The overhaul of the Mactaquac generating station could cost as much as $7.2 billion.BRUNSWICK NEWS ARCHIVES

The overhaul of New Brunswick’s most important hydroelectric power plant could cost as much as $7.2 billion – a huge amount tied to the unprecedented electrical rate hikes NB Power is seeking.

The startling figure was released reluctantly by NB Power’s chief financial officer and senior vice president Darren Murphy during a rate hearing in Fredericton last week.

NB Power has not provided an updated estimate since it embarked on the Mactaquac Life Achievement project in 2016, when it said it would cost between $2.9 billion and $3.6 billion to extend the life of the generation station and dam near Fredericton another 50 years.

Murphy at first told the three members of the New Brunswick Energy and Utilities Board he’d rather not give an estimate, citing the fact that tenders have not come in yet for pieces of the work. He said he didn’t have confidence in providing a reliable figure.

But under persistent questioning from Glenn Zacher, a lawyer working for J.D. Irving, Limited, Murphy acknowledged that with inflation and additional scoping work on the project, it would be one and half times to double the original estimate.

That would amount to between $4.4 billion and $7.2 billion.

The board, an independent, quasi-judicial regulator, will ultimately decide whether NB Power has proven its case that it should get its requested rate hikes.

Although most proceedings over the first two days of the hearings at the Fredericton Delta Hotel were dry, polite and formal, at times the atmosphere was tense, including an argument over whether NB Power’s customers would feel rate shock.

NB Power’s three most senior executives – Murphy, CEO Lori Clark and Vice President Brad Coady – appeared as the first panel at the hearing to decide whether the utility should be allowed to raise the average electrical rate by 9.25 per cent this year and the same amount next year.

That’s an average hike only. For instance, households are facing a higher increase of 9.8 per cent, plus a catch-up amount for unexpected costs last year of three per cent, for a total increase of 12.8 per cent as of April this year. Add that to next year’s potential hike, and households could be forced to pay 22.6 per cent more.

Randy Hatfield, executive director of the Human Development Council in Saint John, warned the board that New Brunswick has one of the highest energy poverty rates in the country.

Someone who is energy poor spends six per cent or more of their after-tax income on electricity. In New Brunswick’s case, that’s one in every third person in the province, he said.

Raising electricity rates steeply would be hugely difficult for most of these people, he said, given that most of them already have low incomes and use baseboard electrical heat.

NB Power has some programs to help low-income households, but he said they weren’t nearly enough.

“The glaring hole, the missing piece in a comprehensive energy poverty strategy, is a low-income rebate program,” he told reporters afterward. “That’s available in Ontario, in many of the States in the U.S. and throughout Western Europe. And in the absence of a low-income energy rebate, we’re going to find more and more, low-income households falling back onto whether they spend money on heat or eat.”

Big industrial customers face the highest hikes, this year amounting to slightly more than 15 per cent. JDI, which runs paper and sawmills throughout the province, is a huge consumer of electricity.

Clark said NB Power needs the increases to prepare for future load growth, meet climate change goals, deal with intense weather and worse storms, replace badly aging infrastructure, handle inflation, address supply chain problems and fulfill its financial obligations.

As part of NB Power’s efforts to shore up its finances and prepare for the spending at Mactaquac, among other big projects, it is under pressure from the Progressive Conservative government to wipe $1 billion of debt off its books by 2029.

Zacher pointed out that NB Power had failed to reduce any of its debt since formulating a plan in 2013 to reduce it by $1 billion, despite having $426 million in net earnings since that period.

“So ratepayers, for the next five years, are expected to pay the entire freight,” Zacher said.

But Clark said it was unfair to portray the situation that way. The chief executive argued that breakdowns at the Point Lepreau nuclear plant in Saint John were one of the main reasons her organization couldn’t pay down debt, a situation it hopes to address by investing more in annual maintenance and repairs.

Every time the plant has an unscheduled outage, the utility is forced to pay for expensive power from out of province or run other generators, otherwise people would experience brown-outs or rolling blackouts, she said.

And during the pandemic, NB Power decided to freeze electrical rates to help its customers cope.

“In hindsight, I don’t think it was the right thing to do,” Clark said. “But at the time, it was the right thing to do.”

NB Power lawyer John Fury asked the panel of NB Power executives whether the JDI lawyer was right to say ratepayers would shoulder the entire $1-billion debt repayment burden over the next five years. Coady said no, and estimated that about half the amount, $500 million or so, would likely come from revenues made from export sales of electricity to markets outside of New Brunswick.

Besides, Clark said the utility could not wait any longer to pay down debt because the upgrades were so badly needed at Lepreau and Mactaquac.

The Mactaquac project alone is expected to take 15 years. It’s already behind schedule, with Murphy explaining that experts had advised the utility to take its time and get the project started right, rather than rushing in.

NB Power asked for tenders on replacing the turbines and other work and expects to make a recommendation on how to proceed to its board of directors at the beginning of next year, with a final cabinet decision six to nine months later. That means work could start in the fall of 2025.

Alain Chiasson, the public intervener who the provincial government hired to represent the public interest, said the Mactaquac project concerned him. He wonders if NB Power will be able to keep rates at an annual average increase of 4.75 per cent for the three years following the latest hikes.

“The cost for Mactaquac has exploded since 2016,” he told reporters. “It will probably be at least $7 billion or if not more. So, yes, I’m concerned about that.”

At one point in the hearing, JDI’s lawyer recited sworn testimony from Clark at last year’s rate hearing, when NB Power unsuccessfully asked for an 8.9 per cent increase (the board only gave it a little over half the amount, 4.8 per cent).

He recounted that Clark had described rate shock as an increase of 10 per cent or more, what many customers are threatened with this year.

“Any amount when you’re already struggling to pay for groceries and gas will feel like rate shock,” Clark argued, adding that NB Power has a guiding principle of trying to avoid double-digit increases.

Zacher asked if she wouldn’t agree that the proposed increases were extraordinary.

“They are higher than what you’d normally see,” Clark said. “But these are not normal times.”

By John Chilibeck, Local Journalism Initiative Reporter

Original Published on Jul 03, 2024 at 07:26

This item reprinted with permission from   The Daily Gleaner   Fredericton, New Brunswick

Comments are Welcome - Leave a reply below - Posts are moderated