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Get ready for a tangle: this is an editorial about electrical power, FERC Order 888 and the need for an OATT. First, an explanation: the U.S. Federal Energy Regulatory Commission (FERC) issued Order 888 in 1996, requiring electrical suppliers to allow access to their distribution grids. If you export to the States, you need to play by those rules, and have an OATT, an open access transmission tariff.

Why? Here's what FERC has said: "As the commission noted in Order No. 888, it is in the economic self-interest of transmission monopolists, particularly those with high-cost generation assets, to deny transmission or to offer transmission on a basis that is inferior to that which they provide themselves."

Across Canada, provinces have opened their grids (to different degrees) and have brought in OATTs that match FERC's rules. Blake, Cassels and Graydon LLP, one of Canada's largest law firms, put together a primer on electricity regulation in Canada. Here's their take on the Saskatchewan power system: "The SaskPower OATT is consistent with the pro forma U.S. Federal Energy Regulatory Commission tariff and allows market participants to export electricity, to wheel power through the province, or to sell power to the two independent municipal utilities in Swift Current or Saskatoon. Market participants eligible to access transmission pursuant to the tariff include suppliers and traders from outside the province that wish to wheel energy through the province ..."

On Manitoba: "Manitoba Hydro implemented its non-discriminatory OATT in 1997. Manitoba Hydro's tariff is in keeping with the pro-forma FERC tariff, allows for third party use of its transmission system provided capacity is available, and thus facilitates reciprocity for those third-party users. The key benefit to Manitoba Hydro is that this enables it to maximize its opportunities for electricity export into U.S. markets which require reciprocal access."

And Nova Scotia: "The Nova Scotia Electricity Act required ... an Open Access Transmission Tariff in order to provide non-discriminatory access to its transmission system ... The OATT is modelled after the pro-forma U.S. FERC Order 888 tariff ... The Nova Scotia OATT allows independent power producers and marketers to import and export power, (and) allows Nova Scotia's limited number of wholesale customers to seek supply from outside the province."

There's a clear trend here - selling to the States means opening access to your own electrical market, something this province has never had to do because the island wasn't connected to the North American grid. We don't have an open access transmission tariff in place in this province: in fact, new Muskrat Falls legislation limiting even the production of electricity by large industrial users suggests that our government is unwilling to allow reciprocal transmission of electricity through our system. Yet, early plans for Muskrat Falls certainly envisioned selling some of the juice in the U.S.

Asked directly about that problem when he was explaining the new legislation, Natural Resources Minister Jerome Kennedy said the government would wait and see whether its new rules were challenged: "Under the open access transmission tariff, there certainly would be an argument there, but we'll have to wait and see how that develops. ... But you are right. Under FERC and under the OATT, there would be or could be potential arguments, but we'll have to wait and see if they arise."

Perhaps Kennedy is hoping that we will fly under the U.S. radar. It's a strange position to be in, because we've argued for years for open access across Quebec, but plan to close access here. Wait and see - it's an interesting strategy.

Let's see if it's effective.

Organizations: FERC, U.S. Federal Energy Regulatory Commission, Manitoba Hydro North American

Geographic location: Canada, U.S., Nova Scotia Saskatchewan Swift Current Saskatoon Manitoba Quebec

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  • Maurice E. Adams
    January 05, 2013 - 13:01

    It seems that there is good chance that Muskrat Falls power will never be exported to the U.S.----- the so-called Water Management Agreement (with itself) between Nalcor and its subsidiarary, CFL-Co, is highly suspect and may be in conflict with the 1969 Quebec contract ----- the advertised 824 MW of power, which has since been reported to be an average of only 570 MW, is suspect ----------- the demand on which the very viability of Muskrat Falls depends (an island demand of 0.8% compounded yearly FOR 50 YEARS) is suspect -------- the argument that we need MORE POWER is suspect (40% of 570MW is only 228MW ---- which is less than half our already installed existing and only partially used NET capacity of Holyrood --- which is 466MW) --- the rates for Muskrat Falls power is highly suspect and will likely be much HIGHER THAN government is saying (ratepayers MUST PAY whatever is needed to pay the Muskrat Falls multi-billion dollar debt)........ the original cost of $6.2 billion is highly suspect and when interest costs during construction is included will likely be $12 billion or more (it is already up around $9 billion)........ I could go on and on, but in short, Muskrat Falls is unneeded, uneconomic, and needs to be halted pending an objective and detailed review.

  • Cyril Rogers
    January 05, 2013 - 11:17

    The government seems to be operating on "a wish and a prayer" when it comes to so many important components of the MF deal that you have to wonder what they are thinking. Jerome Kennedy, as a lawyer, should know that "wait and see"" is a very dangerous position to take when you are dealing with legal matters. It can't be very comforting for him to be spouting such gibberish. When the GFA mill was expropriated they either didn't know or deliberately ran afoul of NAFTA....and they may be doing something similar here. Is it stupidity, incompetence, blind arrogance, or something else entirely?

  • W Bagg
    January 05, 2013 - 08:55

    don't worry, Quebec will pipe up if any Muskrat Power gets sold in the US, and our openness will be challenged. Imagine if we open up our transmission lines and Quebec Hydro sells their cheap power wheeled thru our lines to the US or NS. I think I see a conspiracy theory brewing ;)

  • Ken Collis
    January 05, 2013 - 08:21

    Mr. Kennedy is the man who Danny first promoted to fix the provincial prison system. Does everyone remember that one? I wouldn't claim to know much about law but this kind of attitude towards the laws in place in the US won't work. US lawyers will take you to court just because that's what they do. This whole Muskrat thing is being handled by the same expert who fixed our prisons!!! There are ways to make Muskrat Falls development work but you need people much less greedy than what we have now. Right now ratepayers pay for the whole project. The money government takes in for sale of excess power, they keep that. The money from the sale of power at reduced rates to Labrador mining companies, they get to keep that too. Ratepayers have to pay for 40% of Muskrat power but if they only use 30% then the government gets to sell the remainder of the power elsewhere and they get to keep that money too. I know that a lot more people would more than happy to support the project if only the government would pay up like the rest of us. You might argue that what's good for government is good for the people, but that works the other way too. Moer disposable income in the hands of the middle class means more jobs, and more taxes paid. That is good for government.