April 2, 2002
Only two days after announcing a big budget surplus for 2001-02, the province may have to revise its numbers substantially thanks to a terrible year for NB Power.
In the legislature Tuesday, Finance Minister Peter Mesheau projected a surplus of $37 million for this fiscal year, with a further $70 million being transferred to the fiscal stabilization fund. But those numbers must have been inked before NB Power made its most recent estimates.
In New Brunswick budget documents, the government estimated a net income of about $30 million from NB Power, which was revised to $19 million for 2001-02. That’s likely to drop again, down to the break-even mark, warned Sharon MacFarlane, NB Power’s vice-president of finance and information services. And that could mean a much lower surplus for the province.
It was a rough year for the Crown corporation, she said, noting all the factors that sapped income levels including: the lowest river levels for hydro power since 1953, having to buy $35 million of replacement energy for hydro, unplanned outages at the Point Lepreau nuclear station and the big replacement energy costs there, a declining Canadian dollar, which raised fuel and American-held debt costs, and a decline in export prices last fall.
“All of those things are to a large degree beyond our control,” Ms. MacFarlane said Thursday. “For hydro flows, there’s nothing we can do. It provides 18 per cent of our in-province energy for free because there’s no-fuel cost for water. So when the hydro flows are low, it has a big impact on us.
“This fiscal year, we had budgeted a net income of $32 million from operations. We’ll know in a couple of weeks because this is the last day of the fiscal year, but we’ll likely come in right around break even,” she added. “In the past, the positives offset the negatives in large measure. In this current fiscal year it’s been mostly negative.”
Those same factors led to rate increases and could just as likely hurt the company again in 2002-03, even though the government is forecasting $28 million of net revenue. But a $28-million gain really isn’t much for a company that has $1.2 billion of revenues and $1.2 billion worth of costs, she stressed. Because variables such as natural gas, oil, and the American economy can be volatile, the utility aims to be plus or minus $50 million to $70 million each year. In the past few years, Ms. MacFarlane noted, the company has been able to stay within the break-even mark.
While breaking even is acceptable for NB Power, the province will have less cash to call a surplus, a spokeswoman for the Finance Department confirmed. If NB Power’s final tally for this fiscal year’s net revenues really do fall to zero, the impact could lead to the province having to lower payments to the net debt and that would bring the provincial surplus from $37 million to $18 million.
Liberal Finance critic Marcelle Mersereau said this points to her fear the 2001-02 surplus was due more to luck than managing smarter.
“The problem is, if you’re predicting a nearly $60-million shortfall in your revenue – forget the stabilization fund – that means you have a structural issue you haven’t solved. You’re going into the year knowing you’re spending more than you’re taking in,” she said from Bathurst. “They were lucky. That’s my worry.”