Province's rate-meddling partly to blame for utility troubles, N.B. Power CEO suggests

Years of inadequate rate increases at N.B. Power, many imposed on the utility by interfering provincial governments, has been a key contributor to its current financial problems. two senior executives told a committee of MLAs on Thursday.

"Rates have been lower in hindsight than they otherwise should have been for the past 12 years," said acting N.B. Power president Lori Clark.

"Had we put in higher rate increases our debt would be lower."

N.B. Power was making its annual appearance in front of the Legislature's public accounts committee to answer questions about its most recent financial results.

Several questions were asked about the utility's net debt load, which in September passed $5.2 billion, along with its plans for an 8.9 per cent rate increase this spring.

Clark provided answers that were more direct than previous N.B. Power presidents have supplied, telling the committee the growing debt and large rate hike are directly linked to issues, some of them political, that go back to 2011. 

She acknowledged  a number of troubles have battered N.B. Power finances in recent years, like the poor performance of the Point Lepreau nuclear generating station.  But she added that years of inadequate rate increases have left N.B. Power financially weak and time is running out on turning that around.

"We recognize rates have been low over the last 12 or 13 years and we had to get to a place where that debt was paid down so that we didn't put the utility at risk for customers" she said

Clark didn't directly criticize any particular government or minister but the time frame she picked as the source of N.B. Power's troubles, 2011 to 2022,  began with two rate freezes imposed on the utility by the former government of David Alward.

The back–to–back zero per cent increases in 2011 and 2012 were promised by Progressive Conservatives in the 2010 provincial election.  They were implemented despite a troubled  refurbishment of the Point Lepreau nuclear station going massively over budget at the time and inflation in the province totalling five per cent over those two years.

N.B. Power endured a third rate freeze during the 2021 election year despite inflation of 3.81 per cent.  Then, with inflation running close to eight per cent this year, it was limited to a two per cent increase as the Higgs government made changes to the Electricity Act.

Over the entire 12 year period, N.B. Power figures show its rates will have have effectively shrunk, in inflation adjusted terms, by 10 per cent this year from where they started in 2011. 

N.B. Power senior vice president and  chief financial officer Darren Murphy, who sat next to Clark during the four and a half hour session with MLAs, said long term financial plans put together by the utility to deal with its debt did not anticipate those kinds of financial restrictions.

"If we looked at the rate increase profile over that time, it has been below inflation, which we would not have contemplated at that time," said Murphy.

"We would have contemplated at least keeping up with inflation during that period."

Blaming inadequate rate increases, and by implication the governments behind many of them, has generally been a subject avoided by N.B. Power presidents and other executives in the past. 

Clark herself in October declined to talk about the issue, telling reporters she preferred "to focus on going forward," rather than assign blame about what has caused N.B. Power's problems.

But on Thursday she was less diplomatic, gently but firmly challenging MLAs who were expressing simultaneous concerns about the utility's high debt and its request for a large rate increase, to think of them as connected events.

"Can we go back to a question you asked earlier," she said to PC MLA Ross Wetmore as he began to change subjects away from the debt problem.

"We talked about debt but we didn't talk about how debt gets paid down. The way our debt gets paid down is through rates," she said.

Although not a direct challenge to the government, the comment appeared to contradict a January 2020 speech given by Premier Blaine Higgs where he told an audience he had instructed N.B. Power to "reduce their unacceptable debt level without impacting rates."

Three years later the utility's rates have barely moved as government asked, but its debt has climbed by $300 million.

Wetmore appeared to get Clark's point. 

"I'm not saying governments in the past probably shouldn't have kept their nose out of the rate increases," he said. "But that's certainly the past."