Power rates surge

Daniel McHardie
Moncton Times and Transcript
March 8, 2002

A two-year power rate freeze has ended as New Brunswickers are being hit with a three per cent hike in their power bill on April 1, and the increases may not stop there.

NB Power announced the $19-million rate increase yesterday after it finalized its 2002-2003 budget, which means homeowners will be seeing a three per cent power rate spike and commercial and wholesale buyers are facing an additional 1.5 per cent.

Sharon MacFarlane, vice-president of finance and information systems, said people understand the overall 2.1 per cent price increase is absolutely necessary because of a drop in energy exports and the year-long nosedive taken by the Canadian dollar.

“The average person would know and would appreciate that we haven’t had a general increase in three years or a residential increase for two years. I think people generally know that our costs increase over time,” MacFarlane said.

New Brunswickers may take umbrage with their power rates rising, but the senior executive pointed to the Nova Scotia power utility that is looking for an increase of 8.3 per cent and its Ontario counterpart upping its price by eight per cent. She said NB Power’s rates are “low and competitive.”

The impact of the residential increase will depend on consumption. But a normal residential bill with 1,000 kWh, per month will increase from $91.39 to $92.69, an increase of $1.30. New Brunswickers consuming 2,500 kWh per month will see an increase from $176.74 to $182.56, a jump of $5.82.

Though MacFarlane said the surge in power prices shouldn’t be a shock considering the tough times being experienced in the energy sector, the move does fly in the face of comments made last year by James Hankinson, NB Power’s former chief executive officer. He told a legislative committee he didn’t “see a need for a rate increase in the next four years.”

MacFarlane said her former boss didn’t mislead the politicians and was accurate based on the information he had at the time. The chief financial officer also wouldn’t rule out any more rate increases.

“We haven’t gone that far yet. We haven’t put together a rate plan. We will be doing that over the course of the summer months and will be going to our board in the calendar year,” MacFarlane said.

Natural Resources and Energy Minister Jeannot Volpé said he supports this increase and residential customers must pay their fair share for power. With the increase homeowners pay 93 per cent of the power costs compared to businesses that cover up to 123 per cent. He said every group should pay between 95 and 105 per cent of the cost of production.

“This one is being supported because we feel it is needed. We’ve seen their (NB Power’s) numbers and we feel it is needed for them to be able to cover their cost of production. The residential sector is the only one not covering its cost now,” Volpé said.

The energy minister said the smaller rate increases, compared to Ontario and Nova Scotia, are easier to stomach. But if the power utility is raising rates, it must also continue to find efficiencies in its operations. Allowing NB Power’s debt to mount with continuous deficits is not sustainable, said the minister.

“At some point either we pay it on our power rate or our taxes, but there is a cost. If NB Power makes a deficit it will be reflected on the taxes of New Brunswick,” Volpé said. “So we feel it is better to have it paid to those that are using the power, so the residential are getting an increase, yes it is an increase, but if you look around us at some of the other jurisdictions it looks like increases will be much higher.”

Opposition Leader Bernard Richard isn’t comforted by the minister’s comments that New Brunswickers are still better off than their counterparts in other provinces. But the Liberal leader is taking exception to NB Power raising rates a year after promising a four-year freeze, and he is demanding a better explanation when the utility’s officials come before a legislative committee next Tuesday.

Richard said New Brunswickers should get prepared to ante up even more for their power bills in the future as this will be one of many increases.

“I think they are not asking for just an adjustment because of a one-year event. They are asking for a permanent increase,” Richard said. “We are not likely to see rates go down at the end of this year even though the markets might recover and exports go back up again. I think that is not fair and consumers need to be protected.”

An industry watchdog echoed the opposition leader’s comments on the likelihood of more rate increases. Tom Adams, executive director of the Toronto-based Energy Probe, has been extremely critical of NB Power’s financial state and said it is in dire straits.

“The increases they’ve announced are not going to stabilize the financial situation at NB Power, so ratepayers should expect a lot more bad news to follow,” Adams said. “These rate increases are a small token relative to the kind of hole NB Power has to fill. The music has not stopped, we are going to see more rate increases and I expect they will be reasonably soon.”

The NB Power executive discounts Adams’ musings on the Crown corporation’s finances and said it is not a liability for the province’s credit rating.

“NB Power’s debt is self-sustaining, credit rating agencies believe NB Power’s debt is self-sustaining, it has no impact on the province’s credit rating. We cannot ever allow ourselves to have an impact on the its credit rating,” MacFarlane said.

She said throughout the last five years, NB Power has reduced its debt by $500 million and continues to make advances in the extremely apital-intensive energy industry. The chief financial officer said NB Power’s operational budget is looking to break even this year and with the $19-million rate increase it should post a “slight profit” in 2002-2003.

But Adams remains skeptical of NB Power’s financial viability based on statements released to the public utilities board and believes his assessments are accurate.

“New Brunswickers are facing a serious electricity crisis,” Adams said. “The utility is not being responsibly managed from a financial point of view, they are not reporting their books accurately and they are building enormous liabilities that are going to hit taxpayers or ratepayers or both.”

 

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