Municipal utilities try to block power-rate relief for overcharged NB Power customers

New Brunswick's three municipal utilities are asking that rate relief promised to long-suffering commercial and institutional customers of NB Power be postponed until more is known about the issue, even though the overcharging of the group has been documented in the province for almost three decades.

"There seems to me to be no reason to take steps without a prudent level of consideration, and many reasons to take the time to make good choices," said Paula Zarnett, a Toronto-based expert in utility regulation, rate design and rate policy.

She prepared the evidence on behalf of Saint John Energy, Energy Edmundston and the Perth Andover Electric Light Commission, which oppose the special rate relief for commercial customers.

"I conclude that there is too much uncertainty affecting the future … at this time to make the proposal [for commercial rate relief] justifiable."  

NB Power offers a variety of different rates to different customer groups based on the cost to provide service to each one.   

Overcharged by $30 million

However, for historical reasons the utility acknowledges its commercial and institutional customers, including small businesses, commercial properties and government bodies, are charged at least $30 million too much for the power they consume given the cost to provide them service

Currently, small businesses pay 13.07 cents per kilowatt hour for electricity, 21 per cent more than residential customers. 

Over the years, business groups and various public interveners have complained about that disparity, and three separate times — 1992, 2005 and 2016 — the Energy and Utilities Board and its predecessor, the Public Utilities Board, have ordered it to be fixed

In 2017, NB Power promised to resolve the matter over 10 years by offering commercial customers smaller rate increases than other customers.

This year, it has been proposing to increase rates to most of its commercial customers by just 0.68 per cent with all other customers, including the municipal utilities, getting average increases of 1.64 per cent.  

Municipal utilities did not object to the plan in 2017, but they are this year. They fear losing money if they have to absorb a 1.64 percent increase from NB Power, but then can only charge their own commercial customers 0.68 per cent more.

On Tuesday, Zarnett told the EUB it should gather more evidence before granting commercial customers any additional rate relief.

Conflicting views

The board is scheduled to hold a hearing into NB Power's overall rate design and how it assigns costs to different customers later this year, and Zarnett suggested this could produce some surprise results, including the possible discovery that commercial customers are not overcharged at all.

"The result could be an adjustment made in one year is shown to be inappropriate within a year or two," Zarnett said.

"Changes like that should be undertaken when there is a high degree of confidence that the direction will be substantiated over time."

But not everyone was buying that argument as genuine.

U.S. energy expert Robert Knecht told the hearing all evidence points to New Brunswick commercial customers being overcharged for power for 27 years and being entitled to immediate relief.

They have paid "well in excess of 100 per cent since the first case I did in New Brunswick in 1991," Knecht said.    

"There is always a reason not to be moving rates in line with costs, and I think that getting the rates for [this] class more in line with costs is long overdue."