J.D. Irving and N.B. Power tangle over electricity costs charged to big mills
Company asks EUB to change formula, but N.B. Power says this would hurt residential customers
N.B. Power is asking the New Brunswick Energy and Utilities Board to reject recommendations being made by forestry company J.D. Irving Ltd. — recommendations that would see millions of dollars in costs the utility allots to industrial customers shifted to others, mostly residential customers.
The board has been holding a "cost allocation" hearing to examine the way N.B. Power divides up $1.87 billion in expenses among its six customer groups to help calculate rates that each group pays for electricity.
J.D. Irving Ltd. is advocating changes in the methodology N.B. Power uses that the utility argues is a self-serving attempt by JDI to escape expenses the company wants others to pay for
"It is apparent that each of the individual changes in the proposed methodology is directionally beneficial to the large industrial transmission class of which JDI is a member," N.B. Power lawyer John Furey said in the utility's written final argument.
"N.B. Power submits that the methodology proposed by JDI has the potential to create inequity because of its one-sided nature."
Furey repeated that position in his final oral arguments in front of the EUB on Thursday morning. He said that the witness hired by JDI, utility expert Patrick Bowman from Winnipeg, crafted a number of recommendations that would all serve to benefit JDI if implemented.
In Furey's submission, the utility produced a table showing changes recommended by Bowman would lower $414.1 million in expenses now assigned to big mills by $24.4 million and redirect them mostly to residential customers.
"Every part of the proposed methodology, every change that is recommended by Mr. Bowman operates in a single direction," Furey told Board members. "It allocates fewer costs or more revenue to the large industrial class."
N.B. Power instead wants the EUB to endorse the cost allocation method currently in use for its six customer groups.
Those include residential customers, municipal utilities, general service (commercial and government) customers, streetlight accounts and two industrial customer groups, divided into large and small.
Also endorsing the status quo on Thursday were New Brunswick's three municipal utilities, which serve large numbers of residential customers
However, JDI lawyer Glenn Zacher argued the current division of the utility's expenses among groups is antiquated and does not properly assign the cost of large swings in electricity demand caused by issues such as the use of winter heating by residential customers.
Demand for electricity from N.B. Power by large mills is relatively constant daily, and year round, but demand among other groups, especially residential customers, rises and falls dramatically between winter and non-winter months and from daytime to nighttime.
In JDI's submission, Zacher argued industrial customers are wrongly charged for some of those swings in demand, including for the elevated cost of supplying expensive winter heating electricity to homes and apartments.
"N.B. Power is a strongly winter-peaking system," said Zacher who argued that the costs of daily and seasonal demand swings need to be better "allocated to the [customer] classes that cause them."
"It is our position that the board should accord very little weight to the evidence and the recommendation of N.B. Power that the status quo be maintained without any changes," Zacher said.
A decision from the Energy and Utilities Board will not be rendered for several weeks. Adopting JDI's position would not automatically lead to a change in electricity rates for any group, but it would be a major factor considered in future rate hearings.
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