NB Power's debt ran $1B above its own 2015 plan as rosy forecasts met reality

NB Power's debt strategy was to apply for a series of small two-per-cent rate increases year after year, slowly building equity to pay down what it owes. At its 2015 rate hearing, executives projected the increases would cut debt to $3.95 billion by March 2021 — an $889 million improvement over six years.

Instead, at the February 2020 rate hearing the utility projected March 2021 debt of $4.9 billion — almost $1 billion higher than planned. Robert Knecht, a US utility expert hired by public intervenor Heather Black, told the hearing the strategy had failed because NB Power's planners routinely used overly rosy projections of costs and expenses.

The misses had named causes: the Point Lepreau nuclear station generated 10% less electricity than projected during its first seven years after refurbishment, storm damage kept landing, and hydro dams ran below traditional water flows. The January 2017 ice storm in northeastern New Brunswick cost $30 million — ten times the year's storm-damage budget.

In November 2019 the Higgs government's mandate letter told NB Power to treat debt reduction as its 'first and foremost' priority and shed at least $500 million of debt by 2027. Knecht warned the utility was running out of time to produce a credible scenario, noting its current ten-year models still assume no further significant problems at Point Lepreau and lighter carbon taxes than federal rules allow.

Debt projected almost $1B above plan — $4.9B versus the $3.95B promised for March 2021; a single 2017 ice storm cost $30M, ten times that year's storm budget.

The paydown plan rested on forecasts that consistently took the best case: full nuclear output, modest storm damage, favourable carbon-cost assumptions.

Six years of the strategy produced almost no headway — the debt gap versus plan reached roughly $1 billion rather than shrinking by $889 million.

Best-case modelling left no buffer for the utility's known recurring shocks, from ice storms to refurbished-reactor underperformance.

The province then imposed a hard $500-million-by-2027 target the utility had no credible path to meet.

A plan built on best-case assumptions isn't a plan: steady small rate rises only work if the forecasts beneath them survive contact with storms, underperforming reactors and carbon policy.

The Energy and Utilities Board was hearing NB Power's application for another two-per-cent rate increase from April 1, 2020, with Knecht urging the utility to keep its existing mechanism but make its projections 'a little less optimistic' before the 2027 deadline.