In January 2003, the then Minister of Natural Resources introduced the New Brunswick Electricity Act in the Provincial Legislature.

The Minister was quick to point out that NB Power had earned a solid reputation as a safe, reliable, service-oriented utility. He also said that NB Power was unable to meet some of the U.S. federal regulator standards for selling electricity directly in the United States.

I commented then that it was my understanding that NB Power was a public utility mandated to serve the people of New Brunswick, not customers in the United States.

The current government has designated energy and the export of energy as cornerstones of its self-sufficiency mandate. A few weeks ago, NB Power announced that it was seeking a 9.6% rate increase.

Last year, it sought an 11% increase that in turn was capped by the government of the day at 8%. That same government announced that it would rebate the provincial sales tax on home heating fuels, equivalent to the 8% rate cap.

Last week the New Brunswick Energy and Utilities Board (formerly the New Brunswick Public Utilities Board) announced that it would grant interim approval of the latest rate increase contingent on (a) the utility proving its need for a rate increase and (b) that in the event that it did not prove that need, that customers would be credited for whatever overpayment accrued during the public hearing process.

NB Power’s rate application cites rising fuel costs and the need to recover lost revenues from last year’s rate cap to justify the need for rate increases.

Some would argue that a company that generated $100 million in profits over the last two years does not need a rate increase but a $100 million profit on two year sales of nearly $3 billion is a paltry 4% or less of pre-tax sales;
far less than any private sector operator would demand and far less than any amount that would

• (a) permit significant debt repayment
• (b) reinvestment in the business and ,
• (c) generate dividend payments to the Provincial government that would equal returns on otherwise invested dollars.

Response from some segments of the New Brunswick business (manufacturing) community suggests that it is entitled to low electricity rates. Entitlement assumes ownership and god-like endowment without cost. Sorry folks, that’s not how the real world works.

The current government has indicated that it would be happy with a break-even operation. The utility cannot sustain itself on a break-even basis.

NB Power is a mish-mash of seven corporate entities: a holding company, a system operator, a finance company and four operating companies including a nuclear generating company, a non-nuclear generating company, a transmission company and a distribution company. The company applying for the rate increase is the distribution company. The companies penalized by rising fuel costs are the non-nuclear and the nuclear generating companies. This begs the question what is lost to consumers from inter-company transactions.

In NB Power’s most recent Annual Report 2004-05, fuel and purchased power costs (from other utilities like Quebec Hydro) were $497 million. That’s 36% of NB power’s operating costs.

A 25% increase in fuel and purchased power costs would be $124 million. In the past, it seems to me that we were told by the utility that every 1% increase in rates would yield about $10 million in new revenue. A 9.6% rate increase, based on 2004-05 revenues would yield about $134 million or $14 million for every 1% increase, not $10 million.

These inconsistencies create the kind of skepticism that has surrounded NB Power for years notwithstanding the fact that Atlantic Business Magazine recently named the utilility’s CEO, David Hay as one of the top CEOs in Atlantic Canada.

I do not accept the fact that NB Power has an obligation to New Brunswick’s business enterprises or indeed to its residential customers to provide electricity below cost or to provide it at rates deemed acceptable by the community unless we as taxpayers and residents of New Brunswick are prepared to mandate our provincial government to subsidize the utility for its losses. Government has a responsibility to ensure that the utility is operating efficiently and to ensure that its rates are fair.

There are two other considerations that colour the background of NB Power’s rate requests: the cost of export energy and the cost of climate change remediation. Customers of NB Power, resident in New Brunswick, commercial or otherwise should not be expected to finance the infrastructure that will facilitate the export of electricity to the United States. Customers of NB Power, resident in New Brunswick should not be expected to finance the burden of environmental cost inherent in the expansion of New Brunswick’s export generating capacity.

These are the costs of economic development, not the costs of service delivery to existing customers.

Customers of NB Power, resident in New Brunswick should be expected to fund the investment required to fund alternative energy sources and we should be expected to fund the research and the technology applications that would increase the efficiency of our energy consumption.

We should also expect our public utility to reward us with lower rates when we consume less and when we become more energy efficient. Current income levels (personal and corporate) will not support ever increasing rate increases. Self-sufficiency demands that we become more efficient and less consuming.

Whatever the decision of the New Brunswick Energy and Utilities Board in respect to NB Power’s rate application, it must reflect these realities.

Where the burden of cost is not sustainable, it must be subsidized by our tax dollars.

If we fail to realize the difference between internal energy sustainability and the cost to export, we will self-destruct. If we get it right, we can grow our economy exponentially.

W.E. (Bill) Belliveau is a Shediac resident and Moncton business consultant. He can be contacted at bill.bellstrategic@nb.aibn.com Atlantic Insight is a published Blog inventory of opinion articles published weekly in New Brunswick's print media as written by W.E. (Bill) Belliveau, who is a resident of Shediac, New Brunswick, and small business owner, operating his Moncton-based marketing consultancy, Bell Strategic. He can be reached by e-mail at bill.bellstrategic@nb.aibn.