A number of factors are conspiring to put pressure on electricity prices in New Brunswick, but how those pressures can be mitigated will to a great extent depend on the provincial government’s vision for the future of the energy sector.
Ratepayers in the province are now in the midst of a three-year price freeze, designed to create price stability as the province ponders how the energy sector in this province can provide us with predictable and sustainable electricity rates in the decades to come.
“Once we have that and are able to digest it, we’ll then be able to provide a more fulsome response,” NB Power’s director of corporate relations Heather MacLean says.
The travelling NB Energy Commission’s final report, released earlier this year after hearing from hundreds of New Brunswickers on the topic, outlined the challenges facing the utility and ratepayers: declining demand, expensive generation, cheaper electricity from our neighbours, a push for more renewable energy (which is often more expensive,) big debt and pressure to use NB Power more often as a tool of economic development are just some of the pressures on electricity rates.
Add to that the federal-provincial spat over who will pay for the billions lost by delays in refurbishing the Point Lepreau nuclear power plant and ratepayers might be forgiven for getting nervous over which direction power rates will trend after the rate freeze expires next year.
And they might well be nervous, says Charles Cirtwill, president and CEO of the Atlantic Institute for Market Studies, in whose opinion government and NB Power can take the smartest and most prudent actions available to them at this point and enjoy a healthy dose of good fortune as well, but power rates are still destined to rise.
“It doesn’t really matter,” Cirtwill says; it’s just a question of how much they’ll rise and how fast.
“There are so many things at play, that the one thing we know is prices are going up, we just don’t know when or by how much.”
The key pressures on industrial and residential rates in New Brunswick for the coming five years, says energy consultant Tom Adams, include the risk that the federal government will stick NB Power with the billions in costs associated with the tardy refurbishment of Point Lepreau – or that the plant won’t work as well as it is supposed to.
Point Lepreau provides about 30 per cent of the province’s electricity.
A further decline in electricity consumption – in-province use and electricity exports – will further put upward pressure on prices because the utility’s costs are mostly fixed no matter if the demand is heavy or light, Adams says.
As well, a revolt by small business owners who feel they are subsidizing residential rates could help push homeowners’ rates higher – and the biggest industrial users in the province are already making that argument forcefully.
Longer-term threats to ratepayers in Adams’ view include the imposing of a carbon tax or similar fees, the eventual need to fix or replace big dams like Mactaquac which is the province’s largest and biggest-producing hydro station and higher interest rates making it more expensive to borrow money and to pay down debt. Fuel costs are the most expensive component of our power bills, MacLean points out. The generation arm of the utility boasts 14 hydro, coal, oil and diesel-powered stations, with an installed net capacity of 3,142 MW made up of 1,728 MW of thermal, 889 of MW hydro and 525 MW of combustion turbine capacity.
While NB Power’s infrastructure is in better shape than some – the Point Lepreau project is nearing completion and the Belledune power plant was rebuilt barely more than a decade ago – the Canadian Electrical Association points out that the International Energy Agency estimates that Canada needs to invest $240 billion in its electricity infrastructure between now and 2030 and the Conference Board of Canada forecasts an even larger expenditure by that date – some $294 billion ($196 billion for generating stations, $36 billion for transmission facilities, and $62 billion for local distribution of electricity.)
NB Power is preparing to forge ahead on these and other challenges as soon as the province comes out with its comprehensive energy policy, a date for which has yet to be set. Minister of Energy Craig Leonard was out of town this week and unavailable to comment on the coming policy.
NB Power boasts that its residential and industrial rates rank among the lower tier of the northeastern seaboard.
The question is whether they can stay there.
The bottom line, Cirtwill says, is that there is no question rates will rise. The question is how quickly or slowly, and by how much or how little. The fate of the province’s heavily fossil-fuel-depedent generators will also likely be addressed in the energy policy, given that imported electricity is cheaper than power produced by these plants. And all of this comes amid a political din in the background that has coloured government policy on NB Power for generations. One of the best things government can do to help itself when it comes to sustainable, stable and reasonable power rates, Cirtwill believes, is to stop meddling in the utility’s operations.
“They have to get out of the way and let these guys run things,” he says.