Ian Peach: NB Power rates must balance profitability with affordability

Article content

NB Power is seeking the approval of the New Brunswick Energy and Utilities Board (EUB) a rate increase of an average of 9.25 per cent per year for the next two years, along with an additional three per cent increase. This is happening at a time when people’s costs for pretty much everything are increasing and, in purchasing-power terms, people are generally getting poorer. We should be grateful NB Power is subject to the oversight of independent institutions like the EUB.

Crown corporations generally exist to balance two competing purposes – to earn income for the government, but to do so while ensuring that citizens are protected from the price-gouging that comes with monopoly capitalism. Both of these purposes are of value to citizens. This is why natural monopolies have been “nationalized” and made Crown corporations in modern societies. Citizens, through their governments, should benefit from the economic opportunity that a natural monopoly represents, but price-setting by those natural monopolies should be subject to citizen oversight. In the case of our electricity rates, it is the EUB that ensures the necessary citizen oversight.

In the current case, the “public intervenor,” whose job is to represent the public interest in the EUB’s review of requested power rate increases, has requested that an independent and knowledgeable expert provide them with an independent assessment of NB Power’s request. That expert, Dustin Madsen, has provided the EUB with a 140-page analysis of the rate increase, concluding that such a large rate increase is neither necessary nor in the public interest.

Madsen identifies three areas in which NB Power’s costs are exaggerated or its revenue estimates are unreasonably low. Madsen sees a total difference of more than $80 million this year and $82.5 million next year between NB Power’s estimates of costs or revenues and more realistic estimates, if, for example, operations, maintenance, and administrative expenses were more carefully managed. These differences represent over half of the income that would be generated by the requested rate increases, an indication that such large rate increases are not actually necessary.

The EUB hearing into the requested rate increase will begin on May 13. Let us hope that the EUB considers Madsen’s analysis carefully and makes a considered decision to balance NB Power’s need for revenues and the public’s need for cost containment appropriately. This is why monopolies require the oversight of independent rate regulators.

Ian Peach has worked in senior positions in federal, provincial, and territorial governments, at universities across Canada, in non-governmental organizations, and as a public policy consultant.