Suddenly NSP Misses DEVCO

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The last time Nova Scotia hospital workers resigned en masse was 1975. Three years later, the provincial government of Gerald Regan went down to a resounding, and unexpected, defeat.

But it wasn't residual anger over the hospital disruption that drove Regan's Liberals from office: it was a massive increase in power rates by the Nova Scotia Power Corporation.

That's one reason why my ears perked up last week when Nova Scotia Power spokesperson Denise Corra said the impending closure of Cape Breton's last coal mine could cause power rates to go up.

"The international price of coal is going up," Corra said in a telephone interview. "There's obviously good value in Cape Breton coal."

Readers who've followed the decades of price warfare between NSP and Devco may think that's a misprint. It's not. NSP's Corra said replacing cheap Cape Breton coal with expensive foreign coal may drive power rates up, and she said it with a straight face.

Well, talk about a switcheroo.

For years, nay decades, NSP and its civil service predecessor, the Nova Scotia Power Corporation, have been whining, crying and gnashing their teeth over the price of Cape Breton coal. Over the price of all Nova Scotia coal for that matter.

Just last winter, NSP halted purchases from Pioneer Coal of Stellarton because owner John "Johnny Nova" Chisholm wouldn't eat a huge price cut.

Chisholm said the company's previous five-year, fixed-price contract with NSP "took five minutes to negotiate," but when he tried to renew it, NSP demanded a deep price cut and refused to budge from its opening position.

Chisholm, who is no softy at negotiations himself, claimed to have been selling at 20 per cent below market prices, but said NSP wanted a price 40 per cent below market.

"Just absolutely nothing other than what they were offering," Chisholm said, "'No, no, no. Forty per cent off or we can't do business.'"

Around the same time, according to a Devco source, NSP tried to impose "unreasonable, unnegotiated, unilateral" price cut on coal from Prince Mine. At one point, the power company was $60-million in arrears on payments to Devco.

NSP was "absolutely, totally unreasonable" in negotiations, the source said. "I don't know if executive compensation has been tied to corporate costs, but their attitude is real, real bad."

Five years earlier, in 1995, when negotiations on price bogged down, the newly privatized utility served notice of termination of its 33-year contract with Devco, triggering a lawsuit between the two companies. In a massive public relations assault aimed at mainlanders, NSP claimed it was paying far in excess of market rates.NSP's long-term contract with the federally owned coal company grew out of the 1978 power crisis that drove Regan from office. At the time, the utility depended almost entirely on oil for power generation, and the Arab embargo had sent oil prices - and Nova Scotia power rates - into the stratosphere.To stabilize costs, NSP proposed a massive switch to coal generation. To justify the huge investment required in new plants, it needed a long-term contract for coal at stable prices. Devco likewise needed such a contract to justify investment in new mines. So they signed a 33-year deal to run through 2010.

The contract provided for renegotiation of quantity and price every five years, so long as each side made every reasonable effort to preserve the contract.

Over time, fluctuations in world energy prices made first one side and then the other anxious to readjust the deal. But there is no doubt the contract was good for both sides. It stabilized power rates. It provided tens of thousands of person-years of mining employment. And it saved NSP and its customers $500-million over the price of oil.

Devco Chairman Joe Shannon concedes that, five years ago, NSP was paying as much as 35 per cent above world market prices. But the bitter 1995 negotiations resulted in a gradual reduction to world values.

Yesterday, NSP was clearly eager to back away from Corra's speculation about power rate hikes. Spokesperson Margaret Murphy said it was "too early to say" whether rates would go up in 2002, adding that the current boom in world coal prices may be only "a blip."

Murphy described the price of coal from Prince as "fair" and competitive," adding that, when Ottawa's efforts to find a buyer for the mine fell through, "We were disappointed."

The value of having a local coal supplier seems to have dawned on the monopoly utility suddenly and belatedly - a reality they couldn't seem to see when they were driving Devco to the wall.

"We see a future for Cape Breton coal," said Murphy, almost wistfully. "It has value for us."

To which Cape Breton miners, facing the death of their industry, can only reply, "Cry me a river."

Originally published by The Daily News in Halifax. All rights reserved by the author. Parker Barss Donham can be contacted at pdonham@fox.nstn.ca.

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