The new government in Fredericton has the opportunity to improve NB Power.
The provincial Crown Corporation has been through a lot in recent years. First, its financial difficulties and the prospect of higher rates drove an earlier government to try to sell the utility to Hydro Quebec. The chief benefit of the sale would have been a five-year rate freeze.
But New Brunswickers resisted the sale of a utility considered a provincial asset, and the sale deal eventually disintegrated.
A new government took a far less radical approach. It eliminated any semblance of an open power market, though it had hardly existed. NB Power returned to the old model, abandoned in many other jurisdictions, as a fully integrated, monopoly. The province’s municipal utilities were required to buy power only from NB Power, effectively removing their freedom of choice.
In throwing out competitive market rules, the government also eliminated the independent operator of its transmission system, created to ensure the grid’s owner did not discriminate in an open market.
It also moved part way toward traditional utility regulation, with the Energy and Utilities Board as a more independent restraint on the utility. But the government retained the right to give orders to the EUB.
While these moves restored a degree of stability, they ignored positive aspects of developments in the electric industry over the past decades. NB Power returned to the stodgy model of non-market, monopoly utilities.
The new government, together with NB Power, has the opportunity to put the traditional utility structure on a more modern footing in ways designed to produce benefits for New Brunswick customers. And it can accomplish that goal without changing the status of NB Power.
One governing principal is to avoid measures increasing residential rates. The high penetration of electric home heating, with its high consumption, makes rate increases unusually difficult to bear.
That strongly suggests even greater efforts to get customers to reduce electric heating and discourage new hook-ups. The development of alternative measures, such as greater efficiency and the use of heat storage units, should be pushed even harder. When other fuels can be used, they should be aided.
And the government could go further is allowing the EUB to operate completely independently in making its judgments. While laws set broad policies and objectives, the long-term grant of full jurisdiction and independence would go a long way to balancing customer needs and costs.
NB Power should also be required to permit the most elementary form of open access on its transmission grid by allowing the three municipal utilities, the so-called wholesale customers, to purchase power from any supplier. While the chances are they will continue to buy from NB Power, this approach would bring New Brunswick into line with the utility world in which it operates.
Another area for government initiative would be to enhance NB Power’s regional role.
Today, it continues to be responsible for the reliability of the transmission systems of the three Maritime Provinces. That produces greater reassurance for customers and can produce savings by sharing the reserves required to deal with outages of major generators or transmission lines.
With the connection of Newfoundland and Labrador’s Nalcor utility to Nova Scotia by the Maritime Link element of the Muskrat Falls hydro project, the last of the Atlantic Provinces could be included in the same reliability system. Given the reliability problems Nalcor faced last winter, that would make sense.
At the same time, New Brunswick should join with other Atlantic Provinces to look at a regional power pool. Unlike the failed Hydro Quebec deal, a power pool would not remove any authority over its own utility from the province.
A power pool can reduce the cost of energy for its participants by using the lowest cost power available each hour in the region to meet customer needs. Units are selected for use according to the cost of their fuel, while their fixed costs continue to be paid by their own provincial customers.
NB Power could commit only those units it wanted to be included in the pool. In any case, creating a power pool would be a gradual process, because of limited interprovincial transmission ties.
A power pool would help in the consideration of the future of the Mactaquac facility. Hydro units, with no fuel costs, are nonetheless assigned an energy price. So it would be paid for its pool use, providing a contribution to meeting in-province costs.
And all power pool participants, even if they contribute no low-cost power, receive a share of the overall savings, also a potential benefit for industrial, commercial and residential customers.
None of these measures would upset the existing New Brunswick utility structure or increase rates. They could contribute to keeping customer rates affordable.
Gordon L. Weil is senior fellow in electricity policy at the Atlantic Institute for Market Studies
*This piece appeared in the opinion section of the Telegraph Journal