A New Brunswick government regulation, written to protect pulp and paper mills from high electricity prices, is forcing N.B. Power to increase the rate subsidies it offers mills this year by 35 per cent, despite a deterioration in the utility’s own financial condition.
The mill subsidies, which have been mandated by the New Brunswick government every year since 2012, have been set by the Department of Energy for the current fiscal year at $28.04 per megawatt hour, an increase of $7.29 over last year.
The utility had not originally budgeted to finance a subsidy that large and said it has revised the expected cost of the program for this year to $16.6 million — up by $2.9 million.
New Brunswick Green Party Leader David Coon has been a long time opponent of N.B. Power being made to finance the subsidy.
He said if the New Brunswick government wants to subsidise energy costs for forestry mills, it should take financial responsibility for the program itself and not make consumers of electricity and the financially struggling utility pay its rising costs.
“N.B. Power’s money doesn’t come out of thin air, it comes out of what people pay on their power bills,” said Coon in an interview.
“It’s just more pain for consumers.”
In hearings last summer N.B. Power confirmed that all New Brunswick electricity customers bear the cost of the support program. A $16.6-million subsidy would cost the average residential customer about $20 for the year.
N.B. Power estimates that a 35 per cent increase in rate discounts it must offer pulp and paper mills will cost the corporation a record $16.6 million. The subsidies are mandated and calculated by the provincial government but paid for by the utility, and they are shooting up despite a deterioration in N.B. Power’s own financial condition.
The subsidy, first introduced by the former Progressive Conservative government of David Alward, has cost N.B. Power more than $135 million, to date.
It is meant to offer mills a rate for the purchase of firm amounts of electricity equal to an average rate paid by similar mills operating in other provinces.
Under a scheme devised by the province, the subsidies are not paid directly but delivered through transactions where N.B. Power buys renewable electricity — generated by the mills at inflated prices — and instantly sells it back to the mills at a discount.
No electricity actually changes hands, but the process of buying electricity at high prices and reselling at low prices is carried on until N.B. Power loses enough money to the mills to equal a pre-determined subsidy amount established by the province.
This year the province calculated the target power rate for mills buying firm amounts of electricity to be $74.27 per megawatt hour, well below the large industrial rate of $102.31 per megawatt hour approved for N.B. Power by New Brunswick’s Energy and Utilities Board.
Subsidising the difference between the two is N.B. Power’s responsibility.
Finance and Energy Minister René Legacy said there� was no discussion inside the Holt government about changing or ending the subsidy for this year.
However, he said whether N.B. Power and its customers should be paying for an industrial subsidy mandated by the government will be reviewed in detail by an independent panel being set up by the province to evaluate N.B. Power’s future direction.
“That’s a great question,” said Legacy in an interview.
“That’s one of the questions we’re proposing to have in the review of what’s N.B. Power’s role.”
Pulp and paper companies have defended the program in the past as critical to their long-term viability. But since the program began, N.B. Power’s own financial viability has become an issue.
Earlier this year N.B. Power reported that ongoing operational problems, including trouble at the Point Lepreau nuclear generating station, had pushed its net debt above $5.8 billion at the end of 2024, $470 million higher than a year earlier.
