MILLTOWN – Halifax finance whiz Kevin Mullen is puzzled by the math behind NB Power’s decision to spend $36 million dismantling Canada’s oldest operating hydro-electric dam.
Mullen has a vested interest – and an inside scoop. He got a look at the books after expressing interest in taking over the 140-year-old Milltown Generating Station in St. Stephen on the St. Croix River bordering Calais, Maine, with a plan to refurbish the plant and sell the green electricity it generates back to NB Power.
The Crown utility rebuffed Mullen’s bid, along with another offer from a Quebec outfit that specializes in rehabilitating aging hydro-electric power plants. Instead, NB Power is proceeding with a plan to decommission and dismantle the Milltown facility and dam, and draw the lost power from the increasingly unreliable Point Lepreau Nuclear Generating Station.
NB Power’s explanation is that it’s mandated to choose the lowest-cost option to protect its customers from rate increases. The utility hiked rates by 1.8 per cent price in March. Mullen says the conclusion his offer isn’t more affordable doesn’t add-up.
“We did the financial model,” he tells the Courier. “The bottom line is if NB Power hands it over for us to do the refurbishment, they’re going to save the cost of decommissioning it and we’d sell them the power at roughly the same cost as their average cost of power.”
The other bidder, Quebec-based EnerGen Hydroelectric Production Ltd., dropped its partnership proposal after getting a cool reception from NB Power. The company’s chief engineer, Jean-François St-Roch, declined to elaborate.
Each of the bidders planned to spruce up the plant and run it for decades more for far less than the $50 million rehabilitation price tag NB Power calculated before it announced the abrupt decommission decision in June 2019. The estimate was tens of millions more than the utility originally budgeted.
St. Stephen Mayor Allan MacEachern, who remains an outspoken critic of the decommissioning plan, says the town was blindsided.
“Back in late 2018, I was concerned about the effect new orange turbines would have on the heritage look,” he recalls. “NB Power came and said they could put shrouds over them. The next thing you know they were talking about tearing it all out.”
MacEachern was in regular contact with both EnerGen and Mullen’s GreenQuest Power Inc. The companies expressed interest in bidding after learning of the decommissioning. Each planned to funnel money into the community with beautification efforts that could draw more tourists. Mullen also floated the possibility of the town generating jobs by wooing a lucrative, power-hungry data centre, attracted by the nearby source of reliable power.
MacEachern says the decommissioning proposal doesn’t consider the impact beyond NB Power. The likelihood of cost overruns for decommissioning, unexpected environmental clean-up costs, and potential other expenses, such as U.S. Homeland Security concerns with the creation of a new path to slip across the border, make decommissioning a riskier and costlier bet, he says.
The environmental benefits, lauded by conservationists and the First Nation Peskotomuhkati in New Brunswick, are overstated, he adds. “They’re saying it will bring all the fish back to the river, but it’s not true. To fix the river, all of the dams would have to come out. You’re talking six dams.”
If restored to its original state, Milltown’s natural waterfalls could prevent many fish species from getting upstream to their ancestral spawning grounds. A so-called fish ladder, a structure that helps migrating fish pass, would need to be installed to replace one that already exists at the dam. Both bidders included plans for an improved fish ladder in their proposals.
Mullen says he decided to launch GreenQuest in early 2019 with his engineer brother in Saskatchewan after seeing opportunities to acquire aging hydro-electric dams and restore them at a much lower cost than utilities themselves could muster.
He says they researched the Milltown dam for months before approaching NB Power with an offer in May 2020.
“Taking the dam out causes more environmental damage than leaving it in according to the people we talked to,” says Mullen, who’s spent his career working as a finance executive consultant and finance VP for a range of companies. “It’s more of a liability to take it out considering you’re releasing toxins downstream that could poison it for a significant amount of time. Plus you’re removing the opportunity for improved fish passage. And you’re removing a source of funding for the future upkeep of the water quality.”
GreenQuest made a $1 offer for the plant, with an initial plan to spend $30 million on refurbishments, and set-up a sinking fund for the possibility of decommissioning decades down the road. The company ended up lowering the refurbishment estimate to $22 million, with plenty of money left over to spend on the community, says Mullen.
“We are very confident we could do an excellent job there and we would save New Brunswickers a fair amount of money,” he says. “Plus, we’d clean up the place. Beautification is a big part of what we want to do. And we’d improve the water quality, the fish passage, and provide some funding for the environmental issues of the Passamaquoddy in St. Stephen.”
GreenQuest was proposing to sell electricity to NB Power for less than eight cents a kilowatt hour, cheaper than the rate at NB Power’s much larger Mactaquac hydro-electric dam near Fredericton, Mullen says.
“As we learned, NB Power tells government their cost of energy is lower than that,” he says.
The figure NB Power provided for its energy generation cost was 3.5 cents a kilowatt hour. Mullen says, by his calculations, that number is far less the “levelized cost of energy.” LCOE, as it’s more commonly known, is a metric that measures lifetime costs of the asset divided by energy production. “That’s the real cost because it includes everything,” Mullen says. “If using anything other than that, you are rationalizing somehow.”
Mullen says he wrote New Brunswick’s auditor general, Kim Adair-MacPherson, to see if her analysis could shed light on the validity of NB Power’s financial conclusions.
Adair-MacPherson wrote a scathing report directed at the utility and its heavy debt load early this year. She’s since left to take on the same role in Nova Scotia and says the request from Mullen didn’t come across her desk.
“When we get letters and public concerns, they go on a list of potential topics that we might look into,” she says from her new post. “That one does not ring a bell. I’m not sure of it’s on the list. There’s usually more than the office can get to.”
NB Power spokesperson Marc Belliveau says the utility can’t disclose pricing details due to confidentiality clauses signed in relation to the discussions with GreenQuest and EnerGen.
“But we remain confident in the decisions we have taken on the project,” he says.
Both proposals were “examined closely” by NB Power’s team, he adds. “In the end, it was determined that power purchase agreements for both would have not been in the best interest of all NB ratepayers, in comparison to decommissioning and alternate replacement energy options.”
Milltown generates roughly 0.7 per cent of New Brunswick’s energy needs. Among the alternate energy options, in addition to Point Lepreau, are the possibility to purchase more wind power or get more nuclear energy from the addition of as-yet-unproven small modular reactors backed by government funding.
NB Power calculated that decommissioning would cost $14 million less than having a third party refurbish and operate the site – a difference that represents a roughly 1 per cent rate increase on power bills for all New Brunswickers.
GreenQuest and EnerGen weren’t asked to counter with cheaper proposals.
NB Power managers admitted to St. Stephen’s town council they’re not happy with the plan to shut the plant.
“This isn’t a decision we take lightly or take great pride in, quite frankly,” NB Power director of operations Lori Clark says at the end of a virtual presentation in late March that was broadcast on Facebook. “As a Crown utility and a regulated utility, we have to go to the regulator and defend our costs and ensure those costs are in the best interests of all New Brunswickers.”
NB Power understands the impact the decision is having on the local community, she adds. “I don’t want to leave you with the impression that we’re heartless.”
Coun. Marg Harding wondered if the potential need for added border security was considered. “When that headpond is gone from the river, on a good day, you could walk from my doorstep to Calais, Maine,” she says. “I don’t know if you have any concerns about that, but it works both ways.”
MacEachern speculated another $20 million could be needed for security. “It’s pretty clear where I stand on it. You haven’t convinced me,” he said as the presentation concluded. “I hate silos in government.”
NB Power is seeking approval on both sides of the border. Decommissioning and deconstruction was scheduled to start in the fall of 2020. But now it isn’t expected to begin before summer 2022, a timeline slowed in part by the COVID-19 pandemic.
Mullen says in early January N.B. Natural Resources and Energy Development Minister Mike Holland promised a three-way call with NB Power CEO Keith Cronkhite to review the numbers for the utility’s lower-cost options for electricity. “That call never happened,” he says.
Minister Holland declined the request for an interview. Chief Hugh Akagi of the Peskotomuhkati, also known as the Passamaquoddy Nation, also declined to comment.
Mullen isn’t read to bail. “We’re willing to keep trying. We’d really love to do this,” he says. “If we go and save them more than $30 million and we sell them power for less than they’re producing power at Mactaquac, isn’t that a good deal?”