Daniel McHardie
Times & Transcript
March 1, 2005

New Brunswickers should brace themselves for a hefty increase in their monthly electricity bills with NB Power poised to announce its annual rate increase today.

"I would not be surprised by a 10-per-cent increase because of the trends in fuel prices and the troubled liabilities that the utility is carrying related to Orimulsion and (Point) Lepreau," said Tom Adams, executive director of the Toronto-based Energy Probe.

NB Power officials would not confirm the pending rate hike, but David Hay, the utility’s president and chief executive officer, has been foreshadowing a major surge in power prices for months. During a December interview Hay said "it will be difficult not to exceed the three per cent rate cap."

Under law, NB Power is forced to explain any power price increases of three per cent or higher to the Public Utilities Board. Rates haven’t exceeded the cap since 1992-1993 when the utility sent bills soaring with five per cent hike.

A regulatory hearing would likely take six months to unfold, so it is possible that NB Power could boost its rates by 2.9 per cent for April 1 and then petition the Public Utilities Board for the remainder of the necessary increase to come into effect later this year.

Brian Lee Crowley, president of the Atlantic Institution for Market Studies, said Hay needs to lay out a detailed multi-year plan for the utility that outlines how NB Power is going to raise rates and cover its expenses. Crowley said it is "shocking" that NB Power has run deficits in recent years by failing to increase rates enough to cover their expenses.

"I think that this policy of artificially lowering the price of electricity has been very bad for New Brunswick," the think tank president said. "We are going to start learning just how bad the price is when we see the rate increases that will be proposed."

Driving the demand for a rate spike is a projected $70-million deficit attributed to rising fuel prices, such as coal, oil and natural gas.

Through his early retirement initiative, Hay announced last week he was able to shave $40 million from the utility’s balance sheet.

The president’s cost containment scheme doesn’t account for inflationary pressures, which have forced NB Power to augment power prices by almost three per cent in each of the last three years.

Each NB Power rate hike of one per cent generates $10 million in new revenue. When power rates grew by 2.9 per cent in April 2004, it meant an average New Brunswick home using 1,200 kilowatt hours of power paid an additional $5 per month or $60 per year.

NB Power isn’t the only utility looking for significant boosts in monthly bills as Ontario ratepayers are in rough shape as well. Energy Probe’s Adams said when the final tally is in, the Ontario government will have hiked industrial power hikes between eight per cent and 12 per cent and rates for homeowners will jump between seven and 10 per cent.

NB Power has been besieged by controversy in the last year thanks mainly to the Orimulsion fuel fiasco, where Venezuela’s state-owned oil company refused to honour a 20-year contract to supply the Coleson Cove Generating Station with the cheap fuel. Not only has Hay been forced to deal with the fall-out surrounding the botched fuel deal, the president has also had to gear up the utility for its restructuring last October and the negotiations with Ontario-based Bruce Energy and Atomic Energy of Canada Ltd. regarding the future of the Point Lepreau nuclear reactor.

And if the current files weren’t tricky enough, energy analysts are quick to point out the corporation has a $3.5-billion debt.

"I hope people have begun to understand that there is something rotten in the state of NB Power," Crowley said.

The AIMS president believes Hay can get New Brunswickers on his side if he can convince them these future bouts of rate hikes are necessary.

"He did not create these circumstances, he is there to clean it up."

Crowley added, "If he is open and honest with people and has a credible plan for fixing the problem I’m not saying people will enjoy it, but I think if they think it is going to result in positive change we will put our shoulder to the wheel."

Energy Probe’s executive director said also said Hay needs to stickhandle the rate file carefully but believes the new president is up to the challenge.

"Hay has a financial background, he is independently minded and I think he can see the crisis that is building on the utility’s balance sheet more clearly than most people," Adams said. "So I’m hopeful that he will start the process of coming clean."