NB Power says rate increase will offset Mactaquac dam costs

NB Power made it clear to the Energy and Utilities Board Tuesday its application for a mid year two per cent rate increase is part of a plan to accumulate money quickly in advance of having to spend billions on the Mactaquac dam.

"We see significant investments required for Mactaquac," NB Power's chief financial officer Darren Murphy said under questioning by EUB board member Patrick Ervin.

"This is a strategy to be in a position to make decisions and have options so that you're not faced with a situation where you couldn't make a decision on reinvestment on Mactaquac because you couldn't withstand the debt load," Murphy said.

Murphy has been asked repeatedly in different ways during NB Power's rate hearing about whether the utility really needs the money it's asking for.

NB Power awarded itself a two per cent increase without a hearing eight months ago with government approval and acknowledges in its own evidence it would turn a respectable $70.2 million profit this year with no increase at all.

But Murphy says the extra $20.4 million in profit the latest increase will generate is a building block toward an overall 14.9 per cent increase in rates the utility wants in stages by 2022 as it builds toward what it hopes will be record profits of $250 million and above to deal with the looming Mactaquac problem.

Ervin said it was clear the dam was driving NB Power's short and long term financial plans, including plans for steady annual rate increases.

"I'm gathering it's probably as obvious as the nose on my face that Mactaquac really figures very, very prominently in the 10 year plan," said Ervin.

Timing driven byMactaquac

"Yeah, you're correct. The timing is driven a lot by those capital investments in Mactaquac," said Murphy.

The Mactaquac dam is the largest of seven hydro-electric power stations operated by NB Power in New Brunswick, producing more power than the other six combined.

But it is deteriorating and expected to last only until 2030.

NB Power has promised a decision next year on whether to rebuild or decommission it but has said neither option will cost it less than $2 billion with the reconstruction option likely to cost substantially more.

It has budgeted $8.8 million this year to study what to do.

Murphy says the utility has just a few years to accumulate the money it needs to deal with Mactaquac and says if rates don't start going up now to deal with it, the pain will be greater down the road.

"If we were to delay, we're of the opinion that results in larger rate increases later," said Murphy. "It just makes it far more difficult in the latter years to ramp up rates quickly."