After removing CEO Keith Cronkhite, the chair of NB Power’s board says a “special skill set” is needed to address the utility’s mammoth debt.
The utility announced Monday that Cronkhite had been removed by the board after just two years and that it will now embark on a “significant transformation of the organization.”
“This utility has the potential to be a significant contributor to the coffers, to the provincial treasury and it should not be a detractor,” said board chair Charles Firlotte in an interview.
“This was about the steep climb and the skill set needed to do that.”
Over the last decade, NB Power has been consistently unable to hit profit or debt reduction targets. In the 2020-2021 fiscal year, Cronkhites’ first as CEO, the crown corporation lost $4 million and added $9 million to its net debt.
The budgeted targets for the year had been a $41-million profit with a $17-million decrease in the net debt. Results from last fiscal year are expected this month, but $40 million had already been added to the debt by the end of the third quarter.
NB Power’s net debt sits north of $4.9 billion, or about 94 per cent of its equity according to ex-auditor general Kim Adair. Debt reduction targets from the Higgs government would see the utility decrease that to 80 per cent by 2027 but little to no progress has been made as of yet.
The board has hired Price Waterhouse Canada which will “lead a strategic review which will include identifying immediate ways to optimize the current cost structure and meet debt obligations, as well as identifying alternative solutions to meet New Brunswickers’ power needs in a cost competitive, reliable and environmentally sustainable way.”
But Firlotte says the utility’s main priority needs to be figuring out how to reduce the debt.
“We are going to tackle our own house and put it in order first,” he said.
“We will leave no stone unturned as we do that.”
Some opposition legislators say that the government has been claiming that the foundations to transform NB Power were being put in place and question why the board now claims more reviews of the organization are necessary.
Liberal energy critic Rene Legacy pointed to amendments to the Electricity Act that will allow NB Power to explore other business ventures through a new holding company in order to generate revenue as well as new efficiency targets that will be implemented next year.
“This government has been in power for four years and for the last two I’ve been told by a minister that all the building blocks were being put in place to make NB Power evolve,” he said.
“I’m not hearing that they let go of their CEO because they wouldn’t execute that plan, now they’re saying they need a whole new plan.”
The next CEO will also have to contend with federal clean electricity regulations that will ban the burning of coal and oil for power in 2030 and 2035, respectively. Those sources made up about 20 per cent of the province’s power generation in 2019-2020 and will need to be replaced.
While NB Power’s debt load remains important, Green energy critic Kevin Arseneau says the utility needs to prioritize the creation of additional green energy and avoid falling prey to some of the costly mistakes made in the past.
“There’s not just the debt that’s the bottom line here, there’s also the climate crisis that needs to be addressed,” he said.
“If that’s not the focus and there’s not a plan for that then any other plan is bogus.”
The Higgs government has touted small modular nuclear reactors (SMRs) as a potential way to fulfill future energy needs and spur economic development. But Arseneau is skeptical that investing in nuclear technology is an effective way to address NB Power’s debt.
Louise Comeau, the director of climate change and clean energy at the New Brunswick Conservation Council, says that roughly half of the utility’s current debt load is from the construction and refurbishment of the Point Lepreau nuclear generating station. But she adds that there are still economic development opportunities in green energy projects.
“I hope that the board and the process brings together both the climate change agenda and the debt issue so we solve them at the same time and come out with a renewed institution, a renewed opportunity in the province that’s bigger than just thinking about small modular reactors,” she said.
Comeau welcomes the review of the utility, but wants to see outside experts welcomed into the review to give their feedback on how the utility can adapt to the changing energy landscape.
Asked what sort of utility the board wants to see, Firlotte said that ultimately they want NB Power to be a consistent source of public revenue and continue to play an important role in the economic life of the province.
“We want a customer-centric, efficient, commercially-savvy enterprise that is a significant contributor to the provincial treasury,” he said.
“That’s the goal here.”