NB Power makes bid to hike electricity rates

NB Power needs to increase electricity rates now in order to be in a better financial position to deal with the end of life of the existing Mactaquac Dam sometime after 2021, a utility official told an Energy and Utilities Board rate hearing on Monday.

The Crown utility is asking for the EUB to approve a 2 per cent rate increase that would take effect Oct. 1.

In NB Power's opening statement at the hearing, Darren Murphy, the utility's chief financial officer, told the board NB Power has set a target of achieving 20 per cent equity by 2021.

"That time has been chosen to order to take advantage of the relatively low capital investments required over the next six years, a fact which allows for reduction of debt, and the building of equity, with a series of small and stable rate increases," said Murphy.

"That period will be followed by a period of very large capital expenditures, as NB Power takes steps to address the end of life of the Mactaquac Dam."

NB Power is studying whether to repower the dam by replacing the spillway and the powerhouse, maintain the headpond by replacing the spillway but not the powerhouse, or remove the spillway, the powerhouse and the earthen dam.

The utility has previously put the minimum cost of each option at $2 billion and stated costs could climb as high as $5 billion.

Murphy said NB Power is trying to keep rate increase from year to year as low and as stable as possible while aiming for the 20 per cent equity target.

"Based on the company's 10-year plan, 2 per cent annual increases are required to reach the 20 per cent minimum equity target before the anticipated major capital requirements put downward pressure on the equity ratio," stated Murphy.

Previously, the Crown utility was allowed to increase rates by two per cent or less without having to get approval from the EUB. However, all rate increases are now subject to approval by the EUB.

NB Power says if approved, the rate increase would amount to an extra $4 per month on the average family's power bill.

The hearing is expected to last two weeks.