NB Power: Is it time for a do over?
I just read a press release from Irving Paper, Limited stating it will permanently shut down 50% of its operations “as a direct result of New Brunswick’s uncompetitive industrial electricity rates.” Some 140 highly paid workers will lose their jobs.
I have been mulling over the NB Power ‘problem’ for quite some time. I’m not an expert in utilities, in electricity production or any other aspect of utilities but I have a little knowledge of the economics of the electricity sector generally and specifically in New Brunswick.
The bottom line is that NB Power has too much debt on its balance sheet. It has what is called ‘stranded debt’ or debt that is not being orderly paid down. Because NBP rarely pays down any debt (beyond its obligatory interest payments), one could argue that most of it debt is stranded - i.e. there isn’t a clear plan to pay it own in an orderly fashion aligned with the lifespan of the associated assets.
The problem is exacerbated as a lot of its energy generation infrastructure is close to requiring significant new investment (e.g. Mactaquac) and it is being compelled to green the grid even further resulting in new costs.
We could debate why NB Power is in this situation - I have heard dozens of excuses but regardless we are now in a situation where rates are rising faster than elsewhere in the country and businesses are now starting to close their doors because of high rates.
Further, New Brunswick households are more sensitive to electricity costs than most other households across the country. A lot of Canadian households use natural gas as the primary energy source and are not as exposed to a large increase in electricity prices.
Maybe it is time to ‘nationalize’ much of NB Power’s debt and by nationalize I mean move it from the rate payer to the taxpayer. The bond rating agencies already act like NB Power’s debt is public so it wouldn’t impact GNB’s bond rating.
Further, NB Power’s rates are not scaled like income taxes or other taxes. In other words, making the rate payer shoulder an increased burden now for the mistakes of the past ends up with more of those costs on the poorest households. If that debt became GNB debt it would be addressed through the general tax system which is scaled in that the more people earn the higher tax rates they face.
It’s been done elsewhere. The Ontario government restructured its electricity system 20ish years ago. Over half the value of all all assets was considered ‘stranded’ and moved of the balance sheets of the successor companies. It seems to me the Ontario system is working quite well these days.
Of course Ontario is not the only example. There are many examples of parts of the energy sector getting into debt trouble. At one point the natural gas fired electricity sector in New England was overleveraged and had to shed debt from the collective balance sheets. A recapitalized sector was then able to operate effectively and generate acceptable returns for investors.
A new NB Power should be set up such that:
-Residential and business rates remain competitive into the future.
-In specific industries, large electricity users can buy power directly from a merchant provider (building on the recent changes to the Electricity Act).
Further, I think we should use this opportunity to turbocharge investment into energy generation -wind, nuclear, etc. not just to meet household and small business demand but to attract large energy users such as data centres, green hydrogen/other fuels, energy intensive manufacturing, etc. Two-thirds of the province is crown land and industrial freehold. Almost the entire province is hilly. Remember my point that Portugal has 2,900 wind turbines and 11 million people in an area not that much larger than New Brunswick. BTW, they are building more and developing offshore wind too.
Fix NB Power. Have more ambition for the energy sector. Build new export-focused industries to power GDP growth into the future.
Sounds simple enough over here in theory-land. Much more difficult in reality-land.
But we need to get serious.
You’ve made some strong points. I’m no accountant, but if restructuring debt makes financial sense and eases the burden, then let’s do it. However, one crucial issue that hasn’t been fully addressed is cost-cutting. When Ontario Hydro underwent its most significant restructuring (which, coincidentally, happened under the last Liberal provincial government), they reduced excess spending—particularly by trimming overpaid executive positions.
New Brunswick has participated in tidal energy research through the Fundy Ocean Research Center for Energy (FORCE), primarily based in Nova Scotia. While tidal power remains promising, we should also focus on more immediate and accessible renewable solutions—like solar energy.
Currently, New Brunswick’s solar energy rebate is capped at $3,000, which pales in comparison to Prince Edward Island’s solar incentives, which cover up to $10,000 or 40% of costs. Susan Holt and the provincial government should prioritize expanding solar grants to make renewable energy more accessible. Why are we investing millions in large-scale projects when we could empower residents to generate clean energy using what’s freely available—the sun?
Moreover, NB Power should compensate homeowners for the surplus power they generate from rooftop solar installations. Net metering should go beyond mere bill credits—let’s allow tax-paying residents to profit from their contributions to the grid. Other provinces have successfully implemented buyback programs, so why can’t New Brunswick?
Our province is rich in renewable resources, yet we’re failing to maximize their potential. We need policies that support homeowners, small businesses, and communities in making sustainable energy choices while ensuring they benefit financially. It’s time to rethink our approach and start putting money back into the pockets of New Brunswickers.
While I agree with much of this post (especially around "nationalizing" and investing), I do have some contentions with some of your framing. When do explanations become excuses? Maybe at the same point that past decisions become mistakes with hindsight?
Residents are certainly more sensitive than many other areas in terms of electricity pricing, but we also pay some of the lowest rates on on the continent (not the lowest of course). How do we square that hole?