NB Power sale won't help debt: auditor general
Last Updated: Saturday, November 14, 2009 | 9:16 PM AT
By Bob Jones, CBC News
Auditor General Mike Ferguson says selling NB Power could actually worsen the province's debt load. (CBC)New Brunswick's auditor general says the sale of NB Power to Hydro-Québec will not help solve the province's debt problem, as promoters of the deal have been claiming.
Mike Ferguson has expressed concern about New Brunswick's growing debt for more than two years and last February publicly called on the government to develop a plan to rein it in.
But selling NB Power does nothing to help, Ferguson said. He said it could ultimately make things worse by shutting down a substantial amount of revenue the province has been collecting from the utility.
"If you look at what [NB Power] made in earlier years where it was providing net income to the province, then [the sale] looks like it's a net negative on the province's statements," he said.
'Actually there will be no impact on the province's net debt because the province has always been deducting NB Power's debt anyway and saying that's not something the taxpayers have to pay.'—Auditor General Mike Ferguson
On Oct. 29, New Brunswick Premier Shawn Graham announced his intention to sell NB Power to Hydro-Québec, in part to solve his government's deteriorating financial position.
Graham was elected in 2006 promising to balance the province's books, but instead has overseen three straight jumps in the province's debt — the last in the middle of the global economic recession — that has added a record $1.7 billion to what the province owes.
Selling NB Power will help ease that problem, Graham maintains.
"There's huge debt associated with NB Power," Graham told a caller during a recent CBC phone-in program. "This transaction today eliminates that debt for future generations."
But NB Power's debt is not a problem for taxpayers because it's self-supporting, backed by assets, such as power plants and transmission lines that pay for themselves, said Ferguson.
The province has never included NB Power's debt on its own financial statements because of that, he said.
"Actually, there will be no impact on the province's net debt because the province has always been deducting NB Power's debt anyway and saying that's not something the taxpayers have to pay."
Loss of revenue
In addition, NB Power has often provided a substantial source of income for the province, Ferguson said. He wants to see an accounting of how much future revenue, if any, the government expects to lose from selling the utility.
This year, NB Power is expected to post its first loss in six years after being directed by the premier to limit its rate increase to three per cent.
But between 2005 and 2009, the utility returned a record $540 million to the province, $285 million in profits and $255 million in fees and income charges.
If NB Power is expected to return to profitability in the future, its sale will mean a loss of income to the province, said Ferguson. He would like to see that explained.
"It's a very complex deal. It's the largest deal that's ever occurred for the province of New Brunswick and it's not the type of deal you can assess or decide the merits of without seeing the detail of the numbers," he said.
Under the proposed deal, expected to be finalized by the end of March, Hydro-Québec would take over most of New Brunswick's generating stations for $4.8 billion, which represents the equivalent of NB Power's debt, Graham has said.
Hydro-Québec would also freeze residential power rates in New Brunswick for five years and lower large industrial rates to the prices offered to the same customers in Quebec for the same period, worth an estimated $5 billion to NB Power customers, according to Graham.
The proposed sale of NB Power needs legislative approval before it can proceed.
Corrections and Clarifications
- N.B. Premier Shawn Graham has overseen three straight increases in the province's debt, not three straight deficit budgets as reported earlier. (Nov. 15, 2009 | 2:25 p.m. ET)
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