The future of Saint John Energy

A ‘muni’ is an industry acronym for a municipal electric distribution company. There are three in New Brunswick. (Saint John, Edmundston, Perth Andover) For 325,000 of New Brunswick’s power consumers there is a review process. The Energy and Utilities Board (EUB) asks questions about rates, policies and procedures. Finances are probed and judgements made. We have considerable reason to doubt its efficacy due to political meddling in the past with its decisions. The minister of Energy Jack Keir tells us that the government will not veto the new board with respect to the upcoming rate increase and one would hope that the board is empowered to investigate all aspects of the power utility business. NB Power presently has a debt of close to 4 billion dollars.

The other 41,000 utility customers in Saint John, Edmundston, and Perth Andover do not have that review process. We have to assume that the part time board members of these utilities have the expertise and the time to set direction for management and ask the right questions. This is unlikely to be the case and they are only fulfilling a part of the necessary tasks. We could ask the question in another way. Why is it important for the EUB to regulate 9 customers when the 10th is not scrutinized?

Certainly, excessive regulatory costs could be a concern but there should be a way to hold hearings with these distribution utilities at a reasonable cost.

The very fact that we have more than one electric distribution utility in the province raises an interesting question. Since it costs less to distribute power in an urban center, Saint John with its own utility, can sell power for roughly 10% less than NB Power, even though the power is generated at the same plants. This is because of the compact nature of cities and the reduced investment in poles and transformers per customer. Should the citizens of Saint John or Edmundston buy kilowatt-hours cheaper than the average New Brunswicker? The question could be rephrased. Why should the residents of Fredericton, Quispamsis or Moncton agree to subsidize power costs to rural areas of New Brunswick when the citizens of Saint John do not? Should they have their own electric utility as Bill Belliveau of Moncton has suggested?

In the past year the City of Saint John has had financial stress for several reasons and has been claiming that ownership of Saint John Energy is vested with the City and not the ratepayers of the utility. The purpose of the sudden interest in SJE is not controlling oil wells or to bring democracy to the workers at the utility. It is more likely that the planners at the City have designs to liberate some of the cash flow from the utility to improve the financial position of the city. This seems to be a magician’s trick to put $250 onto your annual utility bill and slide it into another pocket. We have to pay for the decisions of City Hall in some way.

According to its annual report, Saint John Energy has no long-term debt. If the ownership issue is settled in favour of the City, then it could have a sale price ranging from a low of $70 million based on synergies to a high of $180M if the rates were synchronized with those of NB Power. The possible purchasers would be companies like Emera, Fortis or perhaps NB Power, who would derive benefits from a larger direct customer base in the south of the province. Or it is possible that an annual dividend could be paid to the City by the utility. A regulated utility would require EUB approval to pay the City. What seems fairly certain is that a change from the present status would mean higher rates for electricity.

There is another third alternative to the conservative status quo or the “sell Dad’s company and party time” option. The use of Saint John Energy as a developer of green power such as wind and small hydro could be a start towards sustainable development. Combined heat and Power (CHP) projects for developments in the city core would provide high efficiency use of fuel. The redevelopment of Musquash Hydro and construction of a water treatment plant could be accomplished by the utility without even working up a sweat. Some municipal utilities are providing lower cost citywide wireless Internet or fiber to the home to enhance the city lifestyle and productivity. Attracting people to live in the City requires benefits that overcome the higher taxes. All this and much more is possible with the necessary vision, leadership and cooperation between the City, the Province and Saint John Energy.

The University of New Brunswick is to be congratulated for their “Lets Talk Saint John” initiative. This is a grass roots collaborative project (with members of UNBSJ and the broader community) that encourages open and honest discussion of current and future issues that affect the region of Saint John. This issue could be raised at a future public meeting. Further information on “Lets Talk Saint John” can be found at http://letstalksj.ci-fi.net/ltsj/index.cgi

Other venues for discussion could be an EUB hearing or Saint John Energy holding an annual meeting with the ratepayers (the owner of SJE) or perhaps a town-hall type meeting organized by the city (the owner of SJE). After all, a municipal election is scheduled for 2008 and this is an issue of considerable importance to the electorate. The beginning of rational debate begins with a transparent and open process that honestly discusses the facts and likely outcomes of each alternative. It is not a quick process and it requires discipline and patience on the part of all concerned.

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