NB Power rates will rise: expert

New Brunswick's public intervener says homeowners and businesses should brace themselves for a hike in their power bills now that the NB Power deal with Hydro-Québec is dead.

"If things stay the same, if nothing is done with NB Power, the rates, I predict, will skyrocket over the next few years," said Daniel Theriault, who represents the public at hearings before the provincial regulator, the Energy and Utilities Board (EUB).

'There has to be some way to protect the ratepayers in the future because I'm very scared about what the rates will be.' —Daniel Theriault, public intervener

"There has to be some way to protect the ratepayers in the future because I'm very scared about what the rates will be," he said.

Premier Shawn Graham announced last week the collapse of the controversial $3.2 billion deal that initiated a caucus revolt and sparked several protests.

"Make no mistake about it, rates do have to go up," Graham said. "But we're asking NB Power to look for efficiencies internally, we're asking them to minimize that."

Utility's figures differ

NB Power's debt of about $4.8 billion and its reliance on fossil fuels will be tough to overcome, said Theriault, a Fredericton-based lawyer.

"If the price of world oil goes from $60 a barrel to $70 a barrel, that costs NB Power an additional $40 million," he said.

"I've also seen numbers that if interest rates go up one per cent, that represents a four per cent rate hike to the ratepayers here in New Brunswick."

But NB Power's financial statements do not appear to support Theriault's concerns. In 2009, the utility reported that a $10 increase in the price of oil costs it $12 million — not $40 million — and that it's actually more vulnerable to natural gas prices, which are nearly 70 per cent less than they were two years ago.

The last rate plan NB Power filed with the EUB in January 2009 gave no indication of any big increases on the horizon. It called for five years of three percent increases, followed by five years of two percent increases.

Deal had advantages

People may not have liked the way the deal with Quebec was negotiated, but it would have frozen residential electricity rates for five years and offered a 23 per cent cut to large industrial customers, said Theriault.

It also would have required NB Power to go before the EUB for any rate increases, no matter how small, he said.

"The advantage of that is that it puts the company under scrutiny on a yearly basis. So if your debt's increasing at an astronomical rate, obviously you're going to see that and hopefully the regulator then would be able to correct it," he said.

As it stands, NB Power can raise rates by as much as three per cent without requiring approval from the regulator.

Theriault said he's not aware of any other jurisdiction where a public utility can increase rates by any amount without going before the regulator.

The government has asked NB Power to present a rate plan for this year within two weeks.

"I don't think they'll have any problem whatsoever making a business case for three per cent," said Theriault.

"In fact, I think if they were to be up front and transparent, they would show that they need more than three per cent."

Theriault would not, however, speculate how much more.