08/21/2012 11:36 EDT | Updated 10/21/2012 05:12 EDT

Nova Scotia consumer advocate is 'wrong' to criticize power deal, premier says

HALIFAX - Premier Darrell Dexter is brushing off criticism from Nova Scotia's consumer advocate that an energy rate agreement for the idle NewPage Port Hawkesbury mill could end up costing power customers.

John Merrick has said there's no guarantee power bills won't rise in the deal between Nova Scotia Power and the mill's prospective buyer, Pacific West Commercial Corp.

In its approval of the deal, Nova Scotia's Utility and Review Board ruled that power customers can't be expected to cover the cost of running a biomass plant at the site in Point Tupper.

That would change, however, if the government deems the plant a "must-run facility" — which Dexter said Tuesday needs to happen.

Merrick said he's worried the government is pandering to Pacific West on the backs of power customers.

"The other thing that is particularly galling, if that's the scenario that happened, is that they did it without spending a lot of apparent time worrying about the position or the interests of other ratepayers," he said Monday in an interview.

Dexter dismissed Merrick's criticism of the deal as "wrong" and "unfortunate," adding that the biomass facility is necessary to run the mill.

"I'm very comfortable with this," Dexter said Tuesday. "I think it's a good opportunity for us to reposition a key part of the economic infrastructure of the province so that it will be sustainable for the long period."

He added that losing the mill — and the 1,400 direct and indirect jobs that the government estimates come with it — would be a "real blow" to Nova Scotia.

Dexter also defended a $124.5-million financial package aimed at helping resume operations at the mill, saying the benefits of that far outweigh the costs of allowing the site to remain closed.

The lifeline includes $66.5 million in loans to Pacific West Commercial, $26.5 million of which could be forgiven if the Vancouver company meets certain criteria, including wage targets.

The leaders of the province's Progressive Conservative and Liberal parties have asked whether spending millions to prop up a struggling industry is a prudent use of public funds.

But Dexter said Pacific West Commercial, which has offered to buy the mill for $33 million, has a solid, sustainable business plan for the facility.

The mill, which opened in 1962, shut down last September. Some 600 employees lost their jobs and another 400 forestry contractors were affected by the shutdown.

Pacific West Commercial has said it hopes to employ about 300 workers at the plant and restart one of its two papermaking machines next month.

The Vancouver firm must still receive approval of the power rate deal from the Canada Revenue Agency before the sale can proceed. It's not known when the agency will make that decision.