Friday 27 January 2023

Province's rate-meddling partly to blame for utility troubles, N.B. Power CEO suggests

 
 

Province's rate-meddling partly to blame for utility troubles, N.B. Power CEO suggests

MLAs receive frank talk on N.B. Power troubles from acting president Lori Clark

"Rates have been lower in hindsight than they otherwise should have been for the past 12 years," said acting N.B. Power president Lori Clark.

"Had we put in higher rate increases our debt would be lower."

N.B. Power was making its annual appearance in front of the Legislature's public accounts committee to answer questions about its most recent financial results.

A woman wears a black turtleneck and grey sweater, and smiles directly at the camera. Lori Clark is the acting N.B. Power CEO. She took over in July 2022 after previous president Keith Cronkhite was fired. She is the first woman to hold the position. (Jacques Poitras/CBC)

Several questions were asked about the utility's net debt load, which in September passed $5.2 billion, along with its plans for an 8.9 per cent rate increase this spring.

Clark provided answers that were more direct than previous N.B. Power presidents have supplied, telling the committee the growing debt and large rate hike are directly linked to issues, some of them political, that go back to 2011. 

She acknowledged  a number of troubles have battered N.B. Power finances in recent years, like the poor performance of the Point Lepreau nuclear generating station.  But she added that years of inadequate rate increases have left N.B. Power financially weak and time is running out on turning that around.

"We recognize rates have been low over the last 12 or 13 years and we had to get to a place where that debt was paid down so that we didn't put the utility at risk for customers" she said

Clark didn't directly criticize any particular government or minister but the time frame she picked as the source of N.B. Power's troubles, 2011 to 2022,  began with two rate freezes imposed on the utility by the former government of David Alward.

The back–to–back zero per cent increases in 2011 and 2012 were promised by Progressive Conservatives in the 2010 provincial election.  They were implemented despite a troubled  refurbishment of the Point Lepreau nuclear station going massively over budget at the time and inflation in the province totalling five per cent over those two years.

Two men in suits standing beside each other. The man on the right speaks into a microphone N.B. Power executives trace its financial troubles back to 2011. That is when the former government of Premier David Alward, which included then finance minister Blaine Higgs, made good on a campaign promise to freeze rates for two years. (CBC News)

N.B. Power endured a third rate freeze during the 2021 election year despite inflation of 3.81 per cent.  Then, with inflation running close to eight per cent this year, it was limited to a two per cent increase as the Higgs government made changes to the Electricity Act.

Over the entire 12 year period, N.B. Power figures show its rates will have have effectively shrunk, in inflation adjusted terms, by 10 per cent this year from where they started in 2011. 

N.B. Power senior vice president and  chief financial officer Darren Murphy, who sat next to Clark during the four and a half hour session with MLAs, said long term financial plans put together by the utility to deal with its debt did not anticipate those kinds of financial restrictions.

"If we looked at the rate increase profile over that time, it has been below inflation, which we would not have contemplated at that time," said Murphy.

New Brunswick Premier Blaine Higgs called an election in 2020. N.B. Power took a zero per cent rate increase that year but denied it was the result of any political pressures. Earlier in 2020, Higgs had said he wanted the utility to solve its debt problems 'without impacting rates.' (Andrew Vaughan/The Canadian Press)

"We would have contemplated at least keeping up with inflation during that period."

Blaming inadequate rate increases, and by implication the governments behind many of them, has generally been a subject avoided by N.B. Power presidents and other executives in the past. 

Clark herself in October declined to talk about the issue, telling reporters she preferred "to focus on going forward," rather than assign blame about what has caused N.B. Power's problems.

But on Thursday she was less diplomatic, gently but firmly challenging MLAs who were expressing simultaneous concerns about the utility's high debt and its request for a large rate increase, to think of them as connected events.

"Can we go back to a question you asked earlier," she said to PC MLA Ross Wetmore as he began to change subjects away from the debt problem.

"We talked about debt but we didn't talk about how debt gets paid down. The way our debt gets paid down is through rates," she said.

Although not a direct challenge to the government, the comment appeared to contradict a January 2020 speech given by Premier Blaine Higgs where he told an audience he had instructed N.B. Power to "reduce their unacceptable debt level without impacting rates."

Three years later the utility's rates have barely moved as government asked, but its debt has climbed by $300 million.

Wetmore appeared to get Clark's point. 

"I'm not saying governments in the past probably shouldn't have kept their nose out of the rate increases," he said. "But that's certainly the past."

ABOUT THE AUTHOR


Robert Jones

Reporter

Robert Jones has been a reporter and producer with CBC New Brunswick since 1990. His investigative reports on petroleum pricing in New Brunswick won several regional and national awards and led to the adoption of price regulation in 2006.

CBC's Journalistic Standards and Practices
 
 
 
148 Comments
 
 
David Amos
The Public hearing about this rate increase will begin Monday, February 13 at 9:30 a.m. at the Fredericton Convention Centre.

Methinks everyone should feel free to watch the circus for free but I doubt it will bring the crowds like talks of French Immersion do N'esy Pas?

 
 
David Amos
"Lori Clark is the acting N.B. Power CEO. She took over in July 2022 after previous president Keith Cronkhite was fired."

Methinks she was following Higgy's orders when NB Power tabled the 529 and 541 Matters before the EUB N'esy Pas?

 
 
 
David Amos
FYI

Please note below the information for the Virtual Public Forum related to Matter 541 – NB Power 2023-2024 General Rate Application.

Also note, that parties are permitted to observe, but the public forum is for those not participating in the hearing.

The first session of the Virtual Public Forum will take place via Zoom videoconference on January 30th, 2023, from 2 pm until 4 pm.

Join Zoom Meeting via telephone: 855-703-8985 Canada Toll-free

Or Join Zoom Meeting via web

Meeting ID: 832 8949 3356

Passcode: 607656

 

 

 

Alison Jackson
Let's face facts: when it comes to managing anything the conservatives constantly fall short and I'm not saying the liberals are any better.

Cronyism seems to prevail in this province. Margaret Anne Blaney is a fine example of that.

 
Fredd Tone 
Reply to Alison Jackson  
Liberals have done the same thing!!! 
 
 
Fredd Tone 
Reply to Alison Jackson 
Its been 12 years!!! liberals were in charge also  
 
 
G. Timothy Walton 
Reply to Alison Jackson
Conservatives leave us with deficits when everything starts to break down from lack of maintenance and occasionally Liberals tame deficits and start running surpluses just in time for Conservatives to get back in office.

Mulroney → Chrétien/Martin → Harper (Tax Cuts über Alles!)

McKenna → Lord/Graham/Alward → Gallant (yep, surplus at the end)

 
Alison Jackson
Reply to Fredd Tone
What part of "I'm not saying the liberals are any better" did you not understand. Triggered much?
 
 
Rosco holt 
Reply to Alison Jackson
That's what happens, last example Liberals try to fix/ upgrade some infrastructures(mainly roads) Higgs takes power, cancels everything saying look I'm fiscally responsible. The cancellation of those contracts cost the province money and finishing those repairs/ upgrades will cost more.  
 
 
David Amos  
Reply to Rosco holt 
I get it now 
 
 
 
 
 
 
 
Mark Deckard  
If New Brunswick had gone through with the deal with Quebec a few years ago, customers' rates would be lower.  
 
 
Dan Lee
Reply to Mark Deckard   
Too many people hating the Quebecers and liberals./........thats why it wasnt sold
 
 
Toby Tolly 
Reply to Dan Lee
one of those behind our back deals 
 
 
Rosco holt 
Reply to Mark Deckard
Nope if you understood the agreement, residential customers would have paid more, while corporations enjoyed lower rates.  
 
 
Fred Brewer 
Reply to Rosco holt   
Proof please. I will wait.
 
 
David Amos  
Reply to Rosco holt 
Bingo
 
 
David Amos  
Reply to Rosco holt 
Here is the the proof Freddy is waiting to see

N.B. Power to spend $3.4 million of proposed rate hike on higher industrial subsidies

Utility's planned 8.9 per cent rate increase applies to all customers, except 6 pulp and paper mills

Robert Jones · CBC News · Posted: Oct 11, 2022

 
David Amos  
Reply to Dan Lee
Nope the Quebecers did their due diligence and backed away from the deal 
 
 
Bill Crawford 
Reply to Dan Lee
That's because a lot of NB'ers are tired of being sold out to Quebec. It has caused decline in or local economy. The dairy farmer down the road who sold out a couple years ago said the milk from the farm was all hauled to Quebec. All those old dairy brands are owned by the Saputo syndicate and Agropur Dairy. Do you still think Sussex cheese exists in Sussex anymore? Do you think Lantic sugar is still in Saint John? The list goes on and on. Most of it is our own fault, family run companies sold out because the next generation decided they didn't want to carry the torch. Living on old money looked nicer. 
 
 
 
 
 
 
Rosco holt   
Political interference !?

No dah SHerlock.

That interference has been going on for decades and took up steam ever since the Mckenna government.

  
David Amos  
Reply to Rosco holt 
Yup 





wally corbin 
corporate rates are just going to have to go up to pay for these shortfalls. There can be no more deals.  
 
 
Rosco holt
Reply to wally corbin
That won't happen with this government. 
 
 
David Amos  
Reply to Rosco holt
Oh So True 
 
 
 
 
 
John Pokiok 
They should pay Saint John Energy to teach them how to run Electric company properly. Saint John energy has surplus of money and charges their customers less for kwh than NB Power does, now let that sink in. 
 
 
Mark Atkinson 
Reply to John Pokiok 
exactly 
 
 
Mark Atkinson 
Reply to John Pokiok  
lol, using caps lock gets your comment deactivated 
 
 
David Amos  
Reply to John Pokiok  
Dream On 
 
 
 
 
 
Alex Stevens
No more sweetheart bonus deals for executives.

No more sweetheart rate deals for big business.

It's time the Irving's pay up.

 
Rosco holt
Reply to Alex Stevens 
Good luck with that.  
 
 
David Amos
Reply to Rosco holt 
Ditto 
 


 
 
 
 
 
Stephen Gilbert
blame their incompetence on not being able to gouge the customer. their bonuses didn't seem to be affected by tough times. 
 
 
David Amos 
Reply to Stephen Gilbert
Well Put
 
 
 
 
 
Elizabeth Thimlar  
Finally, a CEO who spoke the truth.. NBPower has been a political football for all parties.. Liberals and Conservatives…. No company can survive with this type of political influence!
 
 
David Amos 
Reply to Elizabeth Thimlar
Trust that she did not speak the whole truth  
 
 
 
 
 
Daisy Dean
Ernie is looking for input from the public before the budget is finalized. There is an 8 page report as well found on the gnb website under treasury board department.  
 
 
Rosco holt
Reply to Daisy Dean    
Can Ernie's budgets be trusted?

He keep missing budget predictions by large margins. He's either incompetent or someone else is doing the books.

 
Daisy Dean 
Reply to Rosco holt 
Fuzzy math in the past that is for sure. Lou Bell argued with me yesterday, and said the budget was already done. If Lou is in the know one has to ask why is Ernie asking for public input? 
 
 
Samuel Champlain 
Reply to Rosco holt 
I hate to break this to you but the minister is not responsible for tallying up the final numbers, the department has accountants that do that and many numbers can be delayed for an entire host of reasons such as delayed payments, interest changes as a couple of the simpler examples.  
 
 
Rosco holt
Reply to Samuel Champlain 
Okay if that is the case then their accountant are incompetent and should be fired and Ernie needs to get the budget checked over before posting it.  
 
 
Samuel Champlain 
Reply to Rosco holt
They would have multiple, not just one. This is a case of be careful what you ask for. NBers wanted more transparency from gov't, the current one went from reporting yearly to quarterly on finances. Problem is, reporting every quarter means you can't always take everything into account as you can yearly. There will always be numbers you are waiting on for various reasons. 
 
 
David Amos
Reply to Rosco holt 
Methinks you should ask me what I know about beancounters N'esy Pas?   
 
 
Rosco holt
Reply to Samuel Champlain 
A corporation makes accurate predictions quarterly, like always government fails at simple tasks for which I think is voluntary. The less accurate are book keeping, more politicians can divert money for their "projects".

Just look at invest NB, when asked about the performance of their investment they say they can't due to business secrets.

 
David Amos
Reply to Rosco holt 
I don't keep secrets when it comes to the public's money


 


 
 
Samuel Champlain 
They are in the mess they are in because of years of very poor management and bloated salaries that are way out of whack as compared to the rest of the civil service. A quick glance at Public Accounts is proof of that. 
 
 
Frank Uxbridge 
Reply to Samuel Champlain
Good work Sammy. Already deflecting for our incompetent premier. You get a treat..Sit....SIT.... there...good boy..  
 
 
Samuel Champlain
Reply to Frank Uxbridge
Higgs does not run NB Power, it is a crown corporation, but you keep obsessing you more ron.
 
 
Daisy Dean  
Reply to Samuel Champlain 
No Higgs is not CEO of NB Power, but he sure has a habit of meddling in it. All last fall he was putting his opinion out there on rate increases. Maybe he should concentrate on other areas that he is responsible for.  
 
 
Samuel Champlain
Reply to Daisy Dean
Expressing opinions is not meddling, and as premier, he is asked for his opinion on many things, it is part of the job. Maybe you should concentrate on that. 
 
 
Daisy Dean  
Reply to Samuel Champlain
So you and Higgs can express your opinions, and that is ok but not the rest of us. Sure.  
 
 
Samuel Champlain
Reply to Daisy Dean
In my reply to you I never said anything about others expressing opinions, maybe a re-read is in order.
 
 
Daisy Dean  
Reply to Samuel Champlain
It’s your tone and attitude that you use on here when you reply to others. You don’t come on here to have an argument or debate to learn anything, but to push the Pc party policies. When you can’t bully your point across you result to calling names. Debating is about discussing and listening to others views and opinions you don’t win by responding with name calling.
 
 
Chris Eidt
Reply to Samuel Champlain
Daisy Dean has nailed Samuel Champlain to the T. 
 
 
Samuel Champlain
Reply to Daisy Dean
I mock people on here who are worthy of being mocked. When the same people come on here daily making baseless posts that can't be backed in any way they are treated accordingly. I have countless times asked them to back up what they say, they can't, they continue their rants so I continue to mock them, and I always will.
 
 
Samuel Champlain
Reply to Daisy Dean
I have had several backs and forths with people who post intelligently and who disagree with me. I did not call you any names, I indicated some errors in your post, feel free to prove me wrong if you like and then you did not comprehend my reply, I thought it was fairly straight forward. I am sorry I attack those who think like you do politically, that is on them when they do it without fact, not me. 
 
 
Samuel Champlain
Reply to Chris Eidt 
Well if you say so it must be true, case closed. 
 
 
Samuel Champlain
Reply to Daisy Dean  
Like another person who was questioning me on the same thing the other day who is also on the left, I asked him why he has no issues with those who have bad attitudes but are Higgs haters, so why do you not call them out? He was not able to answer, not surprising.
 
 
Daisy Dean  
Reply to Samuel Champlain
There is nothing wrong with discussing and disagreeing as long as it is a learning experience. Name calling is not needed. Politicians no matter what party they represent need to be held accountable.
 
 
Daisy Dean  
Reply to Samuel Champlain
When they don’t respond the debate is over. Time to move on to the next one. Yes, you are always going to find people who hate politicians no matter what they do or don’t do it comes with the job. Some people just like politics, and it doesn’t matter who’s in power they just like to discuss the power and politics. 
 
 
Rosco holt
Reply to Daisy Dean  
Wasn't it this government who increase power subsidizes to mills to compete with BC. The same subs among many the the province is fighting in US court at a tune of 6 mill$ and counting.  
 
 
Daisy Dean 
Reply to Daisy Dean  
When you or anyone points out errors in my comments I acknowledge that, because that is how one learns.  
 
 
Daisy Dean 
Reply to Daisy Dean
If you point out errors in my posts or anyone else I acknowledge that. That is how one learns.
 
 
Daisy Dean 
Reply to Rosco holt
Yes pulp and paper mills owned by Irving. It was announced last October. You have a good memory. 
 
 
Samuel Champlain
Reply to Daisy Dean  
I certainly would not put you in the same category as many of the others who post nonsense on a regular basis.
 
 
David Amos
Reply to Rosco holt
Go Figure

https://www.cbc.ca/news/canada/new-brunswick/nb-power-industrial-subsidies-1.6610492

"The 8.9 per cent is to cover our current costs. We are not making significant progress on debt reduction. It is only to cover our costs," said Clark

"We decided it was in the best interests of all of our customers to put an average rate increase in place."

But in a 200-page evidence package submitted with the application to the EUB, the utility revealed it will be using $3.4 million of the $135.8 million higher rates are expected to generate to raise subsidies it supplies to six New Brunswick pulp and paper mills. "

 


 
David Stairs 
can one imagine being hired because one can fix the company problems and then not take responsibility for not being able to fix the companies problems...this is the problem...too many wanting control... 
 
 
Rosco holt
Reply to David Stairs  
We had competent CEO managing the utility but government shown him the door.  
 
 
David Amos 
Reply to Rosco holt
Methinks the only reason Clark and Murphy said what they did is because they are about to follow their old boss out the door as well The real question is how big will be their golden handshake N'esy Pas?  

 

 

N.B. Power to spend $3.4 million of proposed rate hike on higher industrial subsidies

Utility's planned 8.9 per cent rate increase applies to all customers, except 6 pulp and paper mills

Last week the utility announced plans to raise rates 8.9 per cent "across the board" to all customers to address its rising expenses.  Acting N.B. Power president Lori Clark said financial problems the utility faces in the next year are significant and require every customer to contribute equally to address them.

"The 8.9 per cent is to cover our current costs. We are not making significant progress on debt reduction. It is only to cover our costs," said Clark

"We decided it was in the best interests of all of our customers to put an average rate increase in place."

But in a 200-page evidence package submitted with the application to the EUB, the utility revealed it will be using $3.4 million of the $135.8 million higher rates are expected to generate to raise subsidies it supplies to six New Brunswick pulp and paper mills. 

Under a mandatory provincial requirement, N.B. Power has lost more than $100 million buying electricity from pulp and paper mills at high prices and reselling it back at a discount over the past decade. (Mike Heenan/CBC News file photo)

Part of that will cover an expected increase in the consumption of power by the mills next year, but some will partially shield facilities from having to pay the full cost of increased rates. 

The mills include three owned by J.D. Irving Ltd. in east Saint John, west Saint John and Lake Utopia, two owned by the AV group in Nackawic and Atholville and the mill in Edmundston owned by Twin Rivers.

According to N.B. Power's evidence, transfers to the mills will increase 30 per cent, from an estimated $11.3 million this year to $14.7 million next year. That will help keep the price of "firm" power supplied to the mills from rising as much as it does for other N.B. Power customers.

The subsidies are the responsibility of N.B. Power to finance, but the payments are required by provincial regulation, and the increases are not the result of business decisions made by the utility. 

"It is not discretionary," N.B. Power communications officer Dominique Couture noted in an email to CBC News.

The Irving Pulp and Paper mill overlooking the Reversing Falls in Saint John is one of six New Brunswick facilities that has electricity costs subsidized by N.B. Power. The group qualified for $10 million last year, but that will jump to $14.7 million next year. (Roger Cosman/CBC News)

The transfers occur under a ten-year-old policy the province calls the "large industrial renewable energy purchase program" that despite its name serves only pulp and paper mills. 

The regulation requires N.B. Power to buy green electricity the companies self-generate at elevated prices, and then sell it back instantaneously at a discount.

Most of the power is supplied from generators fuelled by the burning of biomass in mill boilers, with a portion also supplied by J.D. Irving Ltd.'s hydro electric dam in St. George.

 Twin Rivers operates a paper mill in Edmundston. It pays power rates that are tied to a Canadian average calculated by the New Brunswick government. The arrangement helps shield mills from rate increases that hit other N.B. Power customers. (CBC)

This year, N.B. Power is paying $110.54 per mega watt hour for what it buys. It then sells it back to the mills at an average of just over $77 per mega watt hour, according to information the Crown corporation has filed with the EUB. 

The utility is made to buy and sell at those price differences until it has lost enough money on the transactions to effectively subsidize the total power costs of the six mills, down to a level the province has declared to be a national average for pulp and paper facilities. 

The transactions are mostly on paper since electricity generated at the mills is consumed onsite and does not actually enter N.B. Power's transmission system.

Last year the scheme cost N.B. Power $10 million. This year that has increased an estimated 13 per cent to $11.3 million, and next year is budgeted to increase a further 30 per cent to $14.7 million. 

According to Couture, N.B. Power has to increase amounts it buys and sells with the mills to accommodate both higher electricity prices and the growing consumption of power by some of the facilities.

"Firm sales to program participants are increasing due to electrification and other growth, and the targeted amount of reduction is increasing, therefore increased purchases are required in order to satisfy the regulation," wrote Couture.

When he was the New Brunswick energy minister in 2012, Craig Leonard introduced subsidies for pulp and paper mills in 2012 to help companies he said were facing 'severe challenges.' Ten years later the department won't say if any updated studies have been done into whether the help is still required.

According to the province, the subsidy program is meant to help New Brunswick mills compete against facilities in other provinces that have access to lower power costs, especially in Quebec and British Columbia.

"The purpose of the Large Industrial Renewable Energy Purchase Program is to make New Brunswick's export-oriented pulp and paper sector competitive with their competitors in other Canadian provinces," the government explains in an online information sheet about the program.

The program only concerns itself with electricity costs and does not attempt to evaluate other expenses of pulp and paper mills, such as wages, wood costs, property taxes or other expenses, to assess if there might be offsetting benefits to operating in New Brunswick.

The Department of Natural Resources and Energy Development oversees the policy but it did not respond to questions about its increasing costs last week.

Last year, J.D. Irving Ltd. issued a statement in support of the program, calling it "critical to the long-term viability of New Brunswick's pulp and paper industry."

Last week, the company's vice president of communications, Anne McInerney, said electricity costs remain a concern. McInerney noted N.B. Power passed along large price spikes this year in the cost of normally cheap non-firm "surplus" energy large industrial customers often access to supplement their firm supplies 

"In some of our operations, we're paying as much as $60 million every year," wrote McInerney in an email to CBC News. 

"In fact, this summer, (non-firm) rates increased so sharply, four times higher than normal, Irving Paper temporarily ceased operations."

ABOUT THE AUTHOR


Robert Jones

Reporter

Robert Jones has been a reporter and producer with CBC New Brunswick since 1990. His investigative reports on petroleum pricing in New Brunswick won several regional and national awards and led to the adoption of price regulation in 2006.

CBC's Journalistic Standards and Practices

 

 

 

 

 

 

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