'Weather tax' not necessary but more fair to customers, argues NB Power VP
$3M budgeted each year for storm damage recovery, but has been exceeded 3 times in the last 4 years
NB Power says its request to the Energy and Utilities Board for permission to bill customers separately for "extraordinary" storm damage is not a necessity, but argues it would be more fair to ratepayers who are on the hook for those costs already and don't realize it.
"We're just proposing additional transparency," said Darren Murphy, the chief financial officer and senior vice president, corporate services, under questioning about the proposal during the utility's ongoing rate hearing.
"Today customers bear that risk. What we're talking about is how these costs get collected — not if the costs get collected."
The idea of a storm damage surcharge has been ridiculed by Opposition Progressive Conservatives as a "weather tax," although it originates from a directive given to NB Power seven years ago by the former PC government of David Alward to pay down $1 billion in debt.
$3M budgeted annually for storm damage
NB Power budgets about $3 million per year for storm damage repairs but that amount has been overwhelmed three times in the last four years, driving down the utility's profits and hampering its debt retirement.
NB Power says it spent $10.7 million to repair damage from ice storms in southern New Brunswick over Christmas 2013, $23.1 million to clean up from post-tropical storm Arthur in July 2014 and then another $30 million to deal with ice storms in northeastern New Brunswick in January 2017.
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By comparison, there were no punishing storms this year and repair expenses are almost right on target at $3.2 million.
In a back and forth exchange for more than an hour late Tuesday afternoon, Murphy told JD Irving Ltd. lawyer Christopher Stewart that big storms are hard to budget for but have to be financed somehow as NB Power is required by the province to generate profits large enough to significantly cut its debt.
"We have not come up with an effective way to estimate them," said Murphy of big weather events. "But the costs are customer costs. The restoration activity, all those things are customer costs."
Direct charge more precise
Murphy claimed charging directly for significant storm damage is a more precise way to cope with a large one-time expense than raising power rates generally, because sagging profits caused by storms might only be a temporary problem.
"There are alternatives to accomplishing the same end," acknowledged Murphy. "In some other utilities they would put a larger (storm damage) estimate in (their budget) and that would be part of the customer's bill.
"We're just proposing something a little bit different. We're talking about letting the cost incur first and then being able to collect."
Stewart pointed out that all other utilities allowed to charge separately for extraordinary storm damage are regulated differently than NB Power, without annual rate hearings. And he noted NB Power has been able to deal with other more significant unexpected financial problems without controversy — like poor performance at the Point Lepreau nuclear plant — by making slight adjustments in its long range rate plan.
Increase comes after profit disappointment
This year, NB Power increased its planned rate hike for 2023 from one per cent to two per cent to move its 10-year debt reduction plan back on target after a number of recent profit disappointments.
Murphy conceded that can be done again in the future to deal with major unexpected storm damage if the EUB ultimately rejects the idea of billing customers separately.
"Some of the alternatives we would have looked at is not changing anything, continue doing what we're doing today," said Murphy.