During the debate over NB Power, a number of people that disagreed with me used the argument that the large industrial users were the problem and if they could be purged, it would be far better for the system. One of the guys I debated with argued that the forest products mills should pay far more for electricity – even if it put them out of business.
The problem I made then – admittedly to very little traction – and I’ll make now is that if you take the large users off the system, you then need to spread that $4.5 billion in debt (or whatever it is these days we don’t know) over a far smaller base of MW usage. The TJ has a good editorial today about what will happen if PEI drops off as a large NB Power customer.
Some of the people that think about these things are telling me that the best thing is for the large industrial users to be allowed to leave NB Power and buy power directly from Hydro-Quebec or Nalcor or generate their own. I think this idea should be pursued but again we have to consider this issue of stranded debt. If you end up with just residential customers and small businesses as NB Power customers, amortizing that debt over the small number gets a whole lot harder.
For those that just scoffed at the debt issue (usually based on an argument about the rebuild value of the assets which is totally irrelevant – what is relevant is how that old, stranded debt gets paid off), the chickens are coming home to roost.
4 thoughts on “The problem of NB Power’s debt”
Exit fees, stranded assets, declining load pool. Don’t go there David – too many people will say you’re making their heads hurt. Don’t worry, be happy.
“what is relevant is how that old, stranded debt gets paid off”
And that, no doubt, is why industrial users want out. They do not want to help pay off that debt. NBers who have the fiscal capacity to invest in energy efficiencies should be doing what they can now to reduce their demand on the power grid. Those who cannot will pay the price.
Debt relief was the main rationale for the sale of assets to HQ and that debt issue looms large in terms of power rate increases down the road. Despite that, many still refuse to acknowledge the role of that debt in NB Power’s situation. Certainly, listening to CBC radio this AM would suggest that CBC staffers believe the debt is not worth discussing. The main story for them seems to be the usual ‘us agin them’ – the little guy vs the industrial bosses.
The cost of infrastructure to supply power to an industrial user is unique to that user. In other words the infrastructure would never have been built if the user wasn’t there.
The cost of this depends on the amount of electricity the user requires, and can be in the millions of dollars, depending on the location of the user and the proximity to the voltage needed.
Having built this infrastructure at no charge to the user, NBP cannot recover the cost because industrial rates in NB do not even cover the cost of production of the power supplied.
It strains c
cont’d credulity to argue that there should be no exit fee to recover these costs should the user decide to leave the grid.
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