NB Power rate freeze could cost more than Liberal calculation

Figures show the cost of a four-year rate freeze for residential and small business customers to NB Power will be as much as $27 million more than the New Brunswick Liberals have calculated.

But the party says it is not aware of any problems in its numbers and will not re-evaluate thepotential effect on the utility's finances.

"We are confident in our estimate," said Jonathan Tower, a spokesperson with the Liberal party.

Liberals have made the promise to freeze power rates for some electricity customers a central feature of their campaign and leader Brian Gallant mentioned it multiple times during Wednesday's leaders debate, including in his closing remarks.

"We will freeze power rates for four years to help our families and small businesses," he said in one of several plugs.

Critics have raised concerns the freeze may worsen NB Power's long-term financial problems, but Gallant has argued there is enough inefficiency inside the organization to deal with less revenue through internal cost cutting.

"It is very possible for NB Power to be more efficient and save approximately $13 million per year," Gallant said whileannouncing the freeze two weeks ago.

More than estimate

The $13 million figure was Gallant's estimate of the value of the freeze in its first year.

But there is some evidence that estimate is well below the amount of money the freeze actually involves, a miscalculation that will widen as the freeze progresses.

According to documents on file with the New Brunswick Energy and Utilities Board and elsewhere, about $784 million in NB Power electricity sales will be subject to the freeze next year.

That's55 per cent of NB Power's in-province sales.

The figure includes $669 million in sales to NB Power's 329,000 residential customers and $45 million in sales to 18,000 of its small commercial customers who consume a maximum of 20 kW of electricity at any one time.

It also includes $70 million in sales to the province's municipal utilities that they resell to about 40,000 other residential and commercial customers who Liberals have promised will also be covered by the freeze.

Banning NB Power from raising rates by twoper cent on $784 million of its sales will save all of those customer groups and cost the utility about $15.7 million in the first year of the freeze, $2.7 million more than the $13 million Liberals announced.

Cost to grow

But that's just the first year.

The freeze on the $784 million in sales is compounded annually costing four percent in year two, 6.1 per cent in year three and 8.2 per cent in year four.

That raises the total cost of the freeze to NB Power to $160 million over four years, about $27 million more thanthe total Liberal estimate.

On paper, the utility can absorb the reduction becauseit was projecting profits over those four years, before the freeze of $376 million. Still, those profits are considered critical in NB Power's long-range plan to reduce its elevated $4.8 billion debt load.

Peter Hyslop, a long time NB Power critic and a former public intervenor at its rate hearings in front of the Energy and Utilities Board saidhe wouldn't mind seeing some belt tightening among top executive at the utility, but doubts there is enough fat to cut to keep profits up.

"NB Power has a significant debt and part of the twoper cent increase each year was to deal with that debt," said Hyslop.

"Again it seems we've stepped in and said, 'Well look, we can gain politically here and the heck with our debt repayment plans.'"