N.B. Power customers face potential $70M bill for generating station outages

Electricity customers, not N.B. Power, will be responsible to pay as much as $70 million in costs for extended outages at two important generating stations this winter if the losses are not offset in the next few months by some kind of financial windfall at the utility.

In an email, N.B. Power's Dominique Couture said the cost of extended outages at the Bayside natural gas and Point Lepreau nuclear generating stations in December and early January are still being tallied, but each do qualify for inclusion in new variance accounts that require customers to reimburse the utility if the accounts carry a balance by the end of October.

"Overall costs will be reported with the fourth quarter," wrote Couture about the bill for the outages.  "Replacement fuel and purchase power will impact the variance accounts,"

Last week, the Point Lepreau nuclear generating station began producing power again following a 36-day forced outage. It joined the Bayside natural gas generating station, which went back into service in early January following nearly a year of major repairs.

Both outages will add unexpected expenses to N.B. Power's current financial year and, although the utility says it doesn't yet know the full cost of that, it is likely to be close to $70 million.

In December, N.B. Power filed estimates with the New Brunswick Energy and Utilities Board revealing that recent Lepreau outages have been costing it "approximately $1.5 million per day" to pay for replacement power and a further $200,000 per day in actual repair costs.  

"The reliability of PLNGS (Point Lepreau nuclear generating station) largely influences the financial performance of N.B. Power as significant costs are incurred in the event of an unplanned outage," it explained in evidence describing the seriousness of any unplanned downtime at the plant.

At Bayside, repair time up until November was expected and budgeted for, but the utility has said the cost of downtime that extended past November would cost it $300,000 per day.

Added together, the 36 days Lepreau was down and at least 37 days Bayside was down past its expected return in November, suggest a potential unbudgeted bill for the two  in excess of $70 million.

In the past, that would hit N.B. Power's bottom line at the end of the fiscal year, driving down its profit or causing a loss and in turn dragging down the province's financial results. 

But under a new system set up by the Higgs government to end poor financial results at N.B. Power and transfer those risks directly to its ratepayers, variance accounts have been set up to collect unexpected gains and losses in utility operations each month and let customers deal with the consequences..  

At the end of each October a year's worth of unbudgeted gains and losses in the variance accounts are now added together.  If a net gain occurs, it is to be returned to customers in a rebate over a period not to exceed three years.  

However, if there is a net loss, it is to be billed to customers in a surcharge added to their normal bill.  Losses also have to be paid up within three years.

In a review of that arrangement commissioned by New Brunswick's acting public intervener Rick Williams as part of an upcoming rate hearing, utility expert Robert Knecht noted that variance accounts work to transfer financial risks "from utility to ratepayer," and also tend to muddy financial reporting.

"N.B. Power touts the new variances as a benefit for stabilizing its net income performance, which is certainly true," wrote Knecht in his analysis.

"However, stabilizing can be another word for concealing or distorting actual net income."

Costs from the unexpected downtime at the Lepreau and Bayside plants, plus interest, will start to be billed to N.B. Power customers beginning in April 2024, unless the utility can pile up unexpected financial gains in other areas to offset them by October

Any number of volatile events, including uncertain fuel prices, hydro flows, export prices, station reliability and other factors can add or subtract from the variance accounts until October. That could help soften any $70 million bill to customers from the Lepreau and Bayside outages, or make it worse. 

"Any variance from budget will also be included in the variance account," noted Couture.