A day in the life of Danny D'Amours

Fixing up NB Power

There has been much debate about NB Power and its role as either the core of New Brunswick’s future wealth as a key component of the “energy hub” or as an inefficient debt laden albatross around New Brunswicker’s necks. As ex-premier Shawn Graham quickly discovered, New Brunswickers have strong feelings when it comes to NB Power. Everybody is quick to complain about rising power rates and to complain about any perceived unfairness when it comes to power rates for different class of users, especially large industrial users.  It is clear that change is needed however as the status quo of ever increasing power rates combined with ever increasing debt loads is not sustainable.

There are a few basic (sometimes competing) goals or tenets that must be adhered to in all NB Power decisions and reforms:

  1. Cost recovery: The utility must be financially viable and the price for power must reflect the cost of generation, transmission and distribution. Operational deficits are not desirable nor sustainable.
  2. Debt repayment: A long term goal should be to reduce the amount of debt held by NB Power. This would free up additional dollars that are currently going to debt servicing costs.
  3. Low power rates: As much as possible power rates should be low to provide competitive advantages to NB industry and to reduce the burden on consumers.
  4. Low environmental impact: As much as possible power generation, transmission and distribution should have as little environmental impact as possible.

Following these goals, I’d recommend some or all of the following initiatives:

  • Convert one or more existing generation plants to natural gas to give more flexibility and take advantage of low natural gas rates. This would also leverage the natural gas development that has taken place in the province as well as the LNG terminal built by Irving Oil.
  • Establish a feed-in tariff rate for consumer micro-generation in a similar fashion to Ontario’s microFit program. Rates don’t need to be as high as Ontario’s which I think are unsustainable but it has to be better than NB’s current net metering rules which do little to encourage consumer renewable generation.
  • Establish a rising block tariff to better reflect the true marginal cost of generation. NB Power could also take this a step further and establish time of day pricing to help pricing reflect the true cost of generation at peak and non-peak hours. Currently there is no economic incentive for a consumer to move consumption to off-peak hours.
  • Introduce a smart meter program that will install power consumption meters which provide more feedback to consumers on their hourly and daily power consumption instead of some large monthly number that consumers cannot correlate back their consumption habits.
  • Acknowledging that large industrial power users support the large fixed costs of power generation as well as an economic development thrust, establish competitive industrial power rates for large industrial users. In a simple model, this could simply be based on consumption or in a more complex scenario industrial power rates could be based on the type of industrial use with targeted uses such as IT or aerospace manufacturing getting lower rates.
Outside of NB Power, the government should continue to invest in and pursue energy efficiency programs for both consumers and industry. In addition, subsidies should be provided for low income consumers who may have trouble affording to pay to heat their homes.
In addition, there should be incentives put in place to convert home heating from electricity to wood and/or wood pellet. This would help reduce peak winter load (when power is expensive) and encourage the use of local fuel sources and local biomass industries. By replacing electricity generated by imported fuel with local biomass, more energy dollars would stay in the New Brunswick economy and generate economic benefits.

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July 9th, 2012 Posted by Danny D'Amours | Atlantic Canada, Business, Economics, New Brunswick | no comments

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