NB Power rates to increase extra 3%

NB Power predicts power rates will rise an extra three per cent next year because of cost overruns refurbishing the Point Lepreau nuclear generating station.

The utility released new estimates for the project on Monday — one day before Premier Shawn Graham was to meet with Prime Minister Stephen Harper to ask Ottawa to cover the costs.

A $1.4 billion rebuild at Lepreau began in the spring of 2008, with the reactor originally scheduled to be back up and running by October 2009.

It's now estimated the total overrun will be $475 million, but only if Lepreau can return to service in February 2011. It remains uncertain when the project will be completed or how much it will cost.

A $475 million overrun would translate into a three per cent rate increase on top of the three per cent announced earlier, said NB Power vice-president Darren Murphy.

"Depending on what additional delays there may be, you can't start collecting the cost until it returns to service," he said. "And we would make some estimates based on that, so through our planning cycle, as we lead into next April, if we had projections that suggested that it was going to return to service sometime in that April to March time frame, we would build that into rates."

Earlier this month, NB Power submitted a new rate plan to the government, calling for a three per cent rate increase, which the Graham Liberals had warned would happen if there were no power deal with Hydro-Québec.

[B]Dispute over who should pay[/B]

The federal and provincial governments have been locked in a war of words over who should cover the costs of the Lepreau refit delays, which the New Brunswick government says are the fault of the federal Crown corporation Atomic Energy of Canada Ltd.

If the federal government compensated the province for part of the cost overruns, the rate increase would be smaller, NB Power CEO Gaetan Thomas said.

"If our shareholder can come with an agreement with the federal government, it will certainly help us in our commitment to try to keep our rates as low as possible," he said.

Thomas said it's just a coincidence NB Power chose to release the latest estimates the day before the premier meets with the prime minister. NB Power wanted to release the numbers as early as it could "to be open and transparent with [its] customers," he said.

Ottawa has said it will respect the terms of the AECL contract with New Brunswick, which does not cover the cost overruns.

[B]Continued delays[/B]

The Lepreau refurbishment was already expected to be 16 months behind schedule, but earlier this month AECL spokesperson Dale Coffin said it may not be finished by the revised deadline of October.

AECL has been running into problems inserting 380 new calandria tubes into the reactor, he said.

All of the nuclear activity of the reactor occurs inside the tubes, which contain pressure rods that hold uranium fuel bundles.

The AECL portion of the project was supposed to have been completed in July 2009, although officials admitted last fall that the original timeline was flawed.

The revised timeline was supposed to see AECL turn the refurbished reactor back over to NB Power in October 2010 for final testing and commissioning before the revamped reactor started producing power in February 2011.

But if AECL is going to meet that October deadline, it will have only five months to complete the remaining one-third of the rebuild. The first two-thirds took two years.

The Point Lepreau project is the world's first refurbishment of a Candu-6 plant. AECL had hoped the process would be a model that could be sold to other countries that purchased a Candu-6.

NB Power has a debt of $4.8 billion.

The government had planned to sell most of NB Power's generation assets to Hydro-Québec for $3.2 billion, eliminating much of that debt, but the deal fell apart in March over Quebec's concerns about unanticipated costs, according to Graham.

NB Power can raise rates by up to three per cent a year without requiring approval from the Energy and Utilities Board, the provincial regulator. But the government asked the utility to come up with a rate plan.