Harsh words, disallowed expenses greet NB Power in rate increase decision

New Brunswick's Energy and Utilities Board has finally approved part of NB Power's year-old request for a rate increase but not before stripping out $1.4 million in expenses it called unjustified and chastising the utility for not controlling its costs.

"The utility must stop overspending on items … that are within its control," wrote the board.

"It does not appear there has been any meaningful changes taken by NB Power in its approach to control costs or reduce debt. Only modest improvements have been seen on debt repayment." 

In the decision released Friday, the EUB ordered NB Power's to recalculate its rate request after subtracting disallowed portions. That will likely lead to a 1.85 per cent power rate increase to customers, although potentially not until next spring.

"With these changes, NB Power is directed to provide the Board, for review, its calculation for a revised rate increase across all customer classes," wrote the Board in its 21-page decision.

NB Power originally applied to the EUB for a two per cent rate hike one year ago on Oct. 2, 2019. It was hoping to have the increase approved and in place for April 1, 2020.  

Hearings were conducted last February, but on March 19, with a ruling imminent, the utility requested an indefinite suspension of the application in light of the COVID-19 pandemic.

"Many businesses are closed or at reduced operation for an unknown time frame and many employees of those businesses have been affected as a result," said then NB Power president Gaëtan Thomas in a letter to the EUB.

"NB Power has concluded that a rate increase implemented on April 1, 2020, would be counterproductive."

In August, NB Power finally asked the EUB to issue its decision but requested whatever increase it approved to be moved to March 31, 2021, to minimize disruption to the economy.  

The EUB has not yet ruled on that request.

Although focused mostly on the current rate increase, the EUB also turned its attention to a string of poor financial results and missed debt reduction targets posted by NB Power over the last half-decade.

The utility lost $16 million in the last fiscal year, the fifth year in a row it has missed its own profit target, and the EUB called on the organization to look internally for solutions.  

"NB Power must find a way to stay within its budget and reduce its costs," wrote the board.  

The board did approve most of NB Power's budget request with exception of $1.1 million in inflated costs for buying electricity from the Pokeshaw wind farm in northeastern New Brunswick after NB Power negotiated lower prices than it included in its budget documents.  

Maritime Iron study

The EUB also disallowed $300,000 the utility had earmarked to study the potential of integrating the proposed Maritime Iron development in Belledune with its nearby coal-fired generating station.

NB Power has since ceased its investigation of how it might help the Maritime Iron project, and the board said it heard nothing at hearings to justify the utility charging customers anything to investigate the feasibility of a development proposed by an outside party.

"This project is speculative. The Board is not satisfied as to the prudence of this spending," it wrote in its decision.

The disallowance by the EUB of $1.4 million budgeted for those two items in NB Power's budget was in addition to money NB Power itself dropped from its request early in proceedings.  

At the start of hearings in February, utility executives, including new president Keith Cronkhite, declared $1.4 million in planned spending to support a hydrogen-from-seawater partnership with Florida-based Joi Scientific inappropriate to bill customers for and withdrew the amount from its budget.

Those three changes combined total $2.8 million and are all to be deducted from the original two per cent increase requested by the utility.

EUB board member John Herron wrote a dissenting opinion, arguing NB Power should be able to keep the rate increase portions tied to disallowed expenses to boost its bottom line, but that position was rejected by EUB acting chairperson Francois Beaulieu and board member Michael Costello, who made up the balance of the three-person panel.

The EUB will likely rule next week on when the rate increase will take effect, after NB Power recalculates the amount without the disallowed expenses.