NB Power likely to miss debt reduction target of $1B by 2022
Crown corporation's goal was to lower debt to $4B by 2022 but officials now say they have 'worries'
NB Power says it's unlikely to hit its goal of reducing its debt by $1 billion by 2022 and will also have a hard time getting 40 per cent of its electricity from renewables.
The Crown corporation's chairman and its chief executive officer told a committee of MLAs Tuesday that it's been blocked from raising rates as high as it needs to if it wants to hit the debt target.
The previous Progressive Conservative government set the $1 billion goal in its energy plan. The reduction would represent 20 per cent of NB Power's $5 billion debt.
But the debt's been cut from $5.062 billion in 2012 to $4.913 billion in 2016, a reduction of only $149 million so far — far off the pace needed to hit the goal.
We certainly have some challenges to achieve them, and even some worries.- Gaetan Thomas, NB Power CEO
"I imagine you're still confident about reaching your objective?" Liberal MLA Wilfred Roussel asked the two executives.
But CEO Gaetan Thomas told Roussel that while the corporation doesn't plan to drop the goal, "We certainly have some challenges to achieve them, and even some worries."
Rate increases rejected
He pointed out the Energy and Utilities Board, which must approve NB Power's rate increases, has turned down the corporation's last two rate-increase applications.
"When you look at the regulators, their goal is the lowest rates possible, and competitive rates," Thomas said.
Earlier this year, NB Power asked the EUB for a two-per-cent residential rate increase but was given a 1.63 rate increase instead. Last year, the utility asked for two per cent and got 1.6.
"It's uncertain to us whether the kind of earnings that we need to reduce debt will be acceptable in this regulated environment, so it's a concern," NB Power chairman Ed Barrett told the committee.
The only way to retire debt is make more money, or don't do some of the capital expenditure we have to do.- Ed Barrett, NB Power chairman Ed Barrett
"It's easy to do the math," he added. "If there's … six years left to do it, do the math. That tells you what the debt reduction needs to be."
Barrett said "The only way to retire debt is make more money, or don't do some of the capital expenditure we have to do."
Thomas said that includes spending ranging from a possible refurbishment of the Mactaquac hydro dam, to basic maintenance of power stations and transmission lines, to tree-trimming to keep branches away from lines. Much of that spending can't be avoided, he said.
He said another complication is the goal to have NB Power derive 40 per cent of its electricity from renewable sources by 2020.
That includes getting 40 megawatts from small-scale projects by First Nations and 40 megawatts from community initiatives.
"This is energy that costs more than what we produce now," Thomas said.
While NB Power expects to hit the 40-per-cent-renewable target, the goal clashes with the need to reduce costs and increase profits to pay down debt, he said.
Thomas said NB Power has delivered "information" to its board about the proposed Mactaquac refurbishment, with a decision due by the end of the year.