Wage waffle: Competing Liberal claims on income growth undermine power freeze argument

Liberal Leader Brian Gallant is standing by his claim that power rates in New Brunswick need to be frozen because they have been rising faster than many people's income, despite competing government claims wages in the province have been growing significantly.

"We hear that people's bills are going up faster than their wages and that includes power bills for many New Brunswickers," Gallant said on Thursday, reiterating reasons he gave for a promise made Wednesday to freeze NB Power rates for residential and some commercial customers if re-elected before switching to a defence of other claims that wages are rising quickly.

"We're very proud of the fact that wages have gone up often by more than three per cent  over the last four years, but of course you recognize that's the average and there are some New Brunswickers that would see no increases."

The promise to freeze power rates caught many by surprise, especially given modest increases NB Power has been winning in front of the Energy and Utilities Board in recent years.   

The last three rate hikes have all been less than inflation, including a 0.9 per cent increase approved by the EUB for Aug. 1 this year, the first jump in 16 months.

In real terms, electricity rates in New Brunswick are cheaper now than they were when Liberals last left office in 2010, rising less than 13 per cent over those eight years. That's well below inflation during that period of 16.5 per cent.   

In addition, one of the largest jumps in power rates during that time was not NB Power's fault, caused instead by an HST increase imposed by the Gallant government in 2016.

"I was really caught by surprise with the announcement to freeze electricity rates," said economist Richard Saillant, a fierce critic of government fiscal management in New Brunswick on CBC's Information Morning Fredericton on Thursday.

"When did premier Gallant express dissatisfaction with power rates in this province? I don't recall any of that. This is much more [electioneering] than anything based on substance."

Among lowest rates

Power rates in New Brunswick are already among the lowest in Canada among provinces that do not have significant hydroelectric resources. According to a report issues by Hydro Quebec last year, the price of residential power in Moncton was already 25 per cent cheaper than in Halifax, Charlottetown or Toronto.

Adding to electricity's affordability in New Brunswick, the province has been touting widespread wage increases throughout the economy for more than a year.

In June, the provincial Department of Finance issued a report on New Brunswick's economy that made specific mention of how strong wage growth in the province has been in recent years — double the amounts power rates increased during the same period.

"Wages and salaries continued to strengthen, rising by 3.3 per cent in 2017. This is the second consecutive year of growth greater than three per cent," the press release accompanying the report said.

Prior to Wednesday's announcement, the only official New Brunswick position on power rates has come through presentations at Energy and Utilities Board (EUB) hearings by the provincially appointed public intervener Heather Black.

Experts hired by Black and paid by the province have suggested rates charged by the utility could be dangerously low given its high debt load, billion-dollar repairs required on the Mactacquac Dam in the near future, and other issues.

Robert Knecht, a utility expert from Massachusetts has expressed concern at multiple NB Power rate hearings, including last winter, that the utility is not retiring debt fast enough to deal with potential risks it faces. He suggested planned annual two per cent rate increases may not be enough to secure its future.

"There are a number of factors that would suggest NB Power may need to move to a higher rate trajectory in the near future," he wrote in a report submitted to the EUB.

Concern about utility's financial viability

Black said it would be inappropriate to comment on the rate freeze proposal, but concerns about NB Power's long-term financial viability are not uncommon in utility circles.

Saint John Energy also attends NB Power's rate hearings and CEO Ray Robinson said he thinks government imposing a freeze is a poor decision.

"I am concerned for NB Power's financial viability and I think they have demonstrated that they need additional revenues," said Robinson.   

"To have rates frozen, that cuts off a significant source of revenues for them to move to a more financially viable model."