First published Telegraph Journal November 10, 2006
Paraphrasing Shakespeare “To PUB or not to PUB? That is the question. Whether ‘tis nobler in the mind to suffer the slings and arrows of government indifference or to take to hearings against a sea of troubles”.
The former King Bernard, fearing the slings and arrows of voter outrage, virtually ignored the June 19th, 2006 decision from the PUB as being too controversial before an election.
The new royal in town is Shawn Graham, who campaigned on “a chicken in every pot”. Energy is high on his agenda. The terms of the existing PUB board members were extended several months and will not lose their heads until January.
Shawn Graham’s choice of Jack Keir as energy minister seems very appropriate. Although Jack admits that he has much to learn, his keen interest in the energy field and background in business will provide a basis for sound economic decisions. He supports the conservation of energy by insulation of our housing stock and the establishment of a solid foundation for NB Power.
But what about the PUB decision of June 19th? Certainly, being the first full hearing on rates since 1993, it has been costly, likely in the range of $10 million of direct and indirect costs. The decision, shown at the website www.pub.nb.ca/Documents/Decisions is 103 pages of information that will put 90% of the general public to sleep faster than counting sheep. For those who are interested why the electric utility seems to be in a financial mess, it makes interesting reading. It appears as though past governments, whether Liberal or Conservative, have been afraid to make difficult decisions on rates over the years. A government decision to allow NB Power to avoid an appearance before the board by limiting rate increases to 3% has delayed the inevitable where losses due to inadequate revenue has led to an insolvent utility. The previous government decided to introduce competition, but not really allowing a workable system, has confused the public utility, the PUB and the general public.
The recent PUB decision has been about reducing subsidies between groups of customers, and changing rate design signals to encourage the wise use of electricity. Changes are required so that the PUB can properly examine the costs of NB Power generation, which represents 80% of the total cost of your power bill. One can only speculate on what the former government wished to hide. The new government has a choice to be transparent via a PUB with teeth or continue in the cover-up process.
Some have suggested that if real competition is desired, NB Power must be forced to sell a majority of its generation assets to outside interests. This is not necessary and in fact is a danger to rates. All that is required to start a competitive process is for NB Power to declare its cost of generation per hour for each of its plants to the New Brunswick System Operator (NBSO) for the next five years. Any private interest that wishes to provide kWh’s to the NBSO would submit a bid for long-term supply. Supply contracts would be awarded by order of economic merit; for example a bid of $65 per MWh would be accepted before a bid of $75. The NBSO would dispatch units to cover the load and the cost per hour of submitted bids by NB Power and private generators would provide the basis for payment of power supply. An audit by the PUB would ensure that the hourly bids of NB Power generating units have no cross subsidization and that the proper order of economic merit is chosen by the NBSO. At the end of the day, all that is required for competition to start is that one private generator has a cost that is lower than the cost of one of NB Power’s units. To ensure a level playing field between fuels, a carbon tax evaluation would be applicable to all generators using fuel that create CO2 gas, and a tax level adjustment factor to equalize the advantages of NB Power.
My congratulations to the PUB board and staff for an excellent decision document. I agree with 90% of the recommendations. In the next months, the Liberal government may decide to make the PUB a vibrant participant in the energy process or it may stumble on the many issues that must be dealt with. I am betting that Jack Keir will inject some common sense into the process.