NB Power executive blames 'confusion' over misleading 2019 testimony

NB Power executives were grilled Thursday about why the Energy and Utilities Board was told last May the company was not planning to spend any new money on a controversial hydrogen project between April 2019 and March 2020 even though at the time it was already paying $20,000 per month rent on a Florida lab to the project owners.

"The question was 'is there anything budgeted' and the response was 'nothing's budgeted,'" said EUB lawyer Ellen Desmond about assurances given by utility executives under oath last spring that NB Power had nothing in its spending plans for the year for Joi Scientific and its hydrogen-from-seawater project.

Transcripts from last year's rate hearing on May 22 show Desmond asking Darren Murphy, NB Power vice-president and chief financial officer, why she could not find any reference to spending on Joi Scientific in NB Power's extensive budget papers for the 2019-20 fiscal year - the so called "test year" being looked at by the hearing.

"When we were looking at the capital expenditures we were not able to see where the spending related to Joi Scientific could be located and maybe it is not in your capital spending sheet," Desmond said at the time. "Maybe there is no spending for the test year. We just wanted to clarify that point."

"Mr. Murphy, is there anything budgeted for the 19-20 year?" she asked.

"There isn't anything budgeted in the test year," Murphy replied. 

It was an important exchange because Desmond said if NB Power was not spending any money on Joi Scientific in the fiscal year the EUB was reviewing last spring there was little the board could do to test the prudence of the project.

"In terms of being assured that the spending is prudent, normally that cost would be explored in the test year in advance," said Desmond.  

But five months later in November 2019, NB Power president Gaëtan Thomas revealed to MLAs and reporters the utility had been spending new money on the Joi Scientific project after all, about $20,000 per month.

"We have rented a lab over there and to ensure we can recoup some of the investment we have made, we are keeping that lab going until we can make a decision whether we can go forward or not," said Thomas on Nov. 1.

In December, CBC News reported records obtained under an Access to Information request showed the bill to NB Power for the Florida lab was $178,413 US (about $235,000 Cdn) over eight months as of October 2019, most of that spent in the fiscal year Desmond had been asking about back in May.

This week in lengthy exchanges with Murphy and Keith Cronkhite, NB Power senior vice-president of business development and strategic planning, Desmond has been seeking an explanation about why she was misled on Joi Scientific spending last spring.

Execs offer explanation

Under questioning, Cronkhite said the utility had come to an agreement with Joi Scientific to fund a lab in February 2019 and the first invoice for it arrived in April 2019, one month before last year's May rate hearing.

"Could you provide a copy of that lease?" asked Desmond.

"There was not an actual lease by NB Power for the lab facilities," said Cronkhite.

"It was simply with Joi being the operator at the facility at their location. There was an agreement to acquire additional lab space, which we provided compensation to them. So NB Power did not provide or did not sign a specific lease for lab space. It was more of not a formal agreement as we would understand today. It was basically a mutual understanding."

Desmond wanted to know if it was understood by the utility before its May rate hearing that it would be paying Joi Scientific out of money it was asking the EUB to approve at that hearing.  

The answer appeared to be NB Power did know.

"These dollars would have been coming out of your revenue for 2019-20?" asked Desmond.

"They would have been expensed during the 2019-20 year," replied Cronkhite.

"In February, when you entered into that agreement it would have been anticipated that these payments would have had to have been made. Is that correct?" continued Desmond.

"Certainly portions of them," acknowledged Cronkhite.

'This is where we are having a bit of a struggle'

Desmond then pressed both Cronkhite and Murphy to explain why planned expenses for the lab were not revealed last May.

"This is where we are having a bit of a struggle,"  she said

Murphy told Desmond at the time he told her nothing was budgeted to be spent on Joi, it was  because he didn't have details of the lab expenses and thought she was asking about other potential expenditures related to Joi Scientific achieving performance targets outlined in the master licensing agreement between the parties.

"Unfortunately there seemed to have been some confusion around that," said Murphy.

"I was not in a position to talk about the ongoing operating expenses that may be incurred as a result of lab fees. My testimony was restricted to the licensing agreement as I didn't have the details to go beyond that."

Cronkhite said he did actually mention ongoing expenses at Joi Scientific in his own May testimony the day after Murphy, although Murphy acknowledged that no one, including Cronkhite, ever mentioned the lab arrangement.

"Upon conferring with Mr. Cronkhite, when he referenced the ongoing expenses that it was not identified at that time specifically what those were intended to be for," Murphy said. "To the best of our recollection, there would not have been reference to ongoing lab, although the expenses themselves would have been referenced, just no specific context to what they would have been for."