All the King’s horses

The upcoming rate hearing for NB Power is sure to generate a lot of controversy, but not necessarily for the right reasons. If you are really brave the documentation can be found on NB Power web site under regulatory affairs. There are hundreds of pages of information guaranteed to make you yawn and scratch your head.

Unless they are fibbing, revenue will be inadequate by $112 million and higher rates are required to operate the business. We can’t change the past so the new EUB should spend some time encouraging transparency on the part of NB Power. The previous government put the generation power purchase agreements off limits in the 2006 hearing for some strange reason. Generation accounts for 75% of the cost of your power bill. This first hearing will be the litmus test for the effectiveness of the new chairman Raymond Gorman. If the EUB fails to obtain all of the information it requires, then it should adjourn the hearing in the same way that John Major did when the federal government was not providing him with information for the Air India hearings.

The all-new EUB might prepare for the hearings by reading the previous PUB decision that was essentially set aside by the Conservative government.

The old PUB had been asking for rate re-design to eliminate the declining block structure for 10 years or more. Presently, kilowatt-hours become less expensive as your usage goes up. Going to a flat rate can be done on a revenue neutral basis and is one of the prerequisites to good energy conservation and social justice for the small apartment dweller who is often impoverished. A good argument can be made for reducing or eliminating the service charge on the bill instead of increasing it.

What is not shown in the rate application or in the corporation annual report is the kWh generation provided by each plant and the annual costs of that plant. In other words, the production costs so that the EUB can evaluate whether management is doing a credible job. In a province like New Brunswick, a lack of transparency is a symptom of someone hiding either incompetence or a sweetheart deal. To those who suggest a requirement for proprietary secrecy, I would ask – “where is the competitive market”?

According to the application, the cost of natural gas and heavy oil for generators will rise by $120 million between 2006 and 2008. Are the Non Utility Generator’s (NUG) natural gas plants in Saint John still a good deal for the people of New Brunswick? Are they properly defined as base load units in the “PROMOD” power simulation software that determine which plant gets scheduled? I don’t know. It may be a great deal but there is just no information available to the public or the EUB.

The self-sufficiency task force indicated the need for an independent study to determine the balance of cost allocation between industrial and domestic users of electricity. One would hope that the EUB would commission this study as it falls within their mandate.

Yet to be clearly defined is the latitude to be given to the EUB and what activities will be retained by the Department of Energy.  An activist government may be tempted to manage NB Power directly as in the past.  It has plans to develop a second nuclear plant, a second coal plant at Belledune and remove barriers to co-generation and green energy. The result will be collisions between the Energy Department, the NB Power board of directors and the EUB. A confused and ineffective NB Power is the result.

As the group responsible for long term energy policy, the department of Energy should cut its links with NB Power and manage, via the EUB, with written regulations under the electricity act or by policy papers published on its website.  To influence on a day to day basis is not acceptable.

The EUB requires direction on a number of issues.  The first is whether a competitive market for electricity should be built or removed.  The present situation of being halfway pregnant is not reasonable and presents inefficiencies at NB Power.

The second is the displacement of oil generation at Coleson Cove.  The eventual decline of world oil production and subsequent escalating price of fuel is likely within five years. Stabilizing rates requires investments in other projects of a renewable nature that will be in service by roughly 2012.

And there are other issues but the greatest is the lack of a holistic vision integrating NB Power into the constantly changing world. Existing debt at NB Power is $4 billion with virtually no equity. The total debt after Lepreau refurbishment is expected to be $5 billion before looking into other generation projects for export or Coleson Cove replacement. Virtually continuous political mismanagement since the days of Richard Hatfield to the present has taken its toll on the corporation.  Can we expect the new EUB and the Energy Department to put Humpty Dumpty together again?  Not based on past history. Will Jack Keir succeed where others have failed?  There are some promising signs and some signs of failure.  For the moment, I reserve judgement.

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