Debt assigned to N.B. Power customers for utility financial misfortunes grows
Customers facing 6 more years of surcharges, mostly to pay for Lepreau breakdowns
A $54.1-million surcharge being paid by N.B. Power customers this year, to reimburse the utility for past financial misfortunes, has made no progress on retiring a $236.1-million debt the payments were originally meant to deal with.
In evidence filed this month with the New Brunswick Energy and Utilities Board, N.B. Power has revealed a pair of "variance" accounts, set up two years ago to transfer the risk of unexpectedly poor financial results — or the benefits of surprise good results — from itself to customers, carried a combined net deficit of $245.5 million, as of Oct. 31.
That's $9.4 million worse than a year ago in October, even though N.B. Power customers have been paying surcharges since April to reduce the accumulated debt.
"This balance represents an amount to be recovered from customers," wrote the utility, in its annual submission about the accounts.
"NB Power proposes to collect the Variance Account balance of $245.5 million over the next six fiscal years," the document said.
Frustrated with years of poor financial results at the utility, the New Brunswick government implemented a new system two years ago to make electricity customers responsible for financial reversals or windfalls at N.B. Power that are considered "beyond the control of management."
Events subject to the scheme include nuclear and hydro electricity production that is higher or lower than budgeted, spikes or dips in the price of fuels used to generate electricity, unexpected changes in domestic and international prices, and demand for power and assorted other variances.
According to the utility, unhappy surprises from the "risks and uncertainties" it faces have "historically impacted the corporations's ability to meet its financial targets," resulting in the decision to transfer those risks to customers.
To date, under the new system, N.B. Power's financial reversals have continued to outpace windfalls, resulting in customers owing the utility significant amounts in a short period of time.
Two major equipment malfunction events at the Point Lepreau nuclear generating station, in late 2022 and again this year, have accounted for most of the poor results that customers must now pay for.
As of Oct. 31, the average N.B. Power residential customer was individually responsible for about $313 of the financial variance deficit and is to be charged about $68 in special payments this year, and again next year, toward that amount.
The utility says with no further surprises in its operations, the current balance will be recovered over a six-year period.
However, surprises have been commonplace and amounts owed by customers can be pushed higher or lower by any number of factors at any time.
In an appearance in front of the Energy and Utilities Board in June, N.B. Power president Lori Clark said the new accounts could work in customer's favour — if the utility experiences better luck in the future than it has in the recent past.
"It doesn't always move in the direction of it being a cost," said Clark.
"Because of Lepreau's performance the prior year, it ended up being a charge to customers. In the future that could also be a credit to customers."
To date, the surprises have been mostly negative. And while shifting poor results into a separate account has added costs to customers, it has had the opposite effect on N.B. Power's financial statements.
Earlier this month the utility reported $73 million in net earnings for the first six months of its current fiscal year, to the end of September.
The half-year result was its best in 13 years.
It came after more than $100 million in costs of an unscheduled summer-long outage at the Point Lepreau nuclear generating station were subtracted out and added to the variance account that customers are now responsible for.
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