Muskrat Falls and Bill 61 A Relapse of the Free Market Society

A Muskrat Falls Discussion Paper Volume 7 December 2012

Open Access

Where Does Newfoundland Stand on Free Markets?

Bill 61 View on Open Markets

Open Access Bill 61

A Complete Monopoly to Nalcor

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FERCs View on Open Markets

What Does the Federal Energy Regulatory Commission Say?

www.ferc.gov/legal/maj-ordreg/land-docs/rm95-8004.txt

Bill 61 precludes other utilities from selling Energy in Newfoundland. 1) Does this now preclude Nalcor from selling power in the US under the FERC reciprocity conditions under Regulation 888? 2) What are the implications for Gull Island? 3) What are the implications for Emera?
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NAFTAs View on Open Markets

Article 1502: Monopolies and State Enterprises

http://www.sice.oas.org/trade/ nafta/chap-15.asp

1. Nothing in this Agreement shall be construed to prevent a Party from designating a monopoly. 2. Where a Party intends to designate a monopoly and the designation may affect the interests of persons of another Party, the Party shall: (a) wherever possible, provide prior written notification to the other Party of the designation; and (b) endeavor to introduce at the time of the designation such conditions on the operation of the monopoly as will minimize or eliminate any nullification or impairment of benefits in the sense of Annex 2004 (Nullification and Impairment). 3. Each Party shall ensure, through regulatory control, administrative supervision or the application of other measures, that any privately owned monopoly that it designates and any government monopoly that it maintains or designates: (a) acts in a manner that is not inconsistent with the Party's obligations under this Agreement wherever such a monopoly exercises any regulatory, administrative or other governmental authority that the Party has delegated to it in connection with the monopoly good or service, such as the power to grant import or export licenses, approve commercial transactions or impose quotas, fees or other charges;

What Does NAFTA Say?

http://www.sice.oas.org/trade/ nafta/chap-15.asp

Article 1502: Monopolies and State Enterprises (contd)

(b) except to comply with any terms of its designation that are not inconsistent with subparagraph (c) or (d), acts solely in accordance with commercial considerations in its purchase or sale of the monopoly good or service in the relevant market, including with regard to price, quality, availability, marketability, transportation and other terms and conditions of purchase or sale; (c) provides non-discriminatory treatment to investments of investors, to goods and to service providers of another Party in its purchase or sale of the monopoly good or service in the relevant market; and (d) does not use its monopoly position to engage, either directly or indirectly, including through its dealings with its parent, its subsidiary or other enterprise with common ownership, in anticompetitive practices in a non-monopolized market in its territory that adversely affect an investment of an investor of another Party, including through the discriminatory provision of the monopoly good or service, cross subsidization or predatory conduct.

What Does NAFTA Say?

1. Considering the Government of Newfoundlands track history in the interpretation of NAFTA, have they considered if Bill 61 is in compliance with NAFTA? 2. Have they provided written notification as required in Clause 2 of Article 1502. 3. Have they even asked the question in preparing Bill 61?

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Organization for Economic Corporation and Development OECD

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What Does the OECD Do?

http://www.oecd.org/daf/co rporateaffairs/corporategove rnanceofstateownedenterprises/34803211. pdf

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OECD Guidance on State Owned Enterprises ?

http://www.oecd.org/daf/co rporateaffairs/corporategove rnanceofstateownedenterprises/34803211. pdf

Does Bill 61 meet the requirements of being in a OECD country? Can Emera as a publically traded company have involvement in a project and partner with a company which is in such contrast to the principals of the OECD?

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OECD View on Government Monopolies?

http://www.oecd.org/compe tition/abuseofdominanceand monopolisation/46452890.p df

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OECD View on Government Monopolies?

http://www.oecd.org/daf/co rporateaffairs/corporategove rnanceofstateownedenterprises/34803211. pdf

What is Nalcors View on their Compliance with OECD regulations resulting from Bill 61?

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OECD View on Government Monopolies?

http://www.oecd.org/daf/co rporateaffairs/corporategove rnanceofstateownedenterprises/34803211. pdf

Has Government Completed a Checklist to see if Bill 61 meets the recommended guidelines for the OECD?

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OECD Guidelines For Multi-National Enterprises

http://www.oecd.org/corpor ate/guidelinesformultination alenterprises/48004323.pdf

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World Trade Organization

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Article XVII of GATT 1994?

http://www.wto.org/english /tratop_e/statra_e/statrad.h tm

Has Government Completed a Checklist to see if Bill 61 meets the recommended guidelines for WTO?

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Electricity in WTO Law?

http://www.wto.org/english /res_e/publications_e/wtr10 _forum_e/wtr10_7may10_e. pdf

Is there an analogy to be made regarding the recent WTO ruling on Ontarios generation issues?
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The National Energy Board

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NEB Export License?

https://www.neb-one.gc.ca/lleng/livelink.exe/fetch/2000/90466/9 4151/544144/544232/560666/A1K2T9 __Letter_to_Nalcor_Energy_and_Elect ricity_Export_Permit_EPE338.pdf?nodeid=560667&vernum=0

The National Energy Board Has Granted a Permit for Nalcor to Export Energy (Non Lower Churchill). This is subject to several conditions:

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NEB Export License?

https://www.neb-one.gc.ca/lleng/livelink.exe/fetch/2000/90466/9 4151/544144/544232/560666/A1K2T9 __Letter_to_Nalcor_Energy_and_Elect ricity_Export_Permit_EPE338.pdf?nodeid=560667&vernum=0

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NEB Export License?

The National Energy Board Act is very clear as to requirements to obtain a permit to export electricity from Canada that the power must be made available to Canadians first

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NEB Export License?

What is the impact of Bill 61 on the National Energy Board Act How can Nalcor sell electricity into the United States at rates lower than it sells it to its own customers? Will Bill 61 potentially preclude the opportunity for Nalcor to get an export licence to sell Lower Churchill Power (whether it is Gull Island or Churchill Falls) How does the 50 year take or pay timeline impact the potential development of Gull Island. Please note that Nalcors existing export permits specifically exclude energy generated from the Lower Churchill. Is that their get out clause? Will they sell the expensive MF power to Newfoundlanders, but then export the cheap Bay DEspoir power? Is this now why the HVDC lines go to Granite Canal?
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Supporting Free Enterprise

Does Newfoundland Support its Business Community?

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Clause By Clause?

1. 2. 3.

Does this now mean that CB Mill, Refinery, Teck Mines etc. are not able to look at alternate sources of power. Can they not access the markets via the Maritime Link? When did government launch this idea? Was it only initated due to the Gordon Weil Commentary? What is the view of the industrial customers?

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Clause By Clause?

1.

Under the proposed Muskrat Falls expansion plan (CPW) there is energy which is purchased from CFLCo required to meet the island demand. This occurs beyond 2041. CFLCo must first sell this power to Newfoundland Hydro to wheel power onto the island. Why are consumers getting gouged at every opportunity? Why are we accepting this tax grab by the government?

2. 3. 4.

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92A

Is Bill 61 In Compliance with the Canadian Constitution

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Section 92A

By limiting exports is there even a potential Constitutional Challenge to Bill 61?

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Conclusions

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 Bill 61 will have a very long reach, both nationally and internationally. Has the Government of Newfoundland considered all the potential issues? This presentation was prepared in short order, but it identifies some of the wider potential impacts. Considering the Governments abhorrent record on the interpretation of international law, should these items not be discussed at committee level of the House of Assembly. Experts should be consulted. The last 4 weeks (FLG, Sanctioning, and the Emera Secondary Deal) clearly demonstrate that we are working outside of the original plan of Nalcor and Government. Is Bill 61 just a response to these changes. And critics by people such as Gordon Weil who have identified the Open Access issues? The Author is still undecided on Muskrat Falls project. But I am certain that the government and/or Nalcor are unable to make an objective decision at this point. They are fire-fighting which will lead to mistakes.

Are we setting ourselves up for failure.

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