All options on table as N.B. tries to restrain rising bills — including sale of utility
N.B. Power much deeper in debt 15 years after a former government's unpopular effort to sell it
Premier Susan Holt says the New Brunswick government is examining options — from a rate freeze to the sale of N.B. Power — to tackle high energy bills.
The province will have a plan to announce "within weeks," Holt told reporters in mid-March.
"We have to do more and different with N.B. because the status quo is not an option."
Holt confirmed that the options on the table include a rate freeze, additional rebates, and the elimination of debt repayment targets.
More drastic options, such as the province assuming responsibility for N.B. Power's debt or selling the utility entirely, are also on the table.
"I want you to know that the government is looking at many different options of what we can do with both N.B. Power, with the situation you are facing on these increased rates," Holt said.
N.B. Power is conducting a third-party audit after people across the province complained of spikes in their bills this winter. That audit is expected to be released in April.
An economic consultant is skeptical about the sale option. David Campbell wonders who would want to buy the utility in its current state.
"Selling the whole of N.B. Power to an investor … that's an option, but it would probably involve the government writing down a huge portion of the debt and also taking liability for Mactaquac," said Campbell, who helped guide economic development strategy under previous Liberal governments, including those of Frank McKenna and Brian Gallant..
N.B. Power's net debt sat at $5.3 billion after the 2023-2024 fiscal year.
The utility is also facing necessary upgrades across its aging transmission network, problems at the Point Lepreau nuclear plant, and the looming refurbishment of the Mactaquac Dam west of Fredericton — arguably its most important asset, according to N.B. Power officials.
The auditor general and bond rating agencies have repeatedly raised concerns about N.B. Power's ability to sustain its operations.
Darren Murphy, the utility's financial vice-president, warned lawmakers during a recent committee appearance that N.B. Power 's annual capital budget will likely hover around $1 billion in the coming years. The yearly capital expenditure has typically been around $450 million over the last several years.
The current financial pressures, and corresponding rate hikes, have been blamed on previous political decisions. Holt herself made that case, even as she didn't rule out taking similar measures.
"One of the reasons we're in this position is because successive governments have artificially frozen rates, or put them in places where that has wiped out N.B. Power's ability to do the kind of maintenance that they needed to do," she said.
N.B. Power was almost sold before.
In October 2009, with a joint news conference at Government House in Fredericton, then-premier Shawn Graham and Quebec premier Jean Charest announced an agreement to sell most of N.B. Power's assets to Hydro-Québec for $4.8 billion, which was the total amount of the debt at the time.
The plan included rate freezes for N.B. Power customers for five years, after which rates were to be tied to the consumer price index. Industrial customers were to see their rates cut to the significantly cheaper Quebec industrial rate.
But the proposed agreement was received poorly by both the public and opposition politicians. Hundreds gathered outside the legislature to protest the decision, and two members of Graham's cabinet resigned.
Fifteen years later,Graham says he wishes he could have seen a deal through. Part of the problem, he said in an interview, was that he couldn't tell New Brunswickers exactly how bad the situation at the utility was.
"It was like saying, I had an old car and I wanted to go out and sell it and get the best possible price for that automobile," he said. "I could not go out and tell everyone how dire the situation was and then negotiate the best possible price.
"We were hamstrung in our communications."
The intervening years have seen N.B. Power's financial picture continue to deteriorate. Graham said he can't imagine there would be much of a case for anyone to buy the utility.
"There's no utility in the world that will come in and pay for the $5.3 billion in debt," he said, also pointing to the impending multimillion dollar Mactaquac refurbishment.
"Sadly, that window has closed."
The utility has been exploring a potential deal with Ontario Power Generation involving Point Lepreau that could include some sort of joint ownership arrangement.
And on the Mactaquac refurbishing, it has been looking at alternative funding pathways, such as the Canada Infrastructure Bank, that would limit the debt impact of the project.
But the fundamental problem of N.B. Power's large debt load, and its struggles to pay it down, remains.
Campbell has advocated the province take on all or part of the utility's debt, which would give N.B. Power some breathing room as it looks to recover.
He argued that in some ways, transferring responsibility from the ratepayer to the taxpayer is fairer.
"The taxpayer pays taxes based on their capacity and their ability to pay," he said. "In other words, the more money they earn, the more they pay income tax. Whereas the ratepayer pays the same rate whether they're poor, whether they're middle class or they're upper class.
"Without some kind of rethinking of this, electricity rates are going to keep going up and up. … I think the time is right for a structural change to set N.B. Power on a firm foundation for the future."
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