A US utility expert who has been sounding the alarm about NB Power’s finances for several years said at his rate hearing on Tuesday that at first he couldn’t fathom how much worse things have gotten this year.
Robert Knecht was called to testify Tuesday afternoon, but before testifying, NB Power filed updated financial information for the current year that showed a quarter billion dollar deterioration in the company’s fortunes only since September.
The drop is so sharp, Knecht told NB Power’s attorney John Furey, that he initially thought it was a mistake when the amount was first revealed last week.
“That’s quite a significant change in three months, isn’t it?” asked Furey.
“Yes, when I saw it, I didn’t believe it,” said Knecht.
While testifying, Knecht made quick calculations on the fly, estimating that NB Power is $260 million worse off since the fall due to higher-than-expected fuel costs and premature outages at the Bayside and Point Lepreau natural gas power plants.
“If I understand correctly, I see a deviation of $260 million, which is worse than the budget-based filing,” he said.
Knecht is a senior consultant at Industrial Economics in Cambridge, Mass.
He has appeared at several NB Power tariff hearings over a number of years and has consistently, and for the most part correctly, predicted that the utility would face financial problems by being overly optimistic in its corporate projections.
In 2017, he expressed doubts that the utility company’s long-term plan to pay off $1 billion in debt by raising interest rates 2 percent a year would work. He believed that it relied too much on good things to happen – like the Point Lepreau Nuclear Power Plant running without problems – and bad things not to happen, like. B. Large storm events.
“I have concerns that NB Power’s 10-year plan may be an optimistic rather than an expected value proposition,” he said at the time.
Since then, NB Power’s net debt has not fallen to $4.5 billion this year like the utility forecast in 2017, but has risen to over $5 billion, as Knecht feared.
He was hired by Rick Williams to offer his opinion on NB Power’s proposed rate hike this year and has again raised concerns that the utility is still underestimating what it needs to do to put itself on a firmer financial footing.
“I’ve had a long-standing concern about this utility that it’s just not making progress [debt reduction].” said servant.
He pointed out that NB Power is budgeting for Point Lepreau to have trouble-free operation next year and said this shows him that the utility is still doing too much wishful thinking in its planning.
“As you know, I have raised these concerns in several proceedings,” he said.
“The [budgeted] Level is higher than anything the facility has achieved since the refurbishment.”
Knecht said he thinks there are ways to cut costs within NB Power, but that stubbornly high levels of debt and recent financial setbacks require more revenue from customers, and he fully supported the price hike request.
“I have recommended to the board to accept the proposed rate hike of 8.9 percent,” Knecht said.
