N.B. Power is appealing to the New Brunswick Energy and Utilities Board to save it from a "deleterious" financial loss caused by the Higgs government blowing up months of its corporate budgeting last fall.
The utility has applied for a 9.25 per cent rate increase that it says it needs to begin on April 1 but a hearing into the request isn't scheduled to even start until mid-May because the company was more than 10 weeks late in filing its request.
N.B. Power says that means a decision on new rates from the board, after it reviews evidence from a May hearing, will probably take until July 1. That, it claims, will cost the utility millions of dollars in lost revenue in April, May and June that it cannot afford to give up.
To remedy that, N.B. Power lawyer John Furey filed a motion with the utilities board last week asking for an "interim" rate increase on April 1, before a hearing is held into whether or not the increase is reasonable.
"Even in the most optimistic scenario in which the board is able to render a partial decision which enables the implementation of rates by July 1, 2024, N.B. Power will sustain a negative net impact of $32.636 million," Furey wrote in the motion.
N.B. Power lawyer John Furey and utility president Lori Clark at an Energy and Utilities Board hearing in 2020. Furey is asking the board to grant an interim rate increase of 9.25 per cent on April 1 before a hearing into the increase is held in May. (Roger Cosman/CBC)
He said missing out on higher rates for three months could wipe out any profit N.B. Power might earn in the coming year and will further deepen its already serious debt problems.
"The likelihood that N.B. Power's earnings would be so substantially reduced, or become negative, is a deleterious impact that justifies the implementation of interim rates," Furey wrote.
Last year N.B. Power was operating under a directive from the Energy and Utilities Board to file for new rates by Oct. 4 to allow for a February hearing into the request.
That was to give the board plenty of time to approve rates or reject and adjust them prior to the beginning of N.B. Power's fiscal year on April 1.
The utility had spent months developing plans and budgets to meet those deadlines.
It was a major undertaking because of N.B. Power's growing financial troubles, major upcoming capital projects and a directive from the Higgs government for it to lower its debt level by hundreds of millions of dollars from 94 per cent to 80 per cent of its total capital structure by March 31, 2027.
Plans for a fall 2023 election in New Brunswick were so advanced organizers for Premier Blaine Higgs booked a bus and outfitted it with PC branding, a new campaign slogan and a giant photo of the premier. A large rate increase announcement from N.B. Power was planned around the same time but postponed after cabinet upended its budget. (Submitted by Charles Doucet)
However, on Sept. 25, nine days before N.B. Power's deadline to submit its rate request, Premier Blaine Higgs signed a surprise cabinet order extending its debt reduction target two years, to March 2029.
It significantly lowered the amount of money the utility would need for immediate debt reduction and upended months of budgeting which then had to be reconstructed.
Eventually N.B. Power filed its rate request 72 days late, on Dec. 15.
"The entire GRA [general rate application] filing package, which was largely complete as of September 27, 2023, when the directive was received, must be updated and/or revised to reflect that directive," N.B. Power's chief financial officer Darren Murphy said in an affidavit explaining the delay to the board.
Premier Blaine Higgs has acknowledged he was on the verge of calling a fall general election around the time N.B. Power was originally scheduled to apply for its rate increase .
Reducing N.B. Power's debt target just days before the filing deadline pushed the announcement of a large increase outside of a potential election window but the government has denied that was a consideration in the last minute change.
"Not politicking at all, not so," Mike Holland, minister of natural resources and energy development, said about the cabinet decision at the time.
"This has been a part of our daily work — not something that we dream up off the cuff."
Higgs eventually changed his mind about the election — despite his party preparing election materials for it, including the renting and outfitting of a campaign bus and Elections New Brunswick spending $1.7 million to prepare returning offices.
Costs to N.B. Power are much higher.
According to the utility it will lose $12.2 million in revenue in April, $10.8 million in May and $9.6 million in June if the original delay in its application pushes the approval of higher rates to July.
It argues granting a full 9.25 per cent increase on April 1 is not harmful because if a full hearing later determines a lower increase should be awarded, overpayments from customers in the early months can be calculated and returned through discounts on a future bill.
It may be a tough argument for the utility to win.
In 2016 the EUB rejected N.B. Power's application for an interim rate increase under similar circumstances. The utility had failed to apply for an increase until late December but requested it be granted on April 1 prior to a hearing.
The request was denied.
Christopher Stewart was a lawyer for J.D. Irving Ltd. in 2016 when he argued against N.B. Power receiving an interim rate increase from the utilities board before a full hearing was held. He's now a board member and will likely have to rule on a similar application this year. (Shane Fowler/CBC)
An additional problem for N.B. Power is that two of the lawyers who argued against awarding an interim increase in 2016, then Public Intervener Heather Black and J.D. Irving Ltd. lawyer Christopher Stewart, have since been appointed to the utilities board as members. Both will likely be involved in ruling on whether or not to grant an interim increase this year.
Stewart was especially skeptical back in 2016.
"What N.B. Power is asking this board to do in this particular application is to say, 'look, we didn't get our work done on time but we would like the result we had wanted if we got our work done on time,'" Stewart said in his 2016 argument.
"That's no basis for you to grant an interim rate increase in this circumstance."
N.B. Power lawyer John Furey, who lost that 2016 application, notes in his motion this year that the late application is the New Brunswick government's fault, not N.B. Power's — a distinction the utility hopes will make a difference.
"The basis for the requested variance of the filing date for this application was beyond the control of N.B. Power," wrote Furey in his current motion.