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

A Muskrat Falls Discussion Paper Volume 7 December 2012

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Where Does Newfoundland Stand on Free Markets?

Open Access

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Bill 61 View on Open Markets

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Open Access – Bill 61

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A Complete Monopoly to Nalcor

FERC’s View on Open Markets

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What Does the Federal Energy Regulatory Commission Say?

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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?

www.ferc.gov/legal/maj-ord-reg/land-docs/rm95-8-004.txt

NAFTA’s View on Open Markets

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http://www.sice.oas.org/trade/nafta/chap-15.asp Article 1502: Monopolies and State Enterprises

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?

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

Article 1502: Monopolies and State Enterprises (cont’d) (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?

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1. Considering the Government of Newfoundland’s 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?

Organization for Economic Corporation and Development

OECD

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What Does the OECD Do?

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http://www.oecd.org/daf/corporateaffairs/corporategovernanceofstate-ownedenterprises/34803211.pdf

OECD Guidance on State Owned Enterprises ?

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http://www.oecd.org/daf/corporateaffairs/corporategovernanceofstate-ownedenterprises/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?

OECD View on Government Monopolies?

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http://www.oecd.org/competition/abuseofdominanceandmonopolisation/46452890.pdf

OECD View on Government Monopolies?

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http://www.oecd.org/daf/corporateaffairs/corporategovernanceofstate-ownedenterprises/34803211.pdf

What is Nalcor’s View on their Compliance with OECD regulations resulting from Bill 61?

OECD View on Government Monopolies?

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http://www.oecd.org/daf/corporateaffairs/corporategovernanceofstate-ownedenterprises/34803211.pdf

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

OECD Guidelines For Multi-National Enterprises

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http://www.oecd.org/corporate/guidelinesformultinationalenterprises/48004323.pdf

World Trade Organization

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Article XVII of GATT 1994?

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http://www.wto.org/english/tratop_e/statra_e/statrad.htm

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

Electricity in WTO Law?

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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 Ontario’s generation issues?

The National Energy Board

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NEB Export License?

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https://www.neb-one.gc.ca/ll-eng/livelink.exe/fetch/2000/90466/94151/544144/544232/560666/A1K2T9_-_Letter_to_Nalcor_Energy_and_Electricity_Export_Permit_EPE-338.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:

NEB Export License?

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https://www.neb-one.gc.ca/ll-eng/livelink.exe/fetch/2000/90466/94151/544144/544232/560666/A1K2T9_-_Letter_to_Nalcor_Energy_and_Electricity_Export_Permit_EPE-338.pdf?nodeid=560667&vernum=0

NEB Export License?

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• 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

NEB Export License?

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• 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 it’s 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 Nalcor’s 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 D’Espoir power?

• Is this now why the HVDC lines go to Granite Canal?

Does Newfoundland Support it’s Business Community?

Supporting Free

Enterprise

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Clause By Clause?

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1. 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?

2. When did government launch this idea? Was it only initated due to the Gordon Weil Commentary?

3. What is the view of the industrial customers?

Clause By Clause?

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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.

2. CFLCo must first sell this power to Newfoundland Hydro to wheel power onto the island.

3. Why are consumers getting gouged at every opportunity?

4. Why are we accepting this tax grab by the government?

Is Bill 61 In Compliance with the Canadian Constitution

92A

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Section 92A

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

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.