N.B. Power critic sees more reasonable approach in latest rate hike request

A utility expert who's been critical of N.B. Power's financial forecasts says the Crown corporation appears to have adopted a more balanced approach with its latest rate request.

Robert Knecht testified Tuesday afternoon during an Energy and Utilities Board hearing in Fredericton.

The board is weighing N.B. Power's request to increase power rates by an average of 9.25 per cent this year and again next year. Its filings with the board show 4.75 per cent increases in each of the following three years.

Knecht, who lives in the United States and has previously testified before the board, was hired by the public intervener to analyze N.B. Power's proposed rate increase.

"By setting a lower increase in the [later] years, it gives itself a little more flexibility," Knecht said in response to questions from N.B. Power lawyer John Furey.

"That could be called more responsible, it could be called more conservative."

Knecht said "it's no secret" he's long been critical of N.B. Power's projections as it faces a $5.4-billion debt and major spending on existing power plants.

Knecht said the proposed rates appear to balance the concerns of current ratepayers with those in the future.

Furey asked if lower rates in earlier years makes it less likely the utility can meet a 2029 debt reduction target set by the provincial government. The target calls for 80 per cent debt and 20 per cent equity in its capital structure.

"All other things being equal, reducing the rates in the early years makes achievement of the equity target even more difficult," Knecht told Furey.

His report filed with the board ahead of the hearing notes the utility has major capital spending looming, including meeting a commitment to achieve net-zero carbon emissions by 2035.

It's a target that would affect the utility's Belledune coal-fired power plant, its Coleson Cove heavy-oil plant, and Bayside natural gas plant.

Furey pointed out there is also a looming decision on the future of the MactaquacDam.

At the same time, Knecht's report points out N.B. Power needs to deal with demand from a growing population and perform upgrades on its transmission system.

Knecht noted the utility appears to be better at reflecting the actual performance of the Point Lepreau nuclear generating station, using historic performance data to forecast into the future.

ButKnecht said he still sees problems in the utility's financial forecasts submitted as part of the rate hearing.

"While it is risky to generalize, my overall assessment of the current five-year financial forecast is that it has substantially reduced much of the undue optimism for the near term, but the longer-term outlook contains assumptions that appear to retain the historical rosiness," his written report, filed with the board, states.

Knecht's report lays out the earnings forecast in a graph, showing the uptick in future years that he describes as a hockey stick.

"The hockey stick is still there and it just keeps moving out," Knecht testified.

The board's hearing on the proposed rates is expected to continue this week.

The board previously approved an interim rate increase this year pending the outcome of the hearing.