In a decision released Thursday to resolve what had been another testy dispute between N.B. Power and its largest industrial customer, the board ruled that the utility does not immediately have to calculate and adopt a seasonal allocation of its electricity supply costs at an upcoming rate-design hearing in June.

"Leave to expand the scope of this proceeding … is denied," François Beaulieu, board chair, said in the oral ruling.

The decision means that what could have been up to $5 million in winter electricity costs, currently assigned by N.B. Power to industrial customers, will not be transferred and charged to residential customers anytime soon.

Winter heating demands by residential customers force N.B. Power to maintain and operate the expensive oil-fired generating station at Coleson Cove, which otherwise remains idle for much of the year. (Robert Jones/CBC)

The dispute emerged in advance of an upcoming June hearing that will begin a long-delayed review of how N.B. Power charges its customers for electricity.

The rate-design hearing is one of several expected over the next few years that could ultimately produce dramatic changes to improve the efficiency of the electrical system and pricing fairness among consumers of power.

Residential customers navigating multiple high, medium and low power rates every day is one potential outcome, but large issues like those will not be dealt with until much later in the process.

Hearing expansion requested by JDI

The first hearing will focus mostly on mundane matters, including reorganizing some of N.B. Power's commercial and industrial customer groups.

It will also address whether churches, farms and charities should be charged residential or commercial rates, whether prices at electric-vehicle charging stations should kept low and a number of other matters.

That list frustrated J.D. Irving Ltd., which earlier this month asked the utilities board to force N.B. Power to expand the first hearing to include a look at introducing a seasonal allocation of its costs that would govern customer pricing.

That set up another clash with N.B. Power two months after the two organizations tangled in a two-week hearing over the utility's April 1 rate increase.

J.D. Irving Ltd. has multiple manufacturing facilities in New Brunswick and is N.B. Power's largest industrial customer. took a lead role in fighting the utility's latest rate increase, and this week tried to force changes in another upcoming hearing. (CBC)

N.B. Power opposed the call for seasonal costing as coming too close to a June hearing that has been scheduled for nearly a year.

"The request is quite late," said N.B. Power lawyer John Furey, who called JDI's request "inherently unfair."

N.B. Power is required by the utilities board to allocate the cost of supplying electricity in New Brunswick among different customer groups and pricing electricity to the groups based on that allocation.

"Cost allocation is the foundation for establishing just and reasonable rates," Beaulieu reiterated on Thursday. 

"It is an essential component of the rate-design process." 

Most expensive to service

Residential customers who heat with electricity are the most expensive to service because their consumption patterns can swing up and down by factors of ten, or more, depending on the time of day, the day of the year and the temperature outside.

N.B. Power has to maintain a fleet of generating stations to serve the moment of highest demand each winter, even though many of the facilities are unneeded for much of the year.

Currently, the utility assigns costs for all of the assets and expenses required to deliver electricity among customers annually, but evidence at earlier hearings has shown if it was done seasonally — once for N.B. Power's winter operations and once for non-winter operations — it would cause a shift in costs mostly from industrial customers toward residential customers.

N.B. Power concedes that point but opposes changes in the immediate term, partly because it is electric-heating customers behind the seasonal expense, and residential customers are a mixture of those who do and don't heat with electricity.

J.D. Irving Ltd. lawyers Nancy Rubin (right) and Brianne Rudderham (left) were unsuccessful in convincing the board to broaden the scope of an upcoming rate-design hearing to look at whether some industrial power costs should be assigned to residential customers, instead. (Ed Hunter/CBC)

The utility presented evidence from consultant John Todd suggesting that more sophisticated costing data and pricing options are "imminent" in New Brunswick with the installation of smart metres that will quickly make seasonal costing obsolete. 

Nancy Rubin, a lawyer for J.D. Irving Ltd., disputed that idea. She called N.B. Power concerns about the potential negative effects on seasonal costing to residential customers "alarmist" and noted smart metres will not be fully deployed in New Brunswick until 2025.

"Mr. Todd's concept of imminent is quite different from my concept of imminent," she said.

In denying J.D. Irving's application, Beaulieu noted N.B. Power's current cost allocation analysis may be stale and proposed a procedural conference in late June, after the rate-design hearing, to discuss how and when it should be updated.   

"The board concludes that a review of N.B. Power's cost allocation methodology, including but not limited to any consideration of seasonal cost allocation, is appropriate," he said.