N.B. Power CEO says she felt 'relief' when province changed debt target
Lori Clark tells MLA she ‘welcomed’ September move that forced utility to rejig rate hike
A year after blaming artificially low power rates for N.B. Power's dire finances, the utility's CEO says she was relieved when the Higgs government pre-empted a major hike designed to tackle its massive debt.
Lori Clark told a committee of MLAs that her officials were speaking "regularly" with the government last fall about how to avoid three consecutive annual rate increases of 12 to 13 per cent that it needed to hit a 2027 debt target.
"We were having ongoing discussions with government and we had proposed a number of options that could work, and one of those options was changing the 2027 date to 2029," she told the legislature's public accounts committee.
The province issued the directive last September, just nine days before the utility was due to file its rate application with the Energy and Utilities Board.
The directive forced officials to miss the filing deadline as they scrambled to recalculate a more modest rate increase — a delay that its lawyers told the EUB would have the "deleterious impact" of postponing the hike and potentially costing it $32.6 million.
Clark said, however, that the directive did not catch her off guard. "I wouldn't say 'surprise' because we had been talking about all the different options we could have used," she said. "If you're asking me the feeling I had when I got it, it was one of relief."
Last year, Clark told the same committee that years of rate freezes or caps, imposed by provincial governments, had deprived N.B. Power of the revenue increases it needed to keep its debt under control.
A
last-minute directive by the premier last fall to reduce N.B. Power's
rate hikes for customers cause it to miss a filing deadline with the
EUB. (Michael Heenan/CBC)
"Rates have been lower in hindsight than they otherwise should have been for the past 12 years," she said at the time.
"Had we put in higher rate increases our debt would be lower."
But Friday, Clark said lowering the debt was just one of "several factors" the utility has to consider, alongside the more immediate impact of rate hikes on customers.
"We certainly were struggling with how do we manage the rate increase for New Brunswickers and doing everything we possibly could," she said.
"So we certainly welcomed the directive that came from government."
Opposition members call directive political
Liberal MLA and energy critic René Legacy said he believed the government issued the directive last fall because Premier Blaine Higgs was considering a fall election and wanted to avoid a controversy over rate hikes.
"To me this feels like some form of political interference," Legacy told Clark.
"What we were most concerned about was the impact on New Brunswickers," the CEO responded.
"It was all around thinking about our customers and how significant this rate impact would be on them."
Liberal MLA and energy critic René Legacy called the premier's pushback of the rate hike political interference. (Jacques Poitras/CBC)
The directive put off a deadline for N.B. Power to reduce its debt to 80 per cent of the total value of the utility from 2027 to 2029, allowing a more modest rate increase application this year of 9.25 per cent.
Energy Minister Mike Holland said at the time the decision was "not politicking at all, not so."
But earlier this month, the Progressive Conservative Party promoted the directive, saying Higgs had "helped save ratepayers" from a larger hike.
Coon called the directive "completely political," and Legacy said the impetus for the delayed debt target clearly came from Higgs.
"It's all related to the premier [who] wanted to go into an election in the fall and didn't want to have almost a 40 per cent hike over the next three years hanging over him, so he tried to find a quick fix."
New Brunswick Auditor-General Paul Martin warned last December that if N.B. Power didn't get its debt under control, the province could be forced to bail out the utility.
Energy Minister Mike Holland dismissed the suggestion that the change in rates was political. (Jacques Poitras/CBC)
"We always have to look at what's happening today. It was a good plan when it was put in place back in 2011 by the government," she said.
"Pushing it out by two years, we are going to be in much better shape and it will not have an impact overall on our ability to service our debt and meet our customers' needs in terms of reliability and energy security, and it was the best for our customers."
Point Lepreau deal questioned
Clark was also questioned Friday about plans for the Point Lepreau nuclear generating station, which she said is on track to operate at 88 per cent capacity this fiscal year — well above the average of 78 per cent over the last five years.
She confirmed N.B. Power is negotiating a deal with Ontario Power Generation that could see the two utilities become joint owners of a new entity that would run Lepreau and sell its electricity exclusively to the New Brunswick grid.
Clark
also faced questions about plans for Point Lepreau, saying that a deal
is being negotiated with Ontario Power Generation for shared ownership
with N.B. Power. (Shane Fowler/CBC)
"This is not a sale. It would be a partnership," she said.
OPG's financial stake could provide N.B. Power with an infusion of capital that might improve its debt picture and lead to lower rate hikes in the future, she said.
"I would want to be able to show New Brunswickers that that rate trajectory will change, and will be better, or at least not be worse."
She said staff from OPG, the utility that operates four nuclear stations at the Darlington power plant east of Toronto, have been working to help Lepreau run better.
"We've seen improved performance," she said. "We've seen improved accountability at the station."
Clark also said concerns about keeping rate hikes low in the past had led N.B. Power to fall below the industry average for investing in maintenance of "high-functioning" nuclear stations, something OPG's expertise can now help it avoid.
She said the two companies hope to reach a deal this year but said it was too soon to reveal more about the options they're looking at.
"This is a huge transaction and one that is quite frankly unique to the investment bankers that have been involved and the lawyers that have been involved," she said.
"We're talking about a significant, billions-of-dollars asset, and two nuclear operators coming together and partnering on this asset."
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"Clark also said concerns about keeping rate hikes low in the past had led N.B. Power to fall below the industry average for investing in maintenance of "high-functioning" nuclear stations, something OPG's expertise can now help it avoid.
She said the two companies hope to reach a deal this year but said it was too soon to reveal more about the options they're looking at.
N.B. Power floats 2nd refurbishment of Point Lepreau nuclear plant
"This is a huge transaction and one that is quite frankly unique to the investment bankers that have been involved and the lawyers that have been involved," she said.
"We're talking about a significant, billions-of-dollars asset, and two nuclear operators coming together and partnering on this asset."
I'm wondering why all their highly paid staff aren't working on strategies to increase capacity, lower costs and keep rate increases to something much less than double digits.
And, specific to capacity, it's also interesting to read that their "plan" this year is for Point Lepreau to operate at 88% capacity. It would indeed be a much welcomed achievement over the 78% average of the past 5 years, but I don't see what's going to change/has been changed to get to 88%. Pulling numbers out of the air looks great on paper to accountants and senior managers, but it never works in reality.
As to Higgs, he's sure not the first Premier to interfere with NB Power, and he won't be the last.
We all know that Higgs had planned a fall election, and it doesn't take a political science expert (which I certainly am not) to figure out what happened with NB Power (and why no election was called).
I'm well aware of how businesses operate, and the impact of inflation on costs and the bottom line.
NB Power is indeed very different. When a business goes bankrupt, it's game over for everyone. The banks and government are secured creditors; employees, contractors and suppliers get whatever crumbs might be left. NB Power is owned by the province, so you do realize that NB taxpayers are ultimately responsible?
I do agree on the Liberals having no interest in actual fiscal management.
It's all political...the citizens of NB s
Deserve better...hard to swallow how people can actually stand by this premier and support him...doesn't say much for any of them
Brian Robertson
Reply to Doug kirby
NB Power's problems long precede the current Premier.
Only the most politically biased would drop their mess on his doorstep.
Don Corey
Reply to Doug kirby
You do realize that this is still a free country and we're all fully entitled to our individual opinions on everything? To say it "doesn't say much for any of them" is typical left wing mentality (i.e. anyone who thinks differently has to be "wrong").
Don Corey.
Reply to Brian Robertson
True.
Rosco holt.
Reply to Brian Robertson
This government has done little to help with their increase subsidize to compete with BC has Higgs stated.
MR Cain
Reply to Brian Robertson
So we just let them pass the buck? Maybe check Higgs election speeches.
Don Corey
Reply to Rosco holt
And just what exactly are we competing for with BC?
David Amos
Content Deactivated
Reply to Don Corey
"You do realize that this is still a free country and we're all fully entitled to our individual opinions on everything?"
Not so free for me Years ago I was falsely arrested under Conservative mandate and Lori Clark tried it again when Higgy won his mandate
Lou Bell
Reply to Doug kirby
Hard to believe how the Liberals think there should be no rate increases , all the while inflation runs high . tthe number of businesses going bankrupt in Canada due to inflation is in the hundreds of thousand in the past year . Time to take a reality check .
Sure doesn't say anything for the Liberals .
Brian Robertson
Want the NBEPC debt reduced?
Tie the debt to the funding of the employees' pension. After all, it was all the pension benefits that created the debt in the first place. Then poor management decisions on Venezuelan Crudeand Point Lepreau's refurbishment just piled onto that total.
Rosco holt
Reply to Brian Robertson
Why not the pension benefits of our mlas. They are suppose to be our employees and they are the ones taking the decisions, they should be held accountable.
MR Cain
Reply to Brian Robertson
NB debt is $11.6 billion, NBP is $5 billion. Even pretending financial ingenuity, won't add up. Pension benefits are negotiated; looks like your preference is the Higgs dictatorial style.
Rosco holt
Reply to MR Cain
The provincial debt was made by incompetent politicians poor decisions. They should be held accountable for their incompetence.
Don Corey
Reply to Rosco holt
The same applies then to the federal government huh? And we all know who tops that list when it comes to both deficits and adding to the federal debt.
MR Cain
Reply to Rosco holt
Isn't that accountability reflected at election time? These guys normally change every 4 years and the new guy has a different agenda.
Eugene Peabody
There has been extremely poor management at NB power for years , I believe if the management of St.John Power took over they could turn things around in a few years if the Premier would keep his nose out of
it.
David Amos.
Reply to Eugene Peabody
Dream on
William Peters
"Politicians are not politicking at all! Trust us." "We're actually here representing the voters and not being whipped in shape to do as we are told". "The pensions we can earn has no bearing on our desire
to get reelected". Can we stop with the charades?
David Amos
Reply to William Peters
Welcome back to the circus
Geordan Mann
Maybe reducing large industry subsidies would be a better strategy to lower residential rates. Oh wait, that would not be popular with a certain ex-oil industry employee or his old boss so, maybe not.
David Amos
Reply to Geordan Mann
Amen
valmond landry
time for a meeting and give the upper class big bonuses just got an e mail notifying me that from now on i wont receive anymore bills by mail i was told if everybody would go on line get automatic withdraw how many trees it would save while we have big corporation cutting 24-7 on our land, crownland plus that hydro plant pumping smoke in the atmosphere talk about the environment.
David Amos
Reply to valmond landry
Par for the course
Jack Straw
Another shell game . One of many by this government. The last one was not long ago with the decision to only give the $300 to seniors who earned work income . Higgs needs to go.
David Amos
Reply to Jack Straw
I concur
Rosco holt
If government could stop interfering with the utility(giving unsustainable subsidizes to 6 mills, political appointments that make 100k, etc...). We wouldn't have these issues.
David Amos
Reply to Rosco holt
I second that emotion
Greg Miller
Anyone else tired of this subject? Just like our health care -- no solution in sight.
Rosco holt
Reply to Greg Miller
It's because our politicians want it that way.
Matthew Smith
Reply to Rosco holt
Way easier to rule needy people
David Amos
Reply to Matthew Smith
Are you certain?
Don Corey
Reply to Greg Miller
Our chances for healthcare improvements are far better than seeing the same with both NB Power debt and management.
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