NB Power's 3 years of poor financial results under scrutiny
NB Power insists it's still on the right track, despite failing to meet profit targets
NB Power's failure to meet profit targets by a wide margin for three years in a row came under intense scrutiny at its rate hearing Thursday in Saint John, but utility executives insist the poor financial results are not a concern.
"We disagree that historical performance is a good indication of how we should be performing in the future," said Darren Murphy, NB Power's senior vice-president of corporate services and chief financial officer.
"We're still on the right track and our long-term plan is still sound."
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But Energy and Utilities Board lawyer Ellen Desmond, who pressed Murphy on a recent series of weak bottom lines at NB Power, questioned the optimism.
"Mr. Murphy, past performance is useful to understanding where you are going in the future — you'd have to agree with that," she said.
"I guess our point is when you have a plan, and then your results are different than what's expected. You have to adjust your plan."
NB Power has set debt reduction as a major corporate priority but has been making slow progress.
Over the past three years, the utility has budgeted for a combined $269 million in profit but has been able to generate only a fraction of that — $58 million — and debt retirement has suffered accordingly.
The reasons have been different in different years including poor performance at the Point Lepreau nuclear generating station, low hydro flows, warm winter weather, falling export sales, punishing storms and this past winter, surging natural gas prices.
Desmond questioned Murphy extensively Thursday about why the utility has not trimmed spending — especially non-essential capital spending — as various unexpected events emerged to drive up costs and deflate profits.
"There isn't one year (since 2013) where the debt reduction has been as planned, is that correct?"
"That's correct," responded Murphy.
Desmond did not specifically mention NB Power's pending application to spend more than $100 million on deploying smart meters provincewide over the next three years but did question whether the utility's capital spending plans are too "aggressive" given its high debt levels.
"Isn't that part of a sound utility practice — meeting those debt reduction targets? And when they're not met, adjusting maybe some capital expenditures going forward?
Extra money on Point Lepreau
Murphy rejected that idea and pointed to operating problems at the Point Lepreau nuclear plant following its refurbishment as an example where extra money had to be spent to fix a problem that has been draining funds.
Since emerging from refurbishment in 2012, Lepreau has suffered numerous reliability problems and produced less power than expected — about $250 million less.
NB Power has boosted spending at the plant significantly to fix those reliability problems and on Wednesday celebrated Lepreau's best production year since its renovation — although its output is still short of original targets.
"We recognized performance of certain generating stations were a challenge in the past, we addressed it and now it's performing a lot better," said Murphy.
"Our view on capital spending needs to be based on a long-term view, not based on short-term performance."