Large NB Power rate increase is not in public's interest, says utility expert
May hearing will weigh evidence arguing half of 9.25% rate hike is not needed
A Calgary utility expert hired to analyze NB Power's application for a pair of 9.25 per cent rate increases over the next two years says the increase could be cut in half.
"NB Power's applied for rate increase of 9.25% is neither required nor in the public interest," said Dustin Madsen in a 140-page written evidence statement delivered to the New Brunswick Energy and Utilities Board last week.
"NB Power has forecast a variety of costs that are not supported as being just and reasonable."
Madsen is an accountant and former Alberta utility executive who now heads Emrydia Consulting Corporation.
He was hired by New Brunswick public intervener Alain Chiasson to review NB Power's rate application.
The utility has proposed rate increases totalling $157 million this year and $167 million next year to get control of its finances and meet New Brunswick government requirements to significantly reduce its multi-billion dollar debt burden.
In
one criticism, Madsen said NB Power has charged $180 million too much
depreciation on its transmission and distribution assets, making its
financial condition seem worse than it is. (NB Power/Facebook)
The increases average 9.25 per cent in each of the next two years, although the amounts vary for different customer groups. For example, residential customers would pay 9.8 per cent more this year.
NB Power was given temporary permission by the Energy and Utilities Board to begin charging the higher rates on April 1 until a final decision can be made on whether they are justified.
A full hearing is scheduled to begin in mid-May. NB Power will be required to rebate customers any excess amounts if the rate increase is less than planned.
A separate three per cent rate increase expected to raise $64 million for NB Power to pay for past over-expenditures also took effect on April 1, but is not subject to the larger rate hearing.
Madsen identified three areas where either NB Power's costs are exaggerated or its revenues are underestimated.
He said given "the need to reduce the unprecedented rate increases sought by NB Power," those amounts should be used to ease the burden on its customers.
New
Brunswick public intervener Alain Chiasson hired two experts to review
NB Power's rate increase and appears to be building a case that there is
room for the Energy and Utilities Board to have it reduced. (Radio-Canada)
In one instance, Madsen pointed out depreciation charges on $1.3 billion worth of electrical infrastructure over the years was measured in a 2019 study to be $187 million more than actual depreciation.
He recommended $25 million per year of that difference be credited back to NB Power as income and that be used to either retire debt or lessen the size of the requested rate increase.
Madsen also said because revised revenue figures show NB Power expects to earn $36.7 million more in higher margins on domestic and export electricity sales this year than originally expected, that too should be credited to customers.
He also claimed operations, maintenance and administration expenses at the utility are being allowed to grow too fast without sufficient justification and should be cut by $19.2 million this year.
He said the increases exceed the inflation rate for the next three years.
"Increases of this magnitude are not just and reasonable particularly in the face of unprecedented rate increases and a lack of supporting evidence for some of those increases," said Madsen.
Madsen said those three issues are worth a combined $80.9 million in NB Power's budget this year and $82.5 million next year, which represent just over half of the value of NB Power's proposed rate increases.
If those calculations are validated at hearings in May, he said it's up to the Energy and Utilities Board to decide whether to reduce the size of the rate increases or the utility's debt levels.
New
Brunswick residential electricity customers began paying 13.8 per cent
more in rates and special surcharges for power on April 1. However, a
full rate hearing in May will decide if the amount is justified. (Robert Jones/CBC)
Madsen also recommended NB Power cancel more than $14 million in planned capital spending in each of the next two years to finance a major internal transition in software systems.
He predicted those costs are "almost always, if not always, double or triple the original estimate," and said it would inevitably cause confusion among employees at a time organizational focus on other problems is required.
NB Power has not responded to Madsen's analysis.
The utility has until April 11 to submit a list of written questions to Madsen about his evidence and provide "rebuttal" evidence by May 8 to challenge any issue it disagrees with.
The rate hearing itself, where Madsen can be cross-examined in person by NB Power, begins in Fredericton on May 13.
ABOUT THE AUTHOR
David Amos
David Amos
Now that you know that, what's your solution? How do you propose we get people and businesses to use less carbon? Oh, and your idea should win a nobel prize if it is to replace the system we now have.
Now, getting back to the subject at hand, the consumer carbon tax on transportation and heating is simply a source of funds for a Liberal income redistribution scheme, and does little (if anything) to reduce emissions. People still need to drive and heat their homes and businesses. Take a look at a map sometime. We're the second largest country in the world with a population of 40 million people spread out from sea to sea to sea, and located in the northern hemisphere. Most of us have little or no access to public transportation alternatives. The winters are long and cold. Heating is essential.
The consumer carbon tax has to be scrapped. As clearly stated by the PBO, "when both fiscal and economic impacts of the federal fuel charge are considered, we estimate that most households will see a net loss".
The tax on industrial emissions is working, and should be retained.
Our country is supposedly responsible for 1.5% of total global carbon emissions, and yet we comprise 7% of of the total land mass and have 7% of the freshwater reserves.
My solution is for Canadians to understand the reality of what's happening. We're still doing way more than our fair share in reducing global emissions, and don't need to burden Canadians with another costly and ineffective tax.
Source: Every privatisation of a Crown corporation ever.
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Comment history
Harvey York posted on Higgs won't rule out notwithstanding clause for addiction treatment bill | CBC News:
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Harvey York posted on Large NB Power rate increase is not in public's interest, says utility expert | CBC News:
"Methinks Jeremy MacKenzie was spot on with his assessment of you, N'esy Pas?"
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