Rates are going up in New Brunswick or NB Power is heading for a flood of red ink – that is, unless the monopoly utility is broken up and replaced with competition.

These are among the conclusions of a report, “New Brunswick’s Power Failure: Choosing a Competitive Alternative” (Requires Adobe Acrobat), by Thomas Adams, executive director of the Toronto-based Energy Probe. The report was prepared for the Atlantic Institute for Market Studies (AIMS).

Adams and AIMS president Brian Lee Crowley will present the findings to the New Brunswick Legislature’s Standing Committee on Crown Corporations, Wednesday 9 October at 1:30 p.m.

“Electricity is not just a consumer product, it is also a key component of economic growth,” says Crowley. “This report shows how far New Brunswick has to go before those in the province can benefit from efficiently produced, low cost electricity.”

Adams’ report recommends quickly opening up New Brunswick’s power market to competition, dismantling NB Power into its component parts, and privatizing most of those parts.

The report finds the utility’s operating costs out of line. The cost of domestic coal is over twice the cost of imported coal. Based on the ongoing losses, Adams recommends the separation of NB Coal from NB Power, and NB Coal’s privatization. After examining NB Power’s efficiency, he recommends a 10% cut in payroll costs.

The reports surveys the world-wide trend toward electricity competition and privatization. The recent experience in Alberta and the U.K. is examined. In the U.K., competition and privatization have resulted in rate cuts to all customers, including savings of more than 10% for homeowners.

Rates for municipal utilities in Saint John and Edmundston are found to be too high. The report reveals that a year ago the municipal utility in Saint John missed an opportunity to cut rates and instead signed a 10-year deal to stay with NB Power.

The report finds that industrial rates in New Brunswick are losing their competitive advantage because rates in New Brunswick are going up while industrial rates in the rest of Canada are stable. Industrial rates are actually dropping in the United States.

Key risks clouding NB Power’s future include potential sale losses due to coming competition between natural gas and electricity, the declining prospects for profits on export sales and uncertainties over the aging of the Point Lepreau nuclear station.

Adams calculates the NB Power lost in excess of $40 million on the operation of Point Lepreau last year.

“New Brunswickers should demand that their corporation, NB Power, open its books to permit a full debate on all options for the future,” Crowley says.