Wednesday 4 October 2023

N.B. Power rate increase announcement cancelled, province retracts debt reduction target


N.B. Power rate increase announcement cancelled, province retracts debt reduction target

Minister denies pre-election motive behind change in 2019 order


Robert Jones · CBC News ·

The New Brunswick government has formally released N.B. Power from having to meet a hard 2027 debt reduction target it set for the utility four years ago, but the province insists it is not a political manoeuvre to avoid the announcement of a large power-rate increase on the eve of a potential election call.

"Not politicking at all, not so," said Mike Holland, minister of natural resources and energy development, about a sudden cabinet decision made last week to add two years of breathing room to N.B. Power's efforts to get its $5.4-billion debt under control.

"We've been working to do these initiatives for three election cycles now. This has been a part of our daily work — not something that we dream up off the cuff," Holland said.

Last spring, N.B. Power was ordered by the New Brunswick Energy and Utilities Board to submit its budget for the 2024-2025 fiscal year by Oct. 4, including any rate increase it might need.  

A man wearing a suit standing in front of a brown buildingNatural Resources and Energy Development Minister Mike Holland said a decision made by cabinet last week to release N.B. Power from a four-year-old debt reduction target had nothing to do with a potential early election call. (Jacques Poitras/CBC)

But in a letter to the board on Thursday, N.B. Power said it had to cancel this week's rate application and announcement indefinitely because in a cabinet order signed by Blaine Higgs on Sept. 25,  the province relaxed N.B. Power's debt reduction target date by two years, from 2027 to 2029. 

That upended months of planning and budgeting around the 2027 date, including amounts that will be needed by N.B. Power in a rate increase to meet it.

"Based on this I wanted to advise the Board as quickly as possible that NB Power will not be in a position to file the GRA [General Rate Application] by October 4, 2023," wrote N.B. Power's senior vice-president and chief financial officer, Darren Murphy, in the letter to the board.

The utilities board has asked N.B. Power to file a budget and rate proposal by Oct. 31, or ask for an extension by Oct. 25. The utility is not saying how long it thinks it will take to rework its numbers, or if they would be released if an election is called. 

Neither the province nor N.B. Power will reveal what kind of increase the utility was preparing to ask for this week but it was almost certainly a large one.

Following miserable financial results last year, and the looming 2027 debt reduction target that the utility is still far from reaching, N.B. Power had few choices but to raise money quickly through significantly higher rates.

A concrete building with a squat, round tower sits on the edge of land with rocks and water in the foreground.N.B. Power is supposed to be reducing debt but it increased, by $468 million, to more than $5.4 billion last year, largely due to a mid-winter breakdown of the Point Lepreau nuclear generating station and other operational problems. (Submitted by N.B. Power)

Holland, who has condemned political meddling in N.B. Power's rate requests in the past as a major cause of the utility's current debt problems, denied that is what is happening again.

Nevertheless, he openly acknowledged the point of deferring debt reduction is so N.B. Power will not raise rates as high as it was planning, in the short term.

"We've been very clear saying that we're not going to meddle with rates," said Holland.

"But … we want to do our part to do what we can — to try to bring relief where we can."

Holland wouldn't say if moving the debt reduction target was N.B. Power's idea or a government initiative. 

N.B. Power's escalating debt has been an ongoing financial worry for the province for years. It's been highlighted as a concern by the last two auditors general and pointed at by credit rating agencies as a problem.

In 2019, Holland sent N.B. Power a mandate letter ordering it to lessen its reliance on debt to finance itself. He told the utility to increase earnings enough to achieve a target of 80 per cent debt and 20 per cent equity in its capital structure by March 31, 2027.

But, since 2019, what the utility owes has only increased, and by March 31 of this year its net debt had passed $5.4 billion, 94 per cent of the utility's total worth.   

In its latest annual report, N.B. Power acknowledged its debt levels are a serious problem, but said it could still meet the 2027 deadline.

"If NB Power does not make meaningful progress toward reducing debt and increasing equity, then NB Power's ability to remain a financially viable organization will be challenged," it wrote in a stark assessment of its own financial position.

A woman wears a black turtleneck and grey sweater, and smiles directly at the camera. Lori Clark, president of N.B. Power, welcomed the decision to give the utility an extra two years to reduce its debt to targeted levels. (Jacques Poitras/CBC)

Earlier this year. N.B. Power president Lori Clark told MLAs that the utility's rates have been kept artificially low "for the past 12 years" and needed to come up to deal with its debt troubles. 

Nevertheless, she issued a statement Tuesday applauding the two-year extension granted by government to get its debt down to target levels.

"We welcome this directive from the province as it will lessen the short-term rate impact on customers," said the statement from Clark.

"Our financial health remains a priority, and we are continuing to look at all aspects of our operations to ensure we are doing everything we can to improve our bottom line."

A year ago Holland rejected calls from opposition MLAs to intervene in N.B. Power's request for an 8.9 per cent rate increase because it would be hard on consumers. He called that idea irresponsible.  

"From the time we took office in 2018, we said that the political games with the utility
had to stop," said Holland.  

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

 
 
72 Comments


David Amos

Why did it take so long to report this?
 


David R. Amos     

Mr Jones is about to get another email from me 
 

 
 
David R. Amos     

FREDERICTON (GNB) – An expert witness appearing on behalf of the public intervener was cross-examined by NB Power legal counsel in front of the New Brunswick Energy and Utilities Board on Jan. 15, the fourth day of public hearings on the Point Lepreau Generating Station Deferral Account.

Kurt Strunk, of National Economic Research Associates in New York, was hired by Public Intervener René Basque to review the calculation of additional generation costs during the Lepreau refurbishment. Strunk's report filed as evidence at the hearing claimed that the deferral account was overstated. NB Power disagrees with this assessment and stands by its estimation of the size of the deferral account in this regard.

During cross-examination by NB Power, Strunk was challenged on a number of areas of his evidence. He was questioned on the accuracy of his assumptions and the estimates he used to calculate his suggestion that the deferral account was overstated.

This hearing covers the balance of the deferral account and the projected operating life of the refurbished generating station. The board stated in its order of July 18 that matters relating to rates will be reviewed at a later date. Notwithstanding, NB Power is confident that the current 10-year forecast of modest two per cent rate increases is adequate to recover the balance in the deferral account.

 

 

Kyle Woodman
PC supporters: Higgs is such a master of finances, look at all the surpluses.

NB Power has 5 billion in debt, can we get them to pay some of that down.

PC supporters: That's different and doesn't count.

 
Ronald Miller
Content Deactivated
Reply to Kyle Woodman 
 
 
Kyle Woodman
Reply to Ronald Miller 
You keep saying that yet this very article states that the debt reduction targets have been postponed indefinitely due to a cabinet directive signed by Blaine Higgs. How do you square that circle logically? 
 
 
Rosco holt
Reply to Ronald Miller
His government did force NBpower to give mills an increase in subsidizes. 


Ronald Miller
Reply to Kyle Woodman 
That is not what the article states, looks like another re-read for you, or maybe a first read? 
 
 
Kyle Woodman
Reply to Ronald Miller 
You can't be serious. 
 
 
Matt Steel
Content Deactivated
Reply to Ronald Miller
 
 
Ronald Miller 
Reply to Matt Steel
Maybe you could run, but the question is would you use your own name or just use the name of the person you are running against?  
 
 
Kyle Woodman
Reply to Ronald Miller  
Are you going to run?


Matthew Steele 
Reply to Matt Steel 
I like your style Matt.  
 
 
David R. Amos
Reply to Kyle Woodman
Are you? 
 
 
Kyle Woodman
Reply to David R. Amos
Thinking about it. How about you David. Can't have too many independents on the ticket.
 
 
David R. Amos
Reply to Kyle Woodman 
I was in very poor health the last time I ran. I promised the folks in Hampton during the last debate 2019 that I would never run again after accurately predicting the outcome of the election and explained we get the governments we deserve because greed and apathy rule the day.
 
 
Kyle Woodman
Reply to David R. Amos
Hope you're feeling better David! 
 
 
David R. Amos
Reply to Kyle Woodman 
My heart was running at 30 percent in 2019 Such things don't get better for an old dude in his seventies. I had to pay the freight on all the MRI etc because Higgy refused me a Health Care card. 




Neil Gregory
"Minister denies pre-election motive behind change in 2019 order"

Yeah, right. I can believe that for a whole ten seconds.


David R. Amos
Reply to Neil Gregory 
That ten seconds longer than I did last week 



 
Ronald Miller
Content Deactivated

 
Matt Steel
Reply to Ronald Miller
From 2022: Dr. Andrew MacLean, a medical resident and health policy analyst in Fredericton, said he hasn't seen any evidence the province has stepped up its recruitment game compared to the past few years.
 
 
Matthew Steele 
Reply to Ronald Miller 
Yeah it will


David R. Amos
Content Deactivated 

Reply to Ronald Miller
When do ya think Higgy will finally refund my Health Care money?
 
 
 
 
 
Ronald Miller
Content Deactivated
 
 
Elizabeth Thimlar 
Reply to Ronald Miller
The government of the day always had to much to say in the running of NBPower,, it’s a political football. 
 
 
Johnny Noname 
Reply to Ronald Miller 
So, it is politicking. 
 
 
David R. Amos
Reply to Johnny Noname
Par for the course




Dale Corbett 
"The New Brunswick government has formally released N.B. Power from having to meet a hard 2027 debt reduction target it set for the utility four years ago, but the province insists it is not a political manoeuvre to avoid the announcement of a large power-rate increase on the eve of a potential election call." Yeah sure, and the moon is made of blue cheese. 
 

Claude Martel 

Reply to Dale Corbett 
And NB Power is not Swiss cheese and is not full of holes.
 

David R. Amos
Content Deactivated

Reply to Claude Martel 
Everything is cheesey 
 
 
 
Fred Brewer
"We've been very clear saying that we're not going to meddle with rates," said Holland.

"But … we want to do our part to do what we can — to try to bring relief where we can."

Translation. We are not going to meddle with the rates, but we are going to meddle with the rates.


Louis Leblanc
Reply to Fred Brewer
I CONcur.


David R. Amos
Content Deactivated
Reply to Louis Leblanc
Never believe anything until its officially denied


 
 
Fred Brewer
I find it funny that Higgs is desperate to pay off our provincial debt while allowing NB Power to continue to add to our debt. Over $5 billion of our debt is from NB Power.


Ronald Miller
Reply to Fred Brewer
Higgs does not run NB Power, maybe read up on how it runs.
 

Kyle Woodman
Reply to Ronald Miller
Why is Mike Holland being interviewed then?


Chris Eidt
Reply to Fred Brewer
"N.B. Power said it had to cancel this week's rate application and announcement indefinitely because in a cabinet order signed by Blaine Higgs on Sept. 25," NB Power is a CROWN Corporation Ronald. Maybe you need to a bit more reading.


Ronald Miller
Reply to Kyle Woodman
He is the Minister of Energy Development, not the Minister of NB Power. NB Power reports to the Leg. through a committee, as they have been for years. Holland is representing cabinet on the debt reduction delay, not rocket science.


Ronald Miller

Reply to Chris Eidt
And you did not finish the rest of the sentence in the article, not surprising. The current gov't does not run the day to day of NB Power, and no gov't has in some time. NB Power applies for rate increases to the EUB, not the current gov't. Based on Higgs' immaculate history in fiscal management and debt reduction you think he would be running a company that keeps racking up debt, it is you who needs to read up on things.


Kyle Woodman
Reply to Ronald Miller
You live in quite the fantasy world Ronald.


David R. Amos
Reply to Ronald Miller
Dream on


David R. Amos
Content Deactivated
Reply to Kyle Woodman
He is well paid to camp there


Ronald Miller
Reply to Kyle Woodman
Prove me wrong, good luck.


David R. Amos
Content Deactivated

Reply to Ronald Miller.
You posted this yesterday correct?
"While the usuals feed on this site's story fueled with little substance and control this, and control that, our PM is actually exerting control by looking to censor podcasts."









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