Great Post from Lower Rates NB

This post was taked from the Lower rates NB website. It has some good arguments. Because of all the posts that get removed from the lower rates site, I copied it here.


11.21.2009 at 10:06 am | Expert panel :
Interesting info off of face book

Background: To fully understand the gravity of this MOU, there are a few things we need to know. I called Marketing to get some ideas on the cost of replacement power and learned this. Power is bought and sold, on an open market. If there is an excess of power, you may get rates cheap, but if demand is high, and power becomes short in supply, prices rise, and sometimes to unbelievable levels.

Prices depend on many factors, Like when its bought, and demand. Prices on Power usually range from $40/MW and up, even as high as $1000/MW or higher. Keep in mind, how long you want the power for, also affects cost. Example, if you buy power 1 day in advance, for the day, you can get a cheaper rate than if you want that amount for a month. The increase in cost over longer purchasing times, is due to the risk that the supplying power company has to assume, to guarantee that they will have this power available a month down the road.

Power also has a charge added to it called tolling charges, which is the cost to send the power down utilities lines. These charges are affected by when the power is sent, called on and off peak. In New Brunswick, off peak, or when demand is usually lower is @$2.88/MW and on Peak, Like Breakfast and Suppertime is @$6.07/MW.

So, now let’s look at the facts, and where they relate to our rates:

FACT: MOU PG5, HQ has placed a 14TWh Limit for residential and industrial use/yr to NB Customers.
FACT: New Brunswick’s use last year 07/08 was 14.25TWH. NB Power Financial report on NB Powers web site.
FACT: Residential Rates Frozen for 5 years at rates MOU was signed then increased at the rate of the NB CPI.
FACT: NB CPI as per statistics Canada web site for last 5 yrs was, 1.5, 2.4, 1.7, 1.9, and for 2008 1.7.
FACT: As per MOU Section 2, HQ will be allowed to recoup extra power charges plus interest above the 14TWH, for this 5 yr term and EVERY year after. This will be recovered after the 5 year freeze.
FACT: MOU page 8 section 3 (Vi) NB Government can recoup decommissioning costs of all 5 thermal plants, through regulatory charges to electricity customers.
FACT: NB Power Financial report PG52 , Decommissioning costs were to be a liability until 2035. So the money is obviously not there and will need to be recouped.

New Solar Panel production plant In Miramichi has been rumored to need 1.2TWH/yr. Also any increased load, NEW plants, new houses etc will be more.

So from all this info. It is a fact, that the rates will be where they are for 5 yrs . but on the 6th year WATCHOUT.

(It will go from the 9.8 cent/KWH) + (increase based on CPI NB @1.8% avg last 5yrs) + (the deferral costs we will have to pay back for extra power above 14TWh + the interest on this extra amount) + (any costs to repair and upgrade infrastructure) + (decommissioning costs for 5 thermal plants, recouped by NB Gov, estimate from Liberals to be over $110million).

NOTE: This will be like this FOREVER after year 5!!!
Still think 3%, or ¼ of 1 cent /KWh increase NB Power was to add was bad?

So Lets estimate cost:

Approximate Cost of Heritage Pool Excess:
Power in Jan and Feb, Runs Approx: $75-85/MW when booked a day in advance. $100+/MW when book for a month in advance.
Tolling Cost To run a MW of power on the lines: During Off Peak Times $2.88/MW. During on Peak Times $6.07/MW

Now During the Past 5 years we have exceeded the 14TWh cap 4 Times by @0.25TWh.

Here is a quick calculation, AT THE LOWEST NUMBERS, for the cost associated with going over the Cap by 0.25TWh:
Replacement power Cost
0.25TWh = 250 000MW
250 000MW X $75/MW = $18 750 000.

Tolling Charges
$2.88/MW X 250 000MW = $720 000.

Penalty/yr during first 5 years
$18 750 000 + $720 000 = $19 470 000.

So as NB’ers we will have to pay $19 470 000./year + Interest for 0.25TWh excess power

That’s right!! Just under $100 Million to be paid by the power consumers of the province over 5yrs.

On top of our current rate ($0.098/KWh) + increase to CPI (@1.8% on average) + increase for repairs to infrastructure + NB Gov add on to Decommission the 5 Thermal Plants Left, estimated at @ $110million by liberals.

Remember Also, we will have this $19.5 Million Penalty + Interest, every year after also, forever. Assuming NO In province electrical growth or increases in purchasing costs for the power.

So $97.35Million divided by 370 000 NB Customers = $263.11 Each, for the first 5 yrs
And $19.47Million Divided by 370 000 NB Customers = $52.62/yr Each, Forever, Pay Up.

One More Consideration, New Plant in Miramichi, which is to make solar panels, has supposedly made a request to NB Power for 1.2TWh/year. This Combined with the 0.2 we are already over would make prices even more absurd. 1.4TWh at $75/MW would equal $105Million, Tolling charges at $2.88 would be just over $4 Million. So this would cost NB’ers Over $109 Million/yr + Interest. So after 5yr Freeze we would have to pay back over $500Million + Interest. Costing Every Customer $1351 each. So Much for any $1400 savings. Plus the extra $110million every year thereafter, costing $297/yr each.

All This because NB Power may Raise the power rates another 3% or to put it in Dollars, From $0.098/KW to $0.100/KW. That’s right from 9.8 cents to 10cents/KW.

Keep in Mind this is only ONE part of the MOU. But it will cripple New Brunswick. Doing exactly the opposite of what the Liberals are saying it will do. I see rates rising uncontrollably after the 5 year freeze, and because of the heritage pool 14TWH amount we will be penalized for ANY in province growth, industrial or residential. It is just not worth the short term gain to be crippled over the not so long term. Vote NO to the sale, and sign a petition, PLEASE!!

What Other thing are bad in the MOU?:

-HQ sub. Keep in Mind that HQ sub, in the MOU is actually NB Power, but owned by HQ. Any mention of charges or costs associated with HQ sub, will be charged to NB’ers, AS I SEE IT. So read the MOU and decide for yourself. This is bad as upgrades, repairs and decommissioning costs, will actually still be on Tax payers of NB, NOT HQ, as we are the customers of HQ sub.
-Loss of carbon tax credits for thermal plants NB Power still owns. Ridiculous. They don’t want the plants, but take our tax credits so we can’t run them. Plus these credits can be bought or sold across North America. The liberals think HQ will use the credits for new industry in NB. Common, where does it say that in the MOU? HQ will surly use the credits for growth in their own province, to create jobs and income from taxes, not in NB as the Liberals have suggested. More lost revenue to NB.

-Pensions, another touchy one. It is a great thing to keep the pensions and it is only fair to the employees who have been paying into it. Unfortunately over the next 10 years they expect 1500 more employees to retire. With no new employees paying into the fund, this will become a large burden on NB’ers to pay for this.

-Revenue. According to the NB auditor general, NB Gov has been paid over $100million/yr by NB Power in taxes and fees, which NB Gov has used to pay for other programs and their debt. Selling NB Power, will actually lose this revenue, making NB’s debt worse. He also stated this doesn’t actually pay down ANY of NB Net debt, at all. As suggested by liberals, listen here: http://www.youtube.com/watch?v=OVMvcp-iI8M

-NB Power debt is getting worse, False. NB Power has paid down over 250million/yr the last 5 years and $1.3billion total over the last 5yrs. Credit rating has gone from a 4ish number down to the 3’s. All this even with NB government taking money, good job David Hay.
-Rates. The Liberals have assumed a savings on rates, based on NB Power raising rates 3%/yr forever. Who said this? NB Power said there would be a 3% increase in the next 2 yrs, NOT EVERY YEAR FOREVER.

-Taxes. Quebec has been given a pass on any taxes paid on revenues in NB. NB Power paid over $100million/yr to NB. Where are we going to recoup this cost? Maybe if NB Power had been given such a break, the 3% increases they are imposing would not have been required. MOU section 7.1 .
- Book value – NB Power was sold for basically what is owing $4.7Billion, ridiculous. Here is an example of book value: NB Power pays off a truck in 3 yrs but may keep it for 10.
Example: Truck new$50000 Paid Down $0 Book Value $60000
Year 1 Paid Down $20000 Book value $40000
Year 2 Paid Down $20000 Book Value $20000
Year 3 Paid Down $20000 Book Value $0
This Depreciation is done because you pay less taxes on the assets. So after year 3, truck on the books, has a book value of $0.00. But in reality it does have a value. The sale of NB Power is based on the book value, not the actual value. BAD DEAL!!

-Pointe Lepreau. We are giving it away. It has been estimated that Lepreau can earn over $6 billion in profits over the next 25yrs, assuming no increase in rates.

-Increases will be controlled by EUB. Please read the MOU section 3.1B “The regulatory framework governing the generation, transmission and distribution of electricity in NB will be altered to conform to the framework currently in effect in Quebec. So all the rate increases agreed to in the MOU will be uncontrollable as listed above. The only increase I see them controlling is the increases to upgrades and repairs, everything else was agreed to in MOU and they can them have uncontrollably.

-Extra $5 Billion. This is assumed with predictions over 50yrs. Comon, Even with a mistake of 1% raise on fuel costs this can make a difference of $2 Billion dollars lost on rates. So actually this $5 billion is nothing but a farce. Base it on existing rates or something, just give us facts.
-Fear mongering? Don’t just accuse us of something, PROVE US WRONG. We are presenting the facts, Debate them.

-Platform of Liberals. They said they would not sell NB Power, a change of mind is fine, but it is only democratic to do a re-election. We are not a communist society yet Shawn Graham. If its such a good deal, let it stand on its merits and give NB’ers a vote. PLEASE!!!!