Seasonal power rates lack support and upset 'social compact,' NB Power tells EUB

Charging NB Power residential customers substantially more for electricity in the winter to better reflect the costs of supplying power in New Brunswick, even if combined with discounts in the summer, is likely to trigger resistance in the public and should be dropped as an idea at least for now, the utility is arguing.

"Current rates inherently reflect a long-standing social compact," NB Power told the Energy and Utilities Board in a submission late last month arguing against a switch to "seasonal" rates in the near future.

"NB Power is not aware of a general preference by customers or policy-makers for such a change from the historical allocation."

NB Power has been in the middle of an on-again off-again hearing over the last three years into how it prices electricity. It was ordered by the EUB with the goal to make what NB Power charges fairer between customers and tied more closely to the costs of supplying power.

Because it is more expensive for NB Power to generate electricity in the winter than in the summer, one of the early recommendations was the utility adopt pricing to reflect that difference with distinct winter and non-winter rates.

Call for fairer pricing

Christensen Associates Energy Consulting, hired by NB Power back in 2017 to offer advice on changes, suggested winter electricity prices for residential customers up to 66 per cent higher than summer prices would more fairly distribute costs between residential customers who heat with electricity and those who don't.

"About 63 per cent of NB Power's residential customers have winter space heating loads. Such heating customers are more expensive to serve than non-heating customers because they consume relatively more power during the winter on-peak hours when electricity is most expensive in New Brunswick," wrote the consultants.

Summertime energy demand is low in New Brunswick and supplied mostly by NB Power's lowest marginal cost generators, like the Point Lepreau nuclear generating station which consumes 7/10ths of a cent of nuclear fuel for every kilowatt hour of electricity it produces.

But the Christensen report noted winter cold snaps require turning on more inefficient generators to bolster the supply, like the Coleson Cove oil and petroleum coke generating plant which eats up almost 14 cents in fuel for every kilowatt hour it produces.

Current pricing spreads those costs among every residential customer even though it is caused by those using electric heat.

"The simplest way to substantially reduce cross-subsidies between heating and non-heating customers would be to replace the current residential rate with a seasonal rate that would have winter energy prices about 66 per cent higher than summer prices," said the Christensen report.

That idea seemed to gain momentum last year when a second consultant hired by the EUB held a series of workshops about electricity pricing that found a broad consensus among "stakeholders" in favour of seasonal pricing.

"I saw consensus developing around seasonal rates," said Ahmad Faruqui, a San Francisco-based consultant, during an EUB hearing last month about those stakeholder workshops.

Public input needed, says utility

But in a written submission after that hearing, NB Power expressed doubts the public would embrace seasonal rates and said stakeholders who liked the idea do not represent residential customers.

"The stakeholder group's makeup was not representative of the general population," said NB Power in its submission.

"Even though much of the discussion was about residential rates, residential customers did not have a formal representative in attendance at the sessions. Residential customers, as a class, lack direct representation and do not have the applied resources and expertise that some other customers have."

Participants in the 2019 stakeholder sessions included representatives of NB Power, the EUB, J.D. Irving Ltd., Liberty Utilities, public intervenor Heather Black, municipal governments, municipal electric utilities, the Canadian Federation of Independent Business and individual concerned citizens.

NB Power said major changes to the way the public is charged for electricity needs substantially more public input and recommended the termination of the current three-year-old process in favour of starting over later this year or next.

"Future proceedings would start with a fresh record and a contemporary group of interested parties," it argued.