N.B. Power leaping into new ventures to tackle debt
Critics warn that utility’s new subsidiaries will lack transparency, carry risk
New Brunswick's energy minister says he expects to find out by June how N.B. Power plans to dabble in new revenue-generating ventures designed to lower its huge debt.
The utility has been given new powers to operate subsidiaries that Mike Holland says can sell energy-related products as a way of raking in profits that will help it meet a 2027 goal.
"We've given them a mandate to reach certain debt reduction targets," Holland said. "And we've also told them all hands on deck [with] whatever means with which you can find opportunities," he said.
But opposition parties say the changes to the Electricity Act are vague and could lead the public utility into risky new projects that end up costing ratepayers even more.
"Given the track record of N.B. Power with things like the whole effort in Florida to look at trying to generate power out of seawater, they shouldn't be going anywhere near creating other subsidiaries," said Green Party leader David Coon.
Liberal MLA and energy critic René Legacy says the only examples of potential new N.B. Power business ventures Holland has spoken about are industrial light and the renting of water heaters, something the utility does now.
"Well, you're not going to fix N.B. Power's debt with water heater rentals," he said. "That's not realistic."
Holland says he plans to meet with utility executives "before the end of this legislative session" in mid-June to find out how they plan to use their new powers.
Cabinet will have to approve any new subsidiaries.
No one from the utility was available for an interview Wednesday. "N.B. Power will look at opportunities that could benefit customers and the utility before moving forward with a new competitive entity," spokesperson Marc Belliveau said in an email.
N.B. Power is carrying a $4.9 billion debt. In 2020, New Brunswick's auditor-general said that represented 94 per cent of the utility's equity.
The Higgs government has ordered the Crown corporation to reduce its debt to 80 per cent of equity by 2027. But in the 2020-21 fiscal year its debt went up by $9 million.
By law, the only way the utility can increase revenue is by raising rates. Holland says that's why the province agreed to legislate amendments to the Electricity Act.
"We charged them with the responsibility of coming up with ways for them to improve their operations," he said. "The utility came back to us and said, 'here are some thoughts we have.'"
The changes, which became law in December, create a new holding company that will own N.B. Power as well as new subsidiaries. It will transfer revenue from the new ventures to the utility.
"I think it's just a mark of desperation," Coon said, arguing the utility would be better off investing heavily in renewable energy.
N.B. Power will have to report to the Energy and Utilities Board on how much revenue is coming into the holding company and being transferred to them.
But Legacy and Coon say with the utility now having to file rate applications with the board every three years, instead of annually as was the case, there'll be less transparency.
Holland says N.B. Power's annual rate filings took a lot of work and cost the utility a lot of money, so submissions every three years are "much more manageable" while still being accountable publicly.
"There's no absence of oversight," he said. N.B. Power will still have to notify the EUB annually of any major variations in its business that might affect rates.
The previous Liberal government established the New Brunswick Energy Solutions Corporation and used it to funnel $10 million in subsidies to two companies developing small modular nuclear reactors outside the scrutiny of the EUB.
The corporation was described as "an avenue [for N.B. Power] to do joint ventures" with more flexibility than the utility itself had.
In 2019 Holland floated the idea of overhauling the corporation to make it more answerable to the EUB.
Instead it's been dissolved. Holland says the new structure could be seen as replacing the corporation, but with more transparency.
At November's committee debate on the legislation, Holland did not rule out that N.B. Power could use its new subsidiaries to invest venture capital in other companies, which Coon says creates the risk the utility will gamble on untested new technologies such as small modular reactors.
Holland says any such investment "would have to be sustainable. It would have to be profitable. It would have to ensure that it didn't require government funds."
But Coon predicts that if any of the new subsidiaries fail, ratepayers will end up having to pay.
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