Natural and man-made troubles push NB Power finances further off course

A hot dry New Brunswick summer, a mid-winter breakdown of the province's nuclear plant, and the year-long effects of COVID-19 have pushed NB Power's troubled finances further off course, and it may require dramatic corrective action soon, according to the utility's senior vice-president and chief financial officer.

"We need to ensure we're looking at any and all options," Darren Murphy said about fixes required for NB Power's finances after it posted a $4 million loss in the fiscal year ended on March 31.

It's the second straight year of negative earnings for the utility and sixth year in a row it has failed to reach budgeted profit targets, a result NB Power president Keith Cronkhite is not glossing over.

"We are very disappointed with these negative financial results," he said in a statement released alongside the company's annual report.

In his own terse statement, Mike Holland, the New Brunswick natural resources and energy development minister, said he too is displeased.

"NB Power's year-end results are disappointing," said the statement.

"There is an ongoing issue that needs to be addressed."

NB Power has been under intense pressure to lower its debt level in advance of undertaking a multiple-billion-dollar refurbishment of its Mactaquac hydro electric generating station but has made almost no progress toward that goal in recent years.  

A  plan to cut its debt $750 million, to $4.16 billion, between 2015 and 2021 has fallen apart completely with its debt rising $14 million in those years instead, to $4.929 billion, including a $9 million increase in the most recent year.

"We need to do better," said Murphy.

"We need to step back and make sure we're considering all options to achieve that objective because the objective is quickly closing in on us."

NB Power was hit by a series of expensive natural and man-made problems during the last year, the worst of which was a dead-of-winter breakdown of the Point Lepreau nuclear generating station that knocked the plant offline for 40 days in the peak consumption months of January and February.

Buying and generating replacement electricity for the idle nuclear plant cost $65 million.

Low water levels in New Brunswick rivers during a scorching 2020 summer was another blow, slashing expected production by NB Power's network of hydroelectric dams that eventually cost it up to $9 million. 

In addition the COVID-19 pandemic cut overall demand for power and reduced sales by a further $19 million.

In the middle of those troubles, the Progressive Conservative government, which has been pushing the utility to reduce debt, encouraged a plan to delay the implementation of a 1.8 per cent rate increase from April 2020 to March 2021 that had been applied for from the Energy and Utilities Board.

That moved the rate hike from hitting consumers before the September 2020 provincial election until after, a delay that cost NB Power $27 million in revenue. The utility and the province both said it was NB Power's idea and done for economic, not political reasons.

The government has expressed ongoing concern about NB Power's debt and nearly two years ago instructed the utility to make paying it down by up to $500 million by 2027 a top priority.

"This target should come first and foremost in utility planning," Holland wrote in a mandate letter to NB Power in November 2019.

Two months later, in January 2020, Premier Blaine Higgs reinforced that directive during his televised state of the province address. 

"I have asked NB Power to immediately develop a plan to reduce their unacceptable debt level without impacting rates," he said.

Since then, however, the utility has posted back-to-back losses, and Murphy said plans to pay down debt gradually over time have not been working and another approach may be needed.

"We've been on a path of trying to achieve these through incremental rate increases and subsequent cost reductions and we just haven't made the progress we'd like to make," he said.

Holland said he expects a workable plan to reduce debt soon.

"I'm not prepared to wait any longer," he said.