Higgs government boosts payments to pulp and paper mills under energy buy-back program

The Higgs government has quietly increased subsidies to major pulp and paper mills in the province through a renewable energy buy-back program with NB Power.

The Progressive Conservative cabinet increased the price that the public utility must pay to mills by 12.5 per cent, retroactive to April 1.

That would hand the companies more than $5 million in discounts based on their electricity sales in 2019-20. 

The Large Industrial Renewable Energy Purchases Program, put in place by the Alward government a decade ago, requires NB Power buy renewable electricity generated by plants at a set price.

It then sells the electricity back to those same plants at a lower price, effectively subsidizing electricity costs for the pulp and paper mills owned by J.D. Irving Ltd., Twin Rivers Paper Co. Ltd. and the AV Group.

Now the price the utility pays is jumping from $95 per megawatt hour, an amount that has been in place since the program began, to $106.91.

That 12.5 per cent increase was part of a regulatory amendment approved by the Higgs cabinet on May 27 without any public announcement.

The amendment also requires the price to now increase every year in tandem with the consumer price index starting in 2022.

“The program rate had not changed since it was introduced in 2012,” said government spokesperson Erin Illsley.

“The addition of an annual escalator based on the percent change in CPI is similar to what other renewable contracts receive.”

The $11.91-per-megawatt-hour increase would mean $5.7 million in additional expenses for NB Power based on the 479,000 megawatt-hours the utility paid for under the program in 2019-20, the last year for which figures are available. That could fluctuate year to year.

Green Party Leader David Coon says he’s surprised the government is further subsidizing pulp and paper mills. (Logan Perley/CBC file)

Illsley did not say why the price needs to increase, given the program is designed to buy and sell enough electricity to reach an overall threshold percentage reduction on power bills.

“It’s surprising to me,” said Green Party Leader David Coon.

“I don’t understand why they’re doing this for the pulp and paper industry. We subsidize them already in so many ways. … It would be a great deal to get, if the rest of us could get it.” 

This year, the Department of Natural Resources and Energy Development has set 14 per cent as the discount that the mills should get on their power bills, based on average industrial rates across Canada.

In 2015, NB Power executive Neil Larlee told the Energy and Utilities Board that he utility buys enough power under the program to get the mills a discount at that pre-set percentage.

“We purchase energy from the participants and that volume is based on the ability for them to achieve the target reduction amount that is in the regulation,” he said. “So that volume can vary depending on whether or not they have that generation available.

“They would sell at $95 up until the equivalent credit they got was such that it gave them the posted discount, and that discount, it is adjusted every year.”

NB Power spokesperson Marc Belliveau says the utility has four agreements under the program — with Twin Rivers,  AV Group’s Nackawic mill, AV Group’s Atholville mill, and J.D. Irving Ltd.

The Irving agreement involves the company’s Irving Pulp and Paper and Irving Paper mills in Saint John and its St. George Power LP hydroelectric dam and Lake Utopia paper mill.

Eligibility ‘hasn’t changed’

Belliveau referred further questions to the Department of Natural Resources and Energy Development, as did J.D. Irving Ltd. vice-president Anne McInerney.

“Our eligibility to participate hasn’t changed,” she said.

She did not respond to a question about whether JDI had asked for the change.

Illsley said the department, which drafted the regulation change, “has discussed the rate with those companies involved in the program and felt indexing the rate was warranted.”

No one from Twin Rivers or the AV Group responded to requests for comment. The industry lobby group Forest NB had no one available to comment on Friday. Natural Resources and Energy Development Minister Mike Holland was not available for an interview. 

U.S. singled out subsidy

At the 2015 rate hearings, New Brunswick ratepayer Greg Hickey argued that if NB Power could afford to spend millions subsidizing large industrial plants, it should not be allowed to raise rates for residential customers.

In 2016, the U.S. Commerce Department identified the Large Industrial Renewable Energy Purchases Program as a potential subsidy to J.D. Irving Ltd. during a trade investigation of Canadian softwood exports to the United States.

Both Irving and the New Brunswick government argued against that position in the case.

Larlee told the EUB that on top of the program giving large mills more competitive power costs, the program also lets NB Power count the electricity generated by the mills toward its own renewable energy targets.

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