A utility expert who's been critical of N.B. Power's financial forecasts says the Crown corporation appears to have adopted a more balanced approach with its latest rate request. 

Robert Knecht testified Tuesday afternoon during an Energy and Utilities Board hearing in Fredericton.

The board is weighing N.B. Power's request to increase power rates by an average of 9.25 per cent this year and again next year. Its filings with the board show 4.75 per cent increases in each of the following three years. 

Knecht, who lives in the United States and has previously testified before the board, was hired by the public intervener to analyze N.B. Power's proposed rate increase. 

"By setting a lower increase in the [later] years, it gives itself a little more flexibility," Knecht said in response to questions from N.B. Power lawyer John Furey. 

"That could be called more responsible, it could be called more conservative."

N.B. Power faces a 2029 target set by the provincial government to reduce its debt. (Shane Fowler/CBC)

Knecht said "it's no secret" he's long been critical of N.B. Power's projections as it faces a $5.4-billion debt and major spending on existing power plants.

Knecht said the proposed rates appear to balance the concerns of current ratepayers with those in the future. 

Furey asked if lower rates in earlier years makes it less likely the utility can meet a 2029 debt reduction target set by the provincial government. The target calls for 80 per cent debt and 20 per cent equity in its capital structure. 

"All other things being equal, reducing the rates in the early years makes achievement of the equity target even more difficult," Knecht told Furey.

His report filed with the board ahead of the hearing notes the utility has major capital spending looming, including meeting a commitment to achieve net-zero carbon emissions by 2025. 

It's a target that would affect the utility's Belledune coal-fired power plant, its Coleson Cove heavy-oil plant, and Bayside natural gas plant. 

Furey pointed out there is also a looming decision on the future of the Mactaquac Dam. 

At the same time, Knecht's report points out N.B. Power needs to deal with demand from a growing population and perform upgrades on its transmission system. 

Knecht noted the utility appears to be better at reflecting the actual performance of the Point Lepreau nuclear generating station, using historic performance data to forecast into the future. 

But Knecht said he still sees problems in the utility's financial forecasts submitted as part of the rate hearing. 

"While it is risky to generalize, my overall assessment of the current five-year financial forecast is that it has substantially reduced much of the undue optimism for the near term, but the longer-term outlook contains assumptions that appear to retain the historical rosiness," his written report, filed with the board, states. 

Knecht's report lays out the earnings forecast in a graph, showing the uptick in future years that he describes as a hockey stick. 

"The hockey stick is still there and it just keeps moving out," Knecht testified. 

The board's hearing on the proposed rates is expected to continue this week. 

The board previously approved an interim rate increase this year pending the outcome of the hearing. 

N.B. Power's proposal to do away with separate urban and rural service charge rates would mean a 15 per cent monthly increase for some customers.

That proposal was spurred by New Brunswick's local governance reform, according to N.B. Power staff appearing before the province's Energy and Utilities Board last week.

N.B. Power rate design specialist Veronique Stevenson said those within municipal boundaries before those reforms took effect in January 2023 are now paying a cheaper urban rate.

While those brought into municipal boundaries in 2023 would technically fall into that same urban category, Stevenson said those households are still paying the more expensive rural rate. 

N.B. Power has missed its profit targets in each of the last four years by a combined $252 million. This year it has informed both the Energy and Utilities Board and the Department of Finance that profits are running ahead of its budget projection. (Radio-Canada)

That's because transferring those households over to the urban rate would mean a considerable revenue loss for the utility, she said.

The Crown corporation's general rate application lists the existing urban and rural rates as $24.57 and $26.96 per month, respectively. It also has a "seasonal" category, which is also charged $26.96 per month.

N.B. Power proposes to merge the categories to a uniform rate of $28.97.

But that would mean a 15.1 per cent increase to the monthly service rate, or $3.70, for about 51 per cent of customers – those who would have previously been charged under the urban category.

Randy Hatfield worries the monthly service charge increase will disproportionately impact low-income people. (CBC)

While the remaining customers in the rural and seasonal categories will take on a 4.9 per cent increase, or $1.31 per month.

"So N.B. Power's proposal is asking urban customers to bear a higher increase in order to cover a lower increase for the rural and seasonal customers, that's the implication?" Abigail Herrington, counsel for the EUB, asked the panel on Thursday.

Stevenson agreed that urban customers "will certainly see a bit of a higher rate increase" if the changes are accepted by the board.

"Because it only applies to the service charge, customers with lower energy will see a higher percentage increase on their bill," Stevenson said. 

 Shelley Petit of the New Brunswick Coalition of Persons with Disabilities said the increase will be difficult for people with disabilities to absorb, as many are on a fixed income. (Nipun Tiwari/ CBC News)

It's a disparity that Randy Hatfield, executive director at the Human Development Council in Saint John, worries will disproportionately impact low-income customers. 

"Low-income people are better off with a lower monthly flat-rate charge. As low as possible," he said. "Because they tend to be users of a smaller amount of electricity, and they have some control or agency over how much they use."

He also pointed to a report from independent consultant Robert Knecht, hired by public intervenor Alain Chiasson, which says the overall increase across categories isn't justified.

Shelley Petit, who is representing the New Brunswick Coalition of Persons with Disabilities, also worries about how the change will affect people's bills and ability to access basic needs. 

N.B. Power is proposing to merge its urban, rural and seasonal monthly service charges into one category. (N.B. Power/Facebook)

"These increases are portrayed as small, just a few dollars here and few dollars there, barely the price of a coffee a day, but we do not have that luxury of going out and buying a coffee," Petit said in a statement. 

"Too many persons with disabilities are already eating only what is obtained from the food banks. They are being forced to skip treatments, uncovered medications and more."

She worries ultimately those on fixed incomes will not be able to handle the proposed increases.

Asked about the utility's reasoning for putting more of the increase on urban customers, N.B. Power spokesperson Dominique Couture referred CBC News to exhibit NBP11.41. 

However, exhibit NBP11.41 does not provide a rationale, but lays out the increases in each category and bill impact.

CBC News requested comment from the province's Department of Local Government on Friday but did not receive a response.