Consumers will pay for NB Power's debt one way or another, intervener says

New Brunswickers will feel pain no matter how NB Power pays off its debt, and the only questions are how severe and how long-lasting the pain will be, says public intervener Heather Black.

NB Power has a responsibility to pay down its debt, something it has been trying to do since 2011, Black said on Information Morning.

In 2011, the utility said it would pay down $1 billion in debt by 2025.

Black said that goal was achievable in 2011, but it became more difficult to realize as time went on.

"Since then NB Power has had a significant amount of trouble meeting its income targets, net income targets, and hasn't made progress towards debt reduction really."

Black cited a mixture of reasons for missing income targets, including unforeseen costs related to buying electricity, the Point Lepreau nuclear station, and storms.

Commodity prices, climate change

At the legislature's standing committee on Crown corporations this week, NB Power CFO Darren Murphy said the projections in 2011 were made using commodity price data available at the time, but the information has significantly changed since then.

"As those prices change we see significant changes in our underlying costs," Murphy said.

Murphy told the committee that climate change has also played a role in the utility's ability to pay down its debt.

"We certainly did not have, built into those long-range plans, the idea that storm frequency and magnitude of the impacts would be as great as they are," said Murphy.

NB Power has asked permission from the Energy and Utilities Board for a yearly average rate increase of 2.5 per cent until 2029 to help the utility reduce the debt.

But documents NB Power filed with the board also point to a more drastic option to reduce the debt: a 22.3 per cent rate increase over five years.

Positives and negatives

 

 Black said both options have negative elements.

The 2025 plan would have the unwanted effect of implementing a steep rate increase but would reduce the debt faster.

The 2029 plan would see a more subdued rate increase, but the utility would have to keep its debt longer.

"Until that reduction is achieved, rate payers still bear the risk of NB Power not having that cushion of equity to be able to be prepared for unforeseen things that happen or future expenditures," Black said.

This could lead to more erratic rate increases, she said, since NB Power will be reacting to unforeseen events without being able to absorb the costs.