UPDATED – Jan. 17, 2013
SAINT JOHN, N.B. – The fifth and final day of the New Brunswick Energy and Utilities Board hearings on the Point Lepreau Generating Station deferral account ended on Jan. 16 with closing arguments by NB Power legal counsel and the public intervener.
The hearing covered the balance of the deferral account and the projected operating life of the refurbished plant, including testimony from several expert witnesses.
During his closing arguments, John Furey, NB Power's legal counsel, summarized the evidence that NB Power and its expert witnesses had provided during the hearings. This included foundational evidence for NB Power's estimate of the expected 27-year life of the plant. It also included internal and expert evidence confirming that NB Power has taken many measures to ensure incurred costs were accurate and appropriately allocated and that accumulated costs included in the Point Lepreau Generating Station deferral account were necessary and recorded in compliance with regulations.
Some of the key points covered by NB Power and its witnesses during the hearing included:
● Since the Electricity Act was amended in 2008 to include the establishment of a Point Lepreau Generating Station deferral account for certain non-capital costs associated with refurbishment, NB Power has been preparing to demonstrate its compliance and to assist the Energy and Utilities Board in its mandate of ensuring that the charges to the deferral account were appropriate according to the Electricity Act.
● After several internal and independent external reviews, NB Power testified and filed evidence that demonstrated it has complied with the regulations laid out in the Electricity Act with regard to the calculation of the deferral account. A conservative approach was used to calculate the charges to the deferral account.
● On Day 2, James Sustman, a recognized industry expert for production cost modelling and simulation, testified that NB Power has applied reasonable judgment and has complied with the Electricity Act with respect to the Point Lepreau Generating Station deferral account, therefore accurately calculating the deferral account.
● On Day 3, Claude Francoeur and Mike Haycox from Ernst and Young testified regarding their review of the financial processes and controls that NB Power has in place to ensure that costs are accurately recorded in the deferral account. In addition, Kevin Dumaresque and Stephen Lund from Deloitte and Touche testified about their review of the costs associated with the Point Lepreau Generating Station deferral account to ensure they are accurately recorded.
● On Day 3, Andrew Logan, a chartered accountant at Teed Saunders Doyle and Co., testified that he was satisfied with the independent reviews conducted by Ernst and Young and Deloitte and Touche and that it would be redundant to do any additional financial reviews.
● On Day 3, Douglas Rodgers, director, fuel channels division, Atomic Energy of Canada Ltd., testified that the combination of the reactor core design enhancements that were part of the refurbishment, along with the intended maintenance and operating parameters as laid out for the plant, should enable the reactor to achieve 210,000 effective full-power hours.
● Based on industry knowledge and experience, NB Power believes it has projected a reasonable lifespan for the plant: 210,000 effective full-power hours at an average capacity factor of 89 per cent, or the equivalent of 27 years. NB Power is prepared to file regular updates on the projected life of the plant with the Energy and Utilities Board.
● On Day 4, NB Power cross-examined Kurt Strunk of National Economic Research Associates, who was hired by the public intervener to review the calculation of additional generation costs during the Point Lepreau refurbishment.
It is expected that the Energy and Utilities Board panel will spend the next several weeks reviewing evidence submitted in advance and testimonies presented during the hearing to render its decisions.
The Energy and Utilities Board will schedule hearings at a later date to cover the appropriate financing and amortization methodology to be used to determine the amount to be recovered and the reflection of this recovery on NB Power's rates. However, NB Power is confident that the current 10-year forecast of modest two-per-cent rate increases it has set out is adequate to recover the deferral account balance.
NB Power’s original statement and backgrounder on the evidence are online.
Witness cross-examined during fourth day of hearings before Energy and Utilities Board
UPDATED – Jan. 16, 2013
FREDERICTON, N.B. – An expert witness appearing on behalf of the public intervener was cross-examined by NB Power legal counsel in front of the New Brunswick Energy and Utilities Board on Jan. 15, the fourth day of public hearings on the Point Lepreau Generating Station Deferral Account.
Kurt Strunk, of National Economic Research Associates in New York, was hired by Public Intervener René Basque to review the calculation of additional generation costs during the Lepreau refurbishment. Strunk's report filed as evidence at the hearing claimed that the deferral account was overstated. NB Power disagrees with this assessment and stands by its estimation of the size of the deferral account in this regard.
During cross-examination by NB Power, Strunk was challenged on a number of areas of his evidence. He was questioned on the accuracy of his assumptions and the estimates he used to calculate his suggestion that the deferral account was overstated.
This hearing covers the balance of the deferral account and the projected operating life of the refurbished generating station. The board stated in its order of July 18 that matters relating to rates will be reviewed at a later date. Notwithstanding, NB Power is confident that the current 10-year forecast of modest two per cent rate increases is adequate to recover the balance in the deferral account.
NB Power’s original statement and backgrounder on the evidence being presented are available online.
The public hearing is scheduled to continue today (Jan. 16), with closing arguments by NB Power and the public intervener.
UPDATED – Jan. 15, 2013
Financial and reactor design expert witnesses appear before Energy and Utilities Board
FREDERICTON, N.B. – Expert witnesses from Ernst and Young, Deloitte and Touche, Teed Saunders Doyle and Co., and Atomic Energy of Canada Ltd. appeared before the New Brunswick Energy and Utilities Board during the third day of public hearings on the Point Lepreau Generating Station Deferral Account.
Claude Francoeur and Mike Haycox from Ernst and Young testified that they reviewed the internal financial controls NB Power has in place to ensure that costs are accurately recorded in the deferral account.
Kevin Dumaresque and Stephen Lund, external auditors from Deloitte and Touche, testified on the review they conducted for the costs associated with the station’s deferral account. Their view is that, based on the samples reviewed, NB Power's costs in reference to the deferral account are accurately recorded. Deloitte and Touche is also responsible for NB Power's year-end financial audit.
Andrew Logan, a chartered accountant at Teed Saunders Doyle and Co., testified that he is satisfied with the independent reviews conducted by Ernst and Young and Deloitte and Touche and that it would be redundant to do any additional financial reviews.
Douglas Rodgers, director, Fuel Channels Division, at Atomic Energy of Canada Ltd., testified that the combination of the reactor core design enhancements that were part of the refurbishment, along with the intended maintenance and operating parameters as laid out for the plant, should enable the reactor to achieve 210,000 effective full power hours, or the equivalent of 27 years of operation. This supports NB Power's estimate of the lifespan of the refurbished plant. Rodgers has 30 years of experience in the design, manufacturing, performance assessment, failure analysis and research and development of core components for CANDU nuclear reactors.
The hearing covers the balance of the deferral account and the projected operating life of the refurbished station. The board stated in its order of July 18, 2012 that matters relating to rates will be reviewed at a later date. Notwithstanding, NB Power is confident that the current 10-year forecast of modest two per cent rate increases is adequate to recover the balance in the deferral account.
UPDATED – Jan. 11, 2013
Expert witness appears during second day of Point Lepreau Lepreau Generating Station deferral account hearing
SAINT JOHN, N.B. – James Sustman, vice-president of special projects at Ventyx, a global software company, appeared as an expert witness before the New Brunswick Energy and Utilities Board during the second day of public hearings on the Point Lepreau Generating Station deferral account.
Sustman holds a PhD in computer science from Yale and an M.S. degree in nuclear engineering from Stanford. He has 36 years of experience developing models and applying them to electric utilities globally. Ventyx specializes in developing software products for electric, mining and other industries
"In my professional opinion, NB Power has applied reasonable judgment and has complied with the Electricity Act with respect to the Lepreau deferral account," said Sustman. "After extensive review of the evidence filed with the Energy and Utilities Board, I am confident that NB Power has accurately calculated the Lepreau deferral account."
The recognized industry expert filed evidence that refutes the public intervener expert's claims that NB Power overstated the balance of the deferral account.
Sustman was cross-examined about the effectiveness of the transaction scheduling and settlement (TSS) computer model designed by NB Power to estimate the costs of replacement power during the refurbishment of Point Lepreau.
"The methodology used by NB Power to simulate [its] incremental energy costs using the TSS software was an appropriate and reasonable approach to performing these calculations," said Sustman.
This hearing is to cover the balance of the deferral account and the projected operating life of the refurbished Point Lepreau Generating Station. The board stated in its order of July 18, 2012, that matters relating to rates will be reviewed at a later date. Notwithstanding, NB Power is confident that the current 10-year forecast of modest two-per-cent rate increases is adequate to recover the balance in the deferral account.
NB Power's original statement and backgrounder on the evidence are online (http://www.nbpower.com/html/en/about/media/media_release/pdfs/2013/EN_Backgrounder_Deferral_January92013.pdf).
The hearing is scheduled to continue on Monday, Jan. 14.
Jan. 10, 2013
Evidence presented in EUB hearings on the Point Lepreau Generating Station Deferral Account
SAINT JOHN, N.B. – NB Power staff appeared today before the New Brunswick Energy and Utilities Board during the first day of the public hearings on the Point Lepreau Generating Station Deferral Account.
The hearings cover the balance of the deferral account and the projected operating life of the refurbished station. The board stated in its order of July 18, 2012, that matters relating to rates will be reviewed at a later date. Notwithstanding, NB Power is confident that the current 10-year forecast of modest two per cent rate increases is adequate to recover the balance in the deferral account.
The original statement and backgrounder on the evidence being presented is available online.
NB Power provided expert and written evidence to back up the following major claims:
● NB Power has taken many measures to ensure incurred costs were accurate and appropriately allocated. Accumulated costs included in the deferral account were necessary and prudently incurred.
● NB Power's evidence on the projected operating life of the refurbished station is founded on industry knowledge and experience. NB Power's estimated station life of 27 years will be subject to the existing periodic review process.
● The calculation of the station’s replacement energy costs is based on a comparison of the actual hourly production data during the refurbishment outage with data modelling what would have been applicable had the station been in service.
● The calculation of the station’s replacement energy costs is performed with a software program that has been thoroughly tested by an external expert and found to be appropriate and acceptable for this purpose. This is a reasonable method to simulate NB Power's incremental energy costs and one that is compliant with regulation.
● The calculation of the station’s replacement energy costs adheres to all regulation and modelling guidelines. NB Power has demonstrated this adherence through its filing of independent expert reports.
The public hearing is scheduled to continue Friday, Jan. 11, and again next w
