Questionable Florida investment by NB Power in spotlight at rate hearing
Utility and province spent $13M on licensing rights for technology claiming to generate hydrogen from seawater
NB Power began an application for a $29.7-million rate increase in front of the Energy and Utilities Board on Wednesday with a surprise change of heart about asking customers to pay extra for its controversial investment in the Florida hydrogen company Joi Scientific.
"We thought it was important to notify the panel NB Power has recently decided it will not seek to recover the cost incurred for the licensing agreement with Joi Scientific," said Darren Murphy, NB Power's chief financial officer and senior vice-president, minutes into what is expected to be a six-day hearing.
"As a result, we are reducing the cost of our application accordingly."
NB Power had been applying for a two per cent rate increase on all of its customers beginning April 1 to raise an extra $29.7 million in revenue for next year.
But Murphy said NB Power decided just before the hearing began it was not appropriate to ask customers to pay about $1.34 million in amortization and interest expenses the utility will incur this year on the investment it made in Joi Scientific.
That will likely force it to lower its rate request to 1.9 per cent.
NB Power invested a total of $7.3 million of its own money in Joi Scientific and was planning on recovering that from utility customers over a six-year period, according to the rate application it first filed with the EUB four months ago.
That remained the plan until utility executives appeared in person at the rate hearing Wednesday.
"We appreciate the late nature of our notice," said Murphy.
Joi Scientific's dubious claims
Joi Scientific claimed to have developed a method to efficiently generate hydrogen gas from seawater to generate electricity on demand. It would have been a major scientific breakthrough and, in 2016, senior NB Power officials, including President Gaëtan Thomas, became convinced it could work.
The utility helped raise $13 million, partly from NB Power funds and partly from the New Brunswick government, to obtain licensing rights for the technology.
But at the EUB, Keith Cronkhite, NB Power's senior vice-president of business development and strategic planning, said the utility was never supposed to invest its own money in the scheme and did so only after the federal government declined a funding request.
Cronkhite said it would not be reasonable to ask NB Power customers to pay it back for something it had not intended to spend money on in the first place.
"The objective here was not to have a direct investment from NB Power," said Cronkhite.
"Half of the licensing arrangement was obtained through provincial support. The goal was to obtain the other half of the funding requirement from the federal government to complete that support.
"The bottom line is these efforts were done at the outset and the intent was never to have this borne by the customers of New Brunswick Power."
Failed bid to reach market
Last year, NB Power spent additional money attempting to engineer a way to get Joi Scientific's technology to market, but Cronkhite said those efforts failed.
"There was a provision whereby we would take efforts to commercialize, to scale up the technology for deployment," he told public intervenor Heather Black.
"The advances that were anticipated relative to the electronics and the ability to simplify the testing of the rig did not develop as we would have anticipated."
In December, New Brunswick Energy Minister Mike Holland announced the province, as NB Power's sole shareholder, did not want the utility to pour any more money into Joi Scientific.
"At this particular moment I have not been presented with any proof of viability," said Holland about the technology.
NB Power's rate hearing continues Thursday.