NB Power concluded its rate hearing Thursday with a plea for the Energy and Utilities Board to grant it a full 1.9 per cent rate increase beginning April 1, even if board members object to individual items in its proposed budget.
"I don't think it follows automatically that the board must reduce the rate when it identifies a cost that it wishes to disallow," said NB Power lawyer John Furey in a 50-minute address wrapping up the utility's request to charge customers an extra $28.5 million for electricity.
NB Power has grumbled for years about the EUB's practice of lowering rate increases when an unjustified expense is found in the utility's budget, claiming it cascades into future revenue shortfalls.
In 2015, NB Power had a $984,000 expenditure for making repairs to the Tobique riverbank disallowed by the EUB during its rate application because it refused to disclose all the information explaining why the project was necessary.
The board then reduced the rate hike it awarded by 0.1 percentage point.
In his closing remarks Thursday, Furey said that five-year-old decision has cost the utility every year since because each new rate hike builds on the last one.
"A $900,000 expense is disallowed in year one but the corporation loses a rate increase that would have produced $900,000 in income for each of the years of the 10-year plan," he said. "You have a $10 million impact on a $900,000 disallowance."
Furey said the EUB should disallow costs it doesn't like but let NB Power keep its full rate increase and transfer disallowed spending over to profit instead.
It was a timely argument because after Furey spoke, public intervener Heather Black called for the board to disallow $300,000 in spending NB Power has planned to further investigate the feasibility of the Maritime Iron project in Belledune and $400,000 it has set aside to help two private companies work on their plans to develop small modular nuclear reactors.
She said she did not see a direct benefit to NB Power customers in either case.
"They may well be viable projects They may well make valuable contributions to the province," said Black who said she does not oppose the developments, just the use of customer money to help them along.
"NB Power, in my view, has not demonstrated the way they make these spending decisions is by using a prudent standard," said Black.
But Black also expressed concerns with NB Power's finances. She joined Furey in encouraging the EUB to consider ways it could allow NB Power to keep its full rate increase while also disallowing questionable expenses.
EUB vice-chairman François Beaulieu appeared cool to the idea, suggesting NB Power is only entitled to the amount of profit it applies for and it may be beyond the board's authority to add to that. He said savings from disallowed items traditionally flow to customers, not the utility, and he questioned whether that should change.
"How fair is that to ratepayers who are relying on us to fix just and reasonable rates?" asked Beaulieu.
Furey said NB Power is in a uniquely vulnerable financial position. It has been directed by the province to generate $500 million in profit over the next seven years to get its debt under control and he said the EUB could at least alter its practice temporarily until that problem is fixed.
"Does the board, once disallowing a cost, need to track that through in a mathematical way to reduce the rate request? In the context that NB Power faces, I would suggest the answer is no," he said.
Decision expected in March
NB Power undermined that argument somewhat itself by voluntarily disallowing some of its own expenses at the start of the hearing on its controversial Joi Scientific hydrogen-from-seawater project.
It announced customers should not have to pay for ongoing expenses and reduced its rate increase request from two per cent to 1.9 per cent, much the way the EUB would do for a disallowed cost.
Nevertheless Furey asked for a halt to that practice and argued the public airing of NB Power's questionable expenses at board hearings is a powerful rebuke on its own and doesn't need a financial penalty attached to it.
"That still provides accountability," Furey said. The public sees it. The utility sees it."
A decision on the rate increase is likely from the board next month.