New Brunswick homeowners and apartment dwellers will be paying higher than average annual increases for electricity for years under a new rate plan outlined this week by NB Power.
But for those who heat with electricity, the news may get even worse if the utility decides — or is pushed — to introduce seasonal power rates.
"Seasonal is a tough one," said New Brunswick public intervener Heather Black. "What that means in a province like New Brunswick is that heating customers will pay higher rates."
NB Power is facing a "rate design" hearing that could significantly change the way electricity is priced in the province — not just among different customers, but also among different seasons, different days and different times of the day.
The hearing itself is not scheduled until next April but the long process of submitting evidence on all the complex issues began this week with an initial proposal from the utility to get its rates for residential customers higher.
NB Power estimates that residential customers will underpay for the electricity they use this year by $60.4 million.
That's a 7.7 per cent discount largely paid for by excessive power rates on others — primarily commercial customers.
E.U.B. wants rate change
NB Power is under direction from the Energy and Utilities Board to stop overcharging some and undercharging others and in its submission suggests implementing three tiers of future rate hikes including low increases for commercial customers, medium increases for industrial customers and higher increases for residential customers to slowly fix its pricing problems.
"NB Power maintains the position that ... this gradual approach is in the best interest of all customers," it says in its proposal.
As an example it suggests under current revenue targets, rates over the next seven years (not including carbon taxes) should increase 4.3 per cent for the main commercial group; 10.4 per cent for the industrial group and 14 per cent for the residential group.
Under that plan residential customers will still be underpaying by $51.7 million after seven years and Black says the Energy and Utilities Board may want to see something that closes the gap faster.
"It's a possibility," said Black. "It's definitely in the Board's discretion to accelerate that timeline but we'll have to see how the evidence comes through."
Another worry for electric heat customers
But that's only problem number one for residential consumers.
A second hit could come when NB Power outlines its position on the issue of seasonal power rates.
Electricity is more expensive to supply in the winter than in the summer because demand for it is significantly higher among those who use electric heat.
Last year the Energy and Utilities Board told the utility it wanted to see those seasonal differences dealt with in a "rate design strategy" which is to be unveiled June 1.
NB Power commissioned a preliminary report two years ago that showed switching to winter (November to March) and non-winter rates in the 2015/16 fiscal year would have cost residential heat customers an extra $24.1 million because so much of their consumption is during cold months.
By contrast large industrial customers who use constant amounts of power year-round would have saved $28.4 million.
Black said there is no question moving to summer and winter rates will cost electric heat customers more but says there is enough wiggle room in what NB Power has been ordered to do by the EUB that the utility may be able to avoid implementing seasonal rates if it chooses to.
"They're not required to propose the implementation of (rates) on a seasonal basis, just to come up with a strategy for it," said Black.
However, even if NB Power does not propose seasonal rates, others are already lined up to push the idea.
Both Enbridge and JD Irving Ltd. are on record favouring seasonal electricity rates and will likely argue for them at the final hearing next spring no matter what position NB Power takes..