Navagating NB Power Increase

Navigating NB Power’s Rate Increase Saga and the Solar Alternative

If you’ve kept up with our blogs you’re well aware of the battle taking place over energy rates in New Brunswick. We wrote a blog about how the Auditor General said NB Power may not be able to sustain operations if their fiscal struggles continue. In our article about the since discontinued rebate program, we touched on variance accounts which NB Power set up to be able to change energy rates at any time based on unforeseen events that may affect the price of power.

In March, New Brunswick Power (NB Power) submitted an application for significant rate increases, prompting scrutiny from industry experts. NB Power requested a steep 9.25% rate increase for 2024 and 2025. Because of the variance accounts I mentioned earlier, the actual rate increase ends up being a whopping 13.2% for 2024 because of power outages they incurred last year. These new rates went into effect April 1st.

To read more about their rate increase you can visit NB Power’s website.

NB Power’s Rate Increase Puzzle

Alain Chiasson, the New Brunswick public intervener, enlisted the expertise of two professionals to assess NB Power’s proposed rate increase, suggesting a potential argument for the Energy and Utilities Board to consider scaling it back.

One such expert, Dustin Madsen, a Calgary-based utility consultant with a wealth of experience, has delivered a comprehensive analysis challenging the necessity and prudence of NB Power’s proposed rate hikes.

In a 140-page written evidence statement presented to the New Brunswick Energy and Utilities Board, Madsen cogently argues that the projected 9.25% rate increase over the next two years is not only unnecessary but also contrary to the public interest. Drawing on his expertise as an accountant and former Alberta utility executive, Madsen highlights several key discrepancies in NB Power’s financial forecasts, suggesting avenues for substantial reduction in the proposed rate adjustments.

Central to Madsen’s critique are three main areas of concern within NB Power’s application: exaggerated costs, underestimated revenues, and unchecked expenditure growth. He asserts that these factors, if properly addressed, could significantly mitigate the burden on consumers while ensuring the utility’s fiscal health.

One notable finding by Madsen pertains to the depreciation charges on NB Power’s electrical infrastructure, which he argues have been overstated by a considerable margin. Recommending an adjustment in the range of $25 million annually, Madsen proposes redirecting these funds towards debt reduction or rate relief, thereby alleviating the strain on ratepayers.

Moreover, Madsen contends that NB Power’s revenue projections exhibit a notable surplus, particularly in expected margins from electricity sales. He advocates for the redistribution of these excess revenues to benefit consumers directly, further tempering the need for exorbitant rate increases.

In addition to his critique of revenue estimates, Madsen calls attention to the utility’s burgeoning operational expenses, which he perceives as outpacing justified growth. Proposing a reduction of $19.2 million in operational costs, he emphasizes the importance of aligning expenditure growth with economic realities, particularly in light of prevailing inflation rates.

Collectively, Madsen identifies these areas of discrepancy as comprising a substantial portion of NB Power’s proposed rate increases, amounting to over half of the total budget for the coming years. As such, he urges the Energy and Utilities Board to consider his recommendations judiciously during the forthcoming hearings in May.

Furthermore, Madsen offers pragmatic suggestions for cost containment, including the cancellation of capital spending earmarked for internal software transitions. Citing potential cost overruns and organizational disruption, he advises against pursuing these initiatives in the current fiscal climate.

While NB Power has yet to respond to Madsen’s analysis, the impending rate hearing presents an opportunity for substantive dialogue and scrutiny. As the regulatory process unfolds, stakeholders must prioritize a balanced approach that safeguards both the financial viability of NB Power and the interests of consumers.

As it stands now, NB Power is permitted to continue with its rate increases that began on April 1st, until a final decision is made on whether or not the new rate is justified.

A CBC article on Madsen’s written evidence statement and the rate increase can be found here.

Opt-Out of Rate Hikes By Going Solar

Any future rate hikes will be far less noticeable to individuals who have invested in solar power. By paying a fixed cost to install solar, you are effectively freezing your cost of electricity for the next 25 or more years. Being able to self-generate your energy will place you in a unique position to capitalize on rate increases by increasing the value of your investment as time goes by. It’s not uncommon for homeowners to generate 90% or more of their annual electricity with solar.

If you are thinking of going solar, our Solar Specialists and Project Managers can cleanly walk you through the steps of what is required in your province and make sure you maximize the value of the rebates you get back. We’ll also get you started on the vital first step of acquiring a tailor-made solar proposal for your personal energy needs at home.

Request a consultation with one of our solar energy experts

Another CBC article about the rate increase can be found here.