Consumer advocate Dennis Browne blasts Newfoundland Power for proposed rate hike

Newfoundland and Labrador consumer advocate Dennis Browne says he plans to fight Newfoundland Power over its proposed rate increases — a move he says is driven by a desire for profit.

For its part, the St. John's-based utility says Browne has his facts wrong. 

On Thursday it was announced that Newfoundland Power is looking for permission for a 1.5 per cent increase to electricity bills effective July 1, followed by another 5.5 per cent increase the following July. The proposed increases would apply to both residential and commercial customers.

"We're studying the application right now, but it seems to us that they are seeking an increase in their rate of return," Newfoundland and Labrador consumer advocate Dennis Browne told CBC News on Friday.

"They're not due any increase in the rate of return. Right now they're doing quite well. In the last quarter they increased their profit margin year over year, went from $30 million to $32.5 million."

That means they made $2.5 million more this year than the previous year, he said. On top of that, electricity sales are also up.

The Public Utility Board will conduct a review of Newfoundland Power's request before making a decision on the proposed hikes.

The general rate application — a process that happens approximately every three years — comes as Newfoundland and Labrador is grappling with spikes in the cost of living. 

Company claims need for hike

"We know that these are challenging times for our customers and we understand that reliable service at affordable rates is more important now than ever," president Gary Murray said in a statement released Thursday.

Murray said effective cost management has meant Newfoundland Power can "serve more customers more efficiently than we did 10 years ago." The company has cut operating costs per customer by almost 10 per cent, adjusted for inflation, he said.

There are factors driving the increase, noted the company statement, pointing to the costs to deliver electricity to customers.

In the same statement, Murray said the increases are needed because the company is replacing aging infrastructure and assets so it can better handle storms, which are becoming more frequent and severe.

"Ongoing, strategic upgrades are crucial to maintaining current levels of reliability for our customers," he wrote.

But Browne said that argument doesn't hold any weight because customers already ultimately pay for infrastructure.

"Ratepayers are already paying for all the infrastructure at a rate in excess of $100 million a year. They have all of that. We paid for that.

"When we go before the board to oppose this application, we will be looking to ensure that there's no increase in Newfoundland Power's rate of return."

In fact, Browne said, over the last 20 years ratepayers have paid approximately $1.5 billion for infrastructure, adding that experts said N.L.'s infrastructure "is overbuilt."

"So no, that is not the reason for this increase. That's already paid for. We've done that. What they are really seeking is more money and profit for the company."

Browne also said Newfoundland Power tried to get an increase a few years ago, when it also cited the needs of infrastructure, which he called misleading. He says Newfoundland Power should be straightforward about what it's doing with the proposed increases.

"If they're looking for an amount of money to increase the profit of Newfoundland Power, say that. Don't pretend it's for something else," said Browne.

Browne making 'false statements,' says utility

In response, Newfoundland Power's manager of public affairs said Browne is misleading customers with "false statements." In a statement sent to CBC News, Michele Coughlan says Newfoundland Power's capital expenditures are reviewed and approved by the Public Utilities Board.

"Approved capital expenditures are financed over the long term and are collected through customer rates as they are used to provide service over many years," reads the statement. "A significant portion of our assets were built in the 1960s and 1970s, and need to be replaced. Ongoing strategic upgrades in the system is crucial to maintaining current levels of reliability and electricity service for our customers."

The utility is required to file a general rate application about every three years as part of the regulatory process, notes Coughlan.

"This general rate application reflects all changes in the costs to deliver electricity to our customers since our last general rate application. This includes investments in the electricity system, as well as a fair and reasonable return on this investment."

Coughlan says Newfoundland Power is "not immune" to the impacts of the increasing cost of materials and supplies, and higher interest rates.

"We remain committed to doing everything we can to minimize the impact of these increasing costs on our customers' electricity rates," says the statement.

"Since 2016, our rate applications have resulted in no increase in base electricity rates for our customers related to our operations. At the same time, we have reduced our operating cost per customer by almost 10 per cent when adjusted for inflation."

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