NB Power seeks to impose 'weather tax' to help pay for storm damage

With NB Power's $100 million smart meter plan still waiting for a decision from the Energy and Utilities Board, the curtain is set to rise on what could be an equally controversial part two of the company's annual appearance in front of  its regulator in Saint John this morning.

In addition to a two per cent average rate increase, the utility is seeking permission to levy surcharges on customers following major storm damage and other expensive unexpected events.

"NB Power proposes that the board approve a process by which NB Power can apply to the board to recover costs associated with uncontrollable and distinct incidents or circumstances," the utility states in evidence submitted in support of its application.

"Hurricanes and ice storms are the most commonly used examples of such distinct events, but are not the only circumstances in which this adjustment mechanism may apply."

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NB Power has struggled to meet profit targets over the last six years and blames bad weather for some of that.

Since its Point Lepreau nuclear plant came back online in 2012, NB Power's earnings have fallen a combined $183 million short of the utility's projections, including an expected $23.5 million shortfall this year.

Those poor financial results have hampered NB Power's debt reduction plans and it says about one third of the trouble is the fault of punishing storms that have been blowing through New Brunswick with alarming frequency.

The utility says it was forced to spend $63.8 million to deal with major damage and extended outages following massive ice storms in December 2013 and January 2017 and a mid-summer tropical windstorm — Arthur — in 2014.

Rather than continue absorbing the cost of similar large unbudgeted damage and outage repairs in the future, the utility is proposing to develop a mechanism where it can temporarily increase prices to customers instead.

"Recovery will be through a rate rider [surcharge]," it states in its proposal.

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NB Power did not originate the idea for an "extraordinary events" surcharge but has come to embrace it.

The concept was originally put forward by an expert hired by public intervener Heather Black, who was alarmed by NB Power's struggle to pay down its debt load.

The Energy and Utilities Board was intrigued by the idea and asked NB Power to develop a proposal for consideration.

But critics are already expressing doubts.

With increased likelihood that NB Power will be able to recover all costs associated with extraordinary events, there is less pressure on the company to control those costs.- U.S. consultant

U.S. energy consultant, Synapse Energy, was hired by the EUB to review NB Power's plans and warned that allowing the utility to establish a disaster surcharge could change the way NB Power deals with severe weather damage and ultimately make it more expensive.

"With increased likelihood that NB Power will be able to recover all costs associated with extraordinary events, there is less pressure on the company to control those costs," Synapse Energy wrote in its evaluation of the idea.

In the legislature in February, Opposition Progressive Conservative MLA Jake Stewart ridiculed the proposal as a "weather tax" and at hearings last year J.D. Irving Ltd. lawyer Christopher Stewart claimed the utility has a record of wrongly blaming issues "outside management's control" for its financial problems.

The public intervener has said she expects an extensive debate on the issue.

"It will be a focus of the hearing, certainly," Black said last month of the rate adjustment mechanism idea. "I think we'll have a healthy discussion about that."

As part of the hearing NB Power is also seeking permission to raise its rates an average of two per cent on April 1, including a slightly higher increase for residential customers of 2.33 per cent.