New Brunswick’s Energy and Utilities Board (EUB) held more than five hours of hearings on Sept. 3 on NB Power’s application to avoid the regulator’s financial scrutiny of its controversial proposal for a 500 MW gas/diesel generating plant on the Chignecto Isthmus.
Justin Urquhart, NB Power’s Vice President of Finance testified the plant should not be considered a capital project because it would be built and owned by the American company PROENERGY under a 25-year power-purchase, leasing agreement.
The provincial electricity act requires EUB approval of any NB Power capital project over $50 million, but the law does not clearly define what a capital project is.
Urquhart was asked why NB Power described its deal with PROENERGY as a partnership in a news release it issued on July 14.
“NB Power is not a formal partner that one might expect in a conventional business relationship of being an ownership interest in the joint venture or anything else,” he replied.
“I think partnership in this context was being pulled more from the NB Power new strategic plan, Energizing our Future, which talks about doing business differently and finding ways for broader partnerships,” he said.
Earlier, NB Power’s lawyer John Furey succeeded in persuading the three-member EUB panel to strike from the record parts of an affidavit filed by accounting expert Dustin Madsen who had been hired by the province’s energy watchdog known as the Public Intervener for the Energy Sector.
Although the panel agreed to certify Madsen as an accounting expert, it ruled he was not qualified to comment on provisions of the electricity act that require EUB scrutiny of capital projects.
The ruling means, for example, that the board will disregard part of Madsen’s affidavit that says the EUB should interpret the term “capital project” based on its grammatical or ordinary meaning and that it should consider accounting guidance and legal precedents from other Canadian jurisdictions.
Meantime, NB Power has hired accounting expert Tarah Schulz who filed her own affidavit and also testified today that under international financial reporting standards (IFRS), leasing agreements are fundamentally different from assets or investments that a business entity owns and controls.
Public Intervener
In a written brief filed with the EUB, Alain Chiasson, the Public Intervener argues that the gas/diesel generating plant should be considered a capital project, one that brings with it considerable financial risks that could affect power rates.
During today’s EUB hearing, he pointed to a $70 million electricity switching facility that would connect the new generating plant to the grid.
PROENERGY would build the switchyard, then sell it for $1 to NB Power because under provincial rules, only NB Power can transmit electricity in New Brunswick.
“We respectfully submit that the Switchback Assets alone represent a capital project with a total projected capital cost of $50 million or more which fulfills the requirements of section 107(1) of the Electricity Act,” Chiasson’s brief states, adding that therefore, under the law, it must be approved by the EUB.
The board will reconvene at 9:30 AM on Friday morning to hear oral arguments from various parties including NB Power, the Public Intervener for the Energy Sector and Moe Qureshi of the Conservation Council of New Brunswick.
To read the heavily redacted “tolling agreement” between NB Power and its PROENERGY partner, click here.
