NB Power requests higher-than-expected rate increases
Increase linked to higher fuel prices, interest rates and foreign exchange costs
NB Power is requesting a higher-than-expected rate increase this year, adding an average of $5 a month to New Brunswick household bills.
Citing increased fuel prices, the utility requested an average 2.5 per cent increase in power rates for all its classes, the highest being a 2.9 per cent increase for residential customers.
Heather Black, public intervenor for the energy sector, said NB Power is expected to go through a rate approval process every year, but this year's proposed rate increase was "surprising."
NB Power's 10-year plan predicted the average rate increase to be two per cent, Black said.
"Seeing a little bit of an uptick to an average rate increase of 2.5 per cent and a little bit higher for the residential class is a little bit unexpected," she said.
Black said there's no way to know if the Energy and Utilities Board will set lower rate increases without going through the hearing and review process.
Increase lowered by board
The last approved rate increase, which was applied in August, was 0.96 per cent for residential, industrial and municipal rates. Commercial and institutional customer rates rose 0.4 per cent.
NB Power had originally requested an average two per cent increase last year, but the utility was able to bring it down to 1.5 per cent because it received a substantial settlement from insurance companies to settle claims resulting from cost overruns suffered by NB Power during a refurbishment of the Point Lepreau nuclear plant.
After weeks of hearings, the board eventually set an even lower increase than NB Power had hoped.
A necessary increase
Gaëtan Thomas, president and CEO of NB Power, said the utility is facing "some significant challenges this year" considering the increasing fuel prices, interest rates and higher foreign exchange costs, as well as bad weather events.
"When you put all these factors together ... in spite of some cost reductions and some plans to operate more efficiently — we still need an average of 2.5 or cent rate increase."
He said fuel costs increased by 10 per cent in the last year, something that wasn't accounted for in the 10-year plan.
"This is hard to predict because all fuel prices are based on market price," he said.
Thomas said NB Power has prepared its case and will be ready to answer Energy and Utilities Board questions about how necessary these rate increases are.
In the last eight years, the utility had three zero-rate increase and two years of proposed two per cent increases.
"This rate increase will still keep us still the lowest in the Maritimes," Thomas said.
The likelihood of that being approved will become more clear during the hearing process.- Heather Black, public intervener
While the approval process is underway, NB Power can apply for an interim increase, allowing them to charge more even before the increase is approved.
Thomas said the utility had not yet decided if it wants to do that.
"We're waiting on the schedule from the regulator," he said.
Black said the application for a rate increase kick starts the review process. The board will review documents until May, when they will conduct an oral hearing and cross examine witnesses. Then the board will make a decision on whether to approve the rate increase.
"Parties to the approval proceeding are able to dig more deeply and ask the utility questions, and dig through the evidence on a more detailed basis. So the likelihood of that being approved will become more clear during the hearing process," Black said.
What the board will be looking for is proof that NB Power has to charge that much more, and they've spent their money responsibility — proving the increase is fair.
"The rates that are charged should recover the costs to provide that service — provided that the costs were reasonably incurred," Black said.