Large NB Power rate increase is not in public's interest, says utility expert

A Calgary utility expert hired to analyze NB Power's application for a pair of 9.25 per cent rate increases over the next two years says the increase could be cut in half.

"NB Power's applied for rate increase of 9.25% is neither required nor in the public interest," said Dustin Madsen in a 140-page written evidence statement delivered to the New Brunswick Energy and Utilities Board last week.

"NB Power has forecast a variety of costs that are not supported as being just and reasonable."

Madsen is an accountant and former Alberta utility executive who now heads Emrydia Consulting Corporation.

He was hired by New Brunswick public intervener Alain Chiasson to review NB Power's rate application.

The utility has proposed rate increases totalling $157 million this year and $167 million next year to get control of its finances and meet New Brunswick government requirements to significantly reduce its multi-billion dollar debt burden.

The increases average 9.25 per cent in each of the next two years, although the amounts vary for different customer groups. For example, residential customers would pay 9.8 per cent more this year.

NB Power was given temporary permission by the Energy and Utilities Board to begin charging the higher rates on April 1 until a final decision can be made on whether they are justified.

A full hearing is scheduled to begin in mid-May. NB Power will be required to rebate customers any excess amounts if the rate increase is less than planned.

A separate three per cent rate increase expected to raise $64 million for NB Power to pay for past over-expenditures also took effect on April 1, but is not subject to the larger rate hearing.

Madsen identified three areas where either NB Power's costs are exaggerated or its revenues are underestimated.

He said given "the need to reduce the unprecedented rate increases sought by NB Power," those amounts should be used to ease the burden on its customers.

In one instance, Madsen pointed out depreciation charges on $1.3 billion worth of electrical infrastructure over the years was measured in a 2019 study to be $187 million more than actual depreciation.

He recommended $25 million per year of that difference be credited back to NB Power as income and that be used to either retire debt or lessen the size of the requested rate increase.