Interference in province’s rates partly to blame for utility problems, says NB Power CEO

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Years of inadequate rate increases at NB Power, many of which were imposed on the utility through the interference of provincial governments, have been a key factor in its current financial troubles. two senior executives told a committee of MPs on Thursday.

“Looking back, rates have been lower than they should have been for the past 12 years,” said NB Power Acting President Lori Clark.

“If we had raised interest rates, our debt would have been lower.”

NB Power made its annual appearance before the Legislative Assembly’s Public Accounts Committee to answer questions about its most recent financial results.

Lori Clark is the interim CEO of NB Power. She took over in July 2022 after the dismissal of former president Keith Cronkhite. She is the first woman to hold this position. (Jacques Poitras/CBC)

Several questions have been asked about the utility’s net debt, which topped $5.2 billion in September, as well as its plans to increase rates by 8.9% this spring.

Clark provided more direct answers than those provided by previous NB Power presidents, telling the committee that growing debt and steep rate hikes are directly tied to issues, some of them political, that date back to 2011.

She acknowledged that a number of issues have plagued NB Power’s finances in recent years, such as the poor performance of the Point Lepreau nuclear generating station. But she added that years of inadequate rate increases have left NB Power financially weak and time is running out to reverse the trend.

“We recognize that rates have been low for the past 12 or 13 years and we have had to get to a place where that debt has been paid off so as not to put the utility at risk for customers,” he said. she declared.

Clark did not directly criticize any particular government or minister, but the period she singled out as the source of NB Power’s problems, from 2011 to 2022, began with two rate freezes imposed on the utility by the former government of David Alward.

Back-to-back zero percent increases in 2011 and 2012 were promised by the Progressive Conservatives in the 2010 provincial election. They were implemented despite a difficult refurbishment of the Point Lepreau Nuclear Generating Station massively over budget at the time and inflation in the province totaling five percent in those two years.

NB Power executives trace its financial troubles to 2011. That’s when Premier David Alward’s former government, which then included Finance Minister Blaine Higgs, delivered on its election promise to freeze rates for two years. (Radio-Canada News)

NB Power suffered a third rate freeze in the 2021 election year despite inflation at 3.81%. Then, with inflation nearing 8% this year, it was limited to a 2% increase when the Higgs government made changes to the Electricity Act.

Over the entire 12-year period, NB Power’s figures show that its rates will indeed have decreased, in inflation-adjusted terms, by 10% this year from their initial 2011 level.

NB Power senior vice-president and chief financial officer Darren Murphy, who sat next to Clark during the four-and-a-half-hour session with MLAs, said the long-term financial plans developed by the department public to deal with its debt did not anticipate this type of financial restriction. .

“If we looked at the pattern of rate increases over that period, it was below inflation, which we wouldn’t have considered at the time,” Murphy said.

New Brunswick Premier Blaine Higgs called an election in 2020. NB Power agreed to a zero percent rate increase that year, but denied it was the result of political pressure. Earlier in 2020, Higgs said he wanted the utility to resolve its debt issues “without impacting rates.” (Andrew Vaughan/The Canadian Press)

“We would have considered at least following inflation during this period.”

In the past, NB Power presidents and other executives have generally avoided blaming inappropriate rate increases and, therefore, the governments behind them.

Clark herself in October declined to speak on the matter, telling reporters she’d rather “focus on the future” than blame whatever caused NB Power’s problems.

But on Thursday she was less diplomatic, gently but firmly challenging MPs who were simultaneously expressing concerns about the utility’s high debt and its demand for a major rate hike, to see them as connected events.

“Can we go back to a question you asked earlier,” she told PC MP Ross Wetmore as he began to change the subject away from the debt issue.

“We’ve talked about debt, but we haven’t talked about how debt is paid off. The way our debt is paid off is through rates,” she said.

While not a direct challenge to government, the comment appears to contradict a January 2020 speech by Premier Blaine Higgs, in which he told an audience that he had asked NB Power to “reduce its unacceptable level of indebtedness without affecting interest rates”.

Three years later, utility rates have barely budged as the government demanded, but its debt has soared by $300 million.

Wetmore seemed to get Clark’s point.

“I’m not saying governments of the past probably shouldn’t have steered clear of rate increases,” he said. “But that’s definitely the past.”

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