setting for new clean energy generation, including solar and wind power.

"It's a fantastic opportunity," he said. "We just need the imagination to seize it and the resources to pursue it.".

After the sharp PC-Liberal partisan exchanges Friday, Coon pointed out Nova Scotia Premier Tim Houston took "a very different approach" in early October by convening a meeting of all provincial party leaders and federal MPs to discuss the Atlantic Loop.

"It really lands, to me, at the feet of the premier for not inviting everyone in to the circle to let us know what's been going on." 

CBC's Journalistic Standards and Practices

Mike Holland says the federal government's 2030 deadline for phasing out coal doesn't give the government enough time to put in place alternatives such as small nuclear reactors.

"Give me runway so we can put these things together," Holland said. "Give me some time and we'll put these renewables and non-emitters in place."

Even some of those options remain uncertain.

The province officially submitted draft regulations to Ottawa recently as the next step in negotiating a potential deal to continue burning coal at NB Power's Belledune generating station until 2040.

The proposal would see the province use Belledune only during winter months. The province says that would allow the plant to emit the same total, cumulative volume of greenhouse gases through 2040 as it would operating full-time until 2030.

The Government of New Brunswick has asked that Ottawa allow NB Power to keep burning coal at its Belledune generating station until 2040. (NB Power)

There just isn't enough time to come up with new sources of power by 2030, Holland said.

"The commitment is there to meet that ultimate goal, but the trajectory needs to come in line with initiatives that we've already completed or are in the middle of.

"We're confident we can meet the target but we need that runway. We need runway."

Without a so-called equivalency agreement, NB Power would have to build a new natural gas-fired generating station, a $1.5 billion expense that would have to be passed on to ratepayers.

While natural gas is cleaner than coal, it still emits greenhouse gases, meaning a new plant would be subject to carbon pricing and other climate policies. 

Anticipating new federal generating standards

Environmental researcher Louise Comeau says she expects new federal standards soon on electricity generation that would aim to "drive fossil fuels out of the electricity system" by 2035.

The Belledune dilemma isn't new, but every day that goes by without a solution, or an agreement with Ottawa, is a day closer to the plant's shutdown.

And the timeline is even more pressing in light of new, even more aggressive greenhouse gas emissions goals from the federal government.

They would require New Brunswick to get emissions from electricity generation down to a cumulative 54.2 megatonnes between 2021 to 2040.

Previously, Ottawa's modelling would have allowed a maximum of 63 megatonnes during those two decades.

The old requirement worked out to 3.15 megatonnes per year. In 2019, the most recent year with records available, emissions from electricity generation in New Brunswick were 3.3 megatonnes, down from 3.7 in 2019.

Under the regulations proposed to Ottawa, the province would cap the emissions at an average of 2.9 megatonnes a year from now until 2025, and then at annual averages of 2.8, 2.4 and 2.3 megatonnes in each five-year period after that.

Another option for making up lost generation at Belledune is small modular nuclear reactors.

But NB Power doesn't expect them to be generating as much electricity as Belledune until the mid-2030s, says Brad Coady, the executive director of business development and strategic planning at the utility.

And it's not clear there'll be a viable business case for the reactors.

"History doesn't tell us that that's how it's going to go, necessarily," says Comeau, citing the huge debt NB Power accumulated from the Point Lepreau generating station.

"We need something that's affordable and reliable, and I'm trying to keep an open mind, but I'm not convinced that's going to be the saviour for them." 

Louise Comeau a climate-policy researcher at the University of New Brunswick, says she expects federal regulations will drive fossil fuels out of the electricity system by 2035. (CBC)

In fact, so far NB Power's projections don't rely on any electricity from SMRs.

It is expecting to get more of the output from the Bayside natural gas generation plant in Saint John, which it bought two years ago.

Bayside will reach the end of its natural design life in 2026 unless NB Power spends $144 million to extend it into 2038, according to the utility's most recent integrated resource plan. 

That's also factored into the projections, as is the time the plant would be down for its upgrade.

Another potential substitute is hydroelectric power that New Brunswick will import from Hydro-Quebec under an agreement signed last year.

The utility says in its 2020 integrated resource plan that non-emitting solar and wind power present "an interesting challenge" because it relies on weather, making it "varied and largely unpredictable."

In 2017 the province's three largest wind farms operated at less than one-third capacity during more than half the year, the report says.

Because conventional generating stations can't be easily turned on and off based on whether it's sunny or windy, "this highlights the challenges of balancing intermittent resources such as wind or solar," it says. 

Holland says reducing demand for electricity is another potential piece of the puzzle.

The province has already looked at and discarded two other ideas to convert Belledune.

One would have used a new hydrogen technology, but it was revealed to be flawed. A second would have seen the plant burn byproduct gas from an iron plant that would have been the biggest greenhouse gas emitter in the province.

Canada's latest emissions-reductions goal is 40 to 45 per cent below 2005 levels by 2030.

New Brunswick emitted 12 megatonnes of greenhouse gases in 2019, which was 38 percent below 2005 levels, exceeding reductions called for in the Paris climate agreement.

But the province's official reduction target in its climate change law is to reach 10.7 megatonnes by 2030. That's 47 per cent below 2005 levels, which would surpass the new federal target.

Green Party Leader David Coon said the legislature's public accounts committee holds some responsibility for keeping the utility in check, but the Energy Act should be amended to give the Energy and Utilities Board the authority to approve the utility's 10-year plans and not just rate increases.

"Without that, you know, they've got one arm tied behind their back and you're not getting the accountability necessary," said Coon.

Adair-Macpherson questioned the business sense of keeping New Brunswick's electricity rates some of the lowest in Atlantic Canada.

Green Party Leader David Coon, Liberal Leader Roger Melanson, and People's Alliance Leader Kris Austin responded to the auditor general's report on this week's political panel. (CBC)

"While maintaining a consistently low annual rate may be advantageous to NB Power consumers, it is likely contributing to its failure to meet the debt to equity target and ever-increasing debt level," said Adair-Macpherson.

Coon said the province should look at amending the Energy Act to deal with industry rates.

"Right now [the act allows] NB Power … to deliver power for less than their cost to heavy industry. So they're losing on revenues there," said Coon.

People's Alliance Leader Kris Austin said he believes the utility would benefit from narrowing its focus to providing electricity to customers.

"I've seen lately that NB Power seems to be branching out into other areas, such as, you know, investment in research and development, which I understand there has to be a certain element of," said Austin.

"You go back to, you know, things like Joi Scientific, where you see money literally just, you know, thrown down the drain here for these whimsical ideas."

The Progressive Conservatives were unable to provide someone to take part in the panel this week.