NB Power's rate hike should be denied, expert says

NB Power's application for a July 1 rate increase should be denied completely, according to new evidence filed by the province's public intervener.

Heather Black, who represents the public in front of the Energy and Utilities Board, formally submitted expert evidence criticizing NB Power's application for a two-per-cent rate hike, it's third identical increase in the last 21 months.

"NB Power's justification for the two-per-cent rate increase requested in its general rate application in this proceeding is insufficient," wrote Boston energy expert John Athas, who was hired by Black to review the application.

"It is my recommendation that the board deny NB Power's request."

NB Power is in front of the Energy and Utilities Board for the first time in eight years to seek permission to raise its rates, something it has been allowed to do unilaterally the last two years and under direction from the Office of the Premier, without public review before that.

The actual hearing doesn't begin until June, but all sides have been submitting evidence in advance for review.

NB Power is projecting a $70M profit

In an evaluation of the rate increase for the public intervener, Athas, who will likely testify at the hearing, says there's no obvious reason for it since NB Power has acknowledged it would still run a $70.2-million profit without an increase and is asking for it exclusively to boost its bottom line.

He said if the utility feels $70 million is not enough income, it should cut costs to boost returns, not raise prices.

"The opportunity exists for NB Power to generate enough earnings ... without the two-per-cent increase in rates requested," wrote Athas.

NB Power is under direction by the provincial government to reduce its debt by $1 billion by 2021 and has openly acknowledged that the rate increase is meant to raise money for debt reduction.

However, Athas says the utility has not demonstrated enough internal cost cutting to convince him raising rates is its only viable option for boosting profits.

In addition, he said natural gas and oil prices have fallen since NB Power put together it's budget and the utility has a track record of overestimating certain budget costs.

He says he's suspicious the utility picked a two-per-cent increase out of habit because that is what the provincial government allowed it to do the last two years.

"NB Power had conveniently been able to arrive at a two-per-cent overall increase in revenue requirements in preparing this application. This allows NB Power to propose a level of rate increase ... that NB Power would have been eligible to unilaterally implement under the prior governing legislation," wrote Athas.

Black says Athas's position on the rate increase is his own and she is still evaluating all the evidence, which is still coming in, before deciding whether she too will argue for the increase to be denied.

"My position will be developed over the rest of the process," said Black.