PUB wants details on secret Irving power deal

26 08 2014

CBC News Posted: Feb 28, 2006 11:03 AM AT Last Updated: Feb 28, 2006 11:03 AM AT

The Public Utilities Board has raised questions about a substantial contract NB Power has with Irving Oil, but is having a hard time getting answers about it.

NB Power buys electricity from Irving every winter, sometimes at prices above what NB Power can generate for itself. The Public Utilities Board wants to know why that is, but so far has been told only that the answer is confidential.

The utility wants to raise power rates for industrial and household users on April 1. It is basing the rate increases on projected financial shortfalls next year. The PUB is holding hearings into NB Power’s rate request, and asking detailed questions about the corporation’s financial dealings.

Irving Oil owns a natural gas generating station that produces electricity, which is bought by NB Power no matter the price.

NB Power says it has an arrangement with Irving to buy all the power produced by the plant each winter between November and March. It doesn’t matter if NB Power needs the electricity, or if the utility could produce the power more cheaply at one of its own plants.

The Irving’s Saint John power plant is medium sized and capable of generating about 40 per cent of the power of the nuclear generator at Point Lepreau.

NB Power originally agreed to winter purchases from the unit as a convenient way to manage high New Brunswick consumption patterns between November and March, but since the contract was signed, natural gas prices have soared.

NB Power executives have testified the contract leaves the utility no choice but to buy from Irving for those five months, but that was called into question when evidence surfaced that NB Power also pays Irving up to $29 million a year in a capacity charge for the plant.

Capacity charges are usually paid only if a customer is unsure if it wants to buy electricity. The customer makes the payment to reserve generating capacity just in case.

PUB member Ken Sollows says the revelation of the capacity payments to Irving suggests NB Power is not necessarily obligated to buy power from the plant, and the utility should be free to generate its own power more cheaply. “I’m left wondering if those contracts don’t actually allow us to just pay the capacity cost and simply schedule the plant not to run,” said Sollows.

NB Power’s distribution company, DISCO, pays the cost of the contract, but the contract itself is between NB Power’s genration company, GENCO, and Irving. Unlike DISCO, GENCO is not subject to regulation and the PUB has not been allowed to see the contract even though board members believe it may be costing New Brunswick rate payers millions.

The Irving power deal has become an issue at the rate hearing because early this winter natural gas got so expensive, power from the Irving plant cost much more than NB Power’s own production at Coleson Cove. Despite that, NB Power spent millions on the Irving electricity.

Sollows says he doesn’t believe NB Power’s contract with Irving really forces it to buy overpriced electricity, but Irving has not consented to let the board look at the contract, so nobody knows for sure. “It really does leave me questioning whether we could cut maybe $90 million out of your fuel price estimate,” he said.

Board chairman David Nicholson said the Irving deal needs to be reviewed, but NB Power executives were unable to answer even simple questions about it.

Even NB Power’s two lawyers said they haven’t seen the Irving contract, except the secrecy provisions, and couldn’t comment on whether the utility really has to buy from Irving or not.

“I personally have not reviewed the NUGs [contracts with private power producers], I don’t know if Mr. Hashey has,” said NB Power lawyer Terry Morrison.

His co-counsel David Hashey, added: “I’ve seen the cofidentiality clauses in them. I’ve only been supplied with the confidentiality clause when I asked to see that.”

But NB Power does buy from Irving, spending $100 million on electricity this year alone, a transaction that so far has not been subject to any public scrutiny.

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One response

26 08 2014
Roger Olmstead

This type of thing has to stop. NBPower is a publicly owned company and all its finance must be public knowledge. This REEKS of corporate welfare and another deal signed in secret without public knowledge or consultation. Sound familiar? VOTE GREEN

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