Lawsuit settlement benefits not being steered away from customers, NB Power insists
'They certainly will get all the benefits of the settlement,' says NB Power vice-president
NB Power's top financial executives denied suggestions Wednesday the utility is misdirecting nearly $50 million of a recent insurance settlement to salvage its own sagging profits instead of sharing settlement benefits completely with customers through lower rates.
"Customers are getting 100 per cent of the benefit of the insurance settlement," said Lori Clark, the utility's senior vice-president of operations, who took issue with suggestions the utility unveiled $48 million in new financial shortfalls last week to "dampen" the amount of insurance settlement money that would be left over to cut rate increases.
"You said, 'Did the in-year results dampen the impact of the settlement,'" Clark replied to Scott Stoll, the lawyer representing municipal utilities at the hearing who raised the issue
"Some people may interpret that to mean they did not get all the benefit of the settlement They certainly will get all the benefits of the settlement."
Bad news reveal
Clark and NB Power Chief Financial Officer Darren Murphy were questioned in detail about why the utility suddenly revealed bad news about its profits last week as part of new evidence meant to show how the insurance windfall will be shared with customers.
NB Power does not normally update its prior year financial statements during rate hearings since it has little bearing on what the utility needs to charge customers in the following year.
But last week, as it submitted documents showing how it proposed to deal with an insurance windfall announced in late March, it also slipped in information about a collapse in its expected profitability for the year ended March 31.
Murphy acknowledged NB Power has known about that deterioration in its finances for sometime but felt no pressing need to divulge it until the insurance settlement came through.
"In the absence of something significant, we would not look to update year-end results as part of the hearing process," said Murphy.
The exact amount of the insurance settlement is not known, but enough information about it has been released to suggest it is worth between $100 million and $150 million at least.
It was paid to NB Power March 29 by insurance companies to settle claims resulting from cost overruns suffered by NB Power during the four-and-a-half-year refurbishment of the Point Lepreau nuclear plant that finished in 2012.
By declaring $48 million in reduced profits before calculating how the insurance settlement would be shared with customers, J.D. Irving Ltd. lawyer Christopher Stewart suggested NB Power had essentially declared that much more debt, which would require the first $48 million of the settlement to fill.
"That difference in the previous year's financial results for the utility were viewed by the utility as not sufficiently material or pertinent to include in the rate case," said Stewart.
"It's only now that you've received the insurance settlement proceeds that you've chosen to bring those (losses) forward."
Murphy appeared to acknowledge that customers would get lower rate increases this year if the profit shortfalls from last year had not suddenly appeared but said the benefit would have been short lived since higher increases in future years would then be required.
"To reduce (rates) one year only to increase it the next didn't seem to make any sense to us so we said why wouldn't we combine those," said Murphy.