New Brunswick's Opposition Tories say the province should collect income taxes from Hydro-Québec if the Liberal government's proposed NB Power deal is passed.

A requirement for Hydro-Québec to pay income tax in New Brunswick is not part of the proposed agreement that would sell a majority of NB Power's assets to the neighbouring power utility.

The Progressive Conservatives are promising to stall the proposed deal, which is based on an idea they had, as the governing party, examined a decade ago.

Shortly after being elected in 1999, the former Progressive Conservative government of Bernard Lord hired TD Securities to offer advice on a possible sale of NB Power.

TD estimated the province could sell NB Power for $3.6 to $4.5 billion, not including the Point Lepreau nuclear plant.

That report recommended selling NB Power but only if the province collected taxes from the buyer.

The report said the province would lose revenue if it sold the utility but it said it could recoup $180 million over five years by making the buyer pay income tax.

Progressive Conservative MLA Jeannot Volpé, who was the minister of natural resources and energy when TD Securities wrote its valuation report, said the report's recommendation on income tax made sense.

The Liberal government's proposed agreement does not include the same income tax clause.

"Is it fair? I will leave it to New Brunswickers, but all those who have pipeline systems, whatever, they all pay taxes," he said.

Hydro-Québec paying for tax break

Thierry Vandal, the chief executive officer of Hydro-Québec, told CBC News last week that his company is paying a higher price for NB Power in return for the tax break.

"We're basically saying, and the government was saying, we'll put that payment in lieu of income tax aside, and you'll value the assets on that basis," Vandal said.

The New Brunswick government has agreed to sell the majority of NB Power's assets to Hydro-Québec for $4.8 billion, which will pay off the utility's debt. As well, Hydro-Québec will freeze residential rates for five years and cut industrial rates to the same level in Quebec.

The New Brunswick government has valued the rate package at $5 billion.

Although Graham and Quebec Premier Jean Charest announced in the summer that they were discussing options for greater energy co-operation, the sale came as a surprise.

Conversely, the 1999 report written for the Tories recommended auctioning NB Power to drive up the price rather than deal with a single buyer.

Volpé said that NB Power is not as valuable now and might not attract as much interest as it would have when the Tories had investigated the possible sale.