Opponents of N.B. Power rate increase focus attention on stale budget numbers

N.B. Power is fighting mounting claims at its rate hearing that the 8.9 per cent increase is an exaggerated request based partly on temporarily high commodity prices from months ago that have long since fallen.  

The utility is dismissing the issue as irrelevant since it has largely locked itself into prices for the next year already and claims it has suffered other financial setbacks that require the higher rates anyway.

"Ultimately it's the Board's call," said Len Hoyt, a lawyer representing the Twin Rivers Paper Company about whether the rate increase can be wrestled down.

Early in the hearing, Hoyt pushed for an accounting of changes in commodity prices that affect N.B. Power since that part of its budget was prepared last spring.  He said it would be up to the Energy and Utilities Board to decide what to do with the updated information.

"I'm just asking that those numbers, which I suspect are fairly easily obtainable by N.B. Power, can be put together," said Hoyt.

N.B. Power's next fiscal year begins in just over six weeks, on April 1, but it openly acknowledges a lot of the numbers in its budget are already stale because of the time it takes to prepare and present at a rate hearing.   

Much of the 8.9 per cent increase being requested is to pay for an estimated $128.7 million spike in the cost of fuel and power N.B. Power buys to supply New Brunswick customers.

But that is based on numbers that were calculated last June, when prices for a number of critical commodities like coal, oil, natural gas and importable electricity were mostly higher than they are now.  

In some cases, they were significantly higher.

On Tuesday, J.D. Irving lawyer Conor O'Neil took a pair of N.B. Power consultants through an examination of natural gas prices showing how average monthly futures contracts had fallen from US $8.14 per million Btus (British thermal units) in May 2022 to US $3.27 per million Btus in January.

N.B. Power is planning to spend $141 million on natural gas in the next year, based on spring 2022 prices and the issue emerging at the rate hearing is whether those expenses are now exaggerated.

O'Neil went through a similar exercise with coal and oil, but N.B. Power lawyer John Furey has already called the exercise pointless since the utility has a policy to lock in or "hedge" prices up to 18 months in advance for much of what it buys and nothing can be done about that now.

"The raw numbers don't tell anyone anything," Furey said about the fluctuating commodity prices.  

"They have to be interpreted in light of the extent of hedging, the period of hedging. And so I suppose the numbers can be provided, but they are not going to help anything."   

In addition N.B. Power is making a case that its financial condition has worsened since it first proposed the 8.9 per cent increase, adding to the urgency of it being awarded in full.

Citing breakdowns at the Point Lepreau nuclear station this winter and last summer, N.B. Power acting president Lori Clark told the hearing a "failure to meet some of our financial targets this year," is now likely. 

"We have had significant challenges with our nuclear plant," said Clark.

"The 8.9 per cent rate increase is even more necessary now."

But opponents of the increase are not convinced and the issue of the stale commodity numbers is certain to flare up again next week. 

An expert hired by the Energy and Utilities Board is likely to testify N.B. Power should have at least updated all of its commodity pricing information in October when it filed its application for the rate hike.  

Vincent Musco, with the Washington, D.C.–based firm Bates White, will appear but has already given a written report criticizing the older numbers N.B. Power relied on.

"While uncertainty will be present in any price forecast of fuel and purchased power, updated forecasts at least minimize that uncertainty by reflecting additional information—in this case, several months of information," Musco wrote.