Enbridge and Spectra say their combination will create North America's largest energy infrastructure company. (CBC)

Enbridge Gas New Brunswick wants ratepayers to cover its legal fees in an escalating battle with the Alward government over natural gas distribution in the province.

The company plans to spend $1.1 million on legal fees this year, said general manager Gilles Volpé.

"It's like we do with any other type of legal challenges that we undertake to protect the business," Volpé told the Energy and Utilities Board during ongoing rate hearings in Saint John.

"We will take those steps to protect the business and preserve our rights," he said, arguing the company's legal costs should be included in the rates.

Enbridge is seeking more than $820 million in losses, damages and other costs from the New Brunswick government in two separate legal actions, the latest filed just three weeks ago.

The lawsuits stem from unilateral changes the Alward government imposed in 2011 on Enbridge's franchise agreement to build and operate the province's natural gas distribution system.

In April 2012, Enbridge filed a $650 million claim for breach of contract and earlier this month followed that up with a $176 million claim to recover money piled up in a deferral account the province has prevented Enbridge from recovering from customers, as originally agreed to.

'As the deferral account is still a legitimate recoverable from ratepayers, then the ratepayers — if someone else pays for that, the ratepayers would benefit.' - Gilles Volpé, Enbridge Gas

The legal fight has become a point of contention at the Energy and Utilities Board where Enbridge is asking permission to pass the costs of the latest lawsuit on to its New Brunswick customers.

"To the extent that we are successful in obtaining damages related to the amounts that are related to specifically the deferral account, those damages would be used to pay down the deferral account," said Volpé in explaining the attempt to charge bills from the second lawsuit to customers.

"As the deferral account is still a legitimate recoverable from ratepayers, then the ratepayers — if someone else pays for that, the ratepayers would benefit," he said.

But lawyers for various Enbridge customers say the company should pay its own legal bills.

"If you lose, the ratepayers get no benefit, but will spend a million dollars," said Christopher Stewart, a lawyer representing two of Enbridge's biggest customers, J.D. Irving Ltd.'s Atlantic Wallboard and the St. Stephen manufacturer Flakeboard.

"They will get nothing if you are not successful," said Stewart.

Public intervener René Basque has also questioned the appropriateness of Enbridge customers being saddled with the company's legal bills.

Changes to 1999 agreement

The Alward government unilaterally imposed a number of changes on Enbridge late in 2011 following years of complaints by natural gas customers about high distribution costs.

Enbridge was given a 20-year monopoly in 1999 to build and operate a natural gas distribution system in New Brunswick, but the cost of the expansion greatly outstripped customer demand for service.

Enbridge was allowed to place much of the expenditures it incurred building its network into a deferral account to be recovered later, but a lack of customers meant the deferral account kept growing with distribution rates kept high to cover the costs.

Critics complained that high distribution costs prevented new customers from coming forward and eventually the Alward government imposed various changes on Enbridge's franchise agreement, including barring the company from charging customers anything for the cost of the deferral account, which the company claims had grown to $176 million by the beginning of 2012.

That immediately reduced costs Enbridge could charge to its customers and distribution rates came down significantly, especially for industrial users.

Premier David Alward has defended the action as necessary to bolster the economy.

"There will always be critics," he told a Fredericton audience in January 2012. "But a responsible government must stand up for New Brunswick jobs, New Brunswick businesses and New Brunswick consumers."

However, Enbridge has been fighting the changes aggressively.

Lori Stickles, manager of corporate services for Enbridge, told the EUB the company spent more than $1 million of its own money on legal fees last year pursuing its breach of contract claim against the provincial government and would likely do the same this year in support of both lawsuits.

"It is similar in amount to what we saw in 2013 for our actual expenses," said Stickles in explaining the plan to spend $1.1 million on the lawsuits this year.

"Through consultation with our legal people — the legal people directly involved with these expenses — it was their expectation that this similar amount of work would be performed in 2014 resulting in a similar amount of costs. So that's how we came to that number."