Energy Minister Jack Keir said he believes the proposed NB Power sale agreement would shield ratepayers from significant rate increases after five years. (CBC)

New Brunswick homeowners and large industry could be facing electricity rate increases to cover the cost of additional power generation in five years, according to NB Power documents.

NB Power's 2009-2019 load forecast, which projects how much power will be needed in coming years, suggests a scenario in which rate increases could exceed the rate of inflation starting in 2015 if the proposed NB Power sale to Hydro-Québec proceeds.

The load forecast, a public document prepared in January, indicates the heritage pool could balloon past 14 terawatts within the next five years.

The 14-terawatt pool is the base amount of generation in the memorandum of understanding governing the sale of NB Power assets to Hydro-Québec.

NB Power's projected load forecast for 2015-16 is 14.5 terawatts. In 2018-19, the demand will hit 15 terawatts.

The memorandum of understanding creates two so-called heritage pools, one for residential consumers and another for industry customers. When power demand exceeds those pre-set amounts Hydro-Québec can charge higher rates to cover additional generation.

Energy Minister Jack Keir questioned the load forecast's projections, saying the sale agreement designed the heritage pools in a way that would prevent New Brunswick customers from being overcharged for power.

Keir said the alternative would have been to establish a higher heritage pool amount in the agreement. But that would have led to New Brunswickers paying for more electricity than the province needs in the early years of the deal.

"I would say there is marginal room for growth in both pools," Keir said in an interview.

"And there is a balance … if you put too much room in there for growth, then we are paying for electricity that we are not using, which doesn't make any sense at all."

Under the proposed NB Power sale to Hydro-Québec, after five years, New Brunswick power rates could increase for three main reasons to keep pace with inflation, to cover additional distribution and transmission costs, or to pay for extra generation costs above the heritage pool.

The 14 terawatts set out in the agreement includes 9.5 terawatts for residential customers and 4.5 terawatts for industrial customers.

If the generation needs for any of those groups exceeds the designated heritage pool, Hydro-Québec will ask for bids from companies that can generate that power.

If that cost is higher than the price for the power already in the heritage pool, it would be passed along to whichever rate category, industry or residential, has exceeded its amount.

Added predictability

Thierry Vandal, CEO of Hydro-Québec, said there will be future growth in generation demands but the deal offers New Brunswick a new level of rate predictability.

"We understand there is going to be growth in the future but you are dealing with a very large block of supply ... frozen for five years, with a very predictable track beyond that five-year period," Vandal said.

"That is going to provide a lot of stability, a lot of predictability to rates, very different from our understanding what rates in the past have been here in New Brunswick."

Vandal said even if the sale to Hydro-Québec didn't happen, New Brunswick ratepayers would be covering the cost of additional supply.

And New Brunswick's energy minister said the public bidding process that Hydro-Québec must follow means extra generation costs could actually be lower.

"If the low bid came in lower than the heritage pool [costs of generation], it would be marginalized into that heritage pool, then the price would go down," Keir said.

Load forecast

NB Power's 2009-2019 load forecast indicates that both residential and industrial customer classes could be near or exceed the heritage pool by 2015-16.

The proposed agreement creates new rate classes that are different than NB Power's current scheme.

According to NB Power's documents, industrial power demand will be 4.8 terawatts in 2015-16.

Meanwhile, the demand for residential customers is projected to be 5.9 terawatts, the small business rate category is expected to hit 2.9 terawatts and street lights will be 0.9 terawatts.

Any extra distribution or transmission costs must be approved by the Energy and Utilities Board, and Hydro-Québec must issue public bids for any new generation.

Keir said Efficiency New Brunswick will play a role in keeping electricity usage under the heritage pool ceiling.