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A New Brunswick economic development consultant says it would need to make a compelling case to justify selling Saint John Energy after examining the finding of his recent economic impact assessment on the utility.
David Campbell was commissioned by Saint John Energy to evaluate the utility’s strategy for growth and innovation. The report will be presented at Saint John Energy’s AGM Thursday morning.
The impact assessment covers the period of 2015 to 2018 and looks at Saint John Energy’s operational and capital spending. It also examines the future growth potential and the economic impacts of the public utility over the next 10 years and its direct and indirect impact on Saint John and the provincial economy.
“They hired me to do an assessment of their economic footprint in Saint John and in the wider New Brunswick economy, so that was essentially the mandate,” says Campbell.
“That’s important because it helps us understand how many jobs, how much gross domestic product, how much labour income, how much taxation, how much consumer spending occurs as a result of Saint John Energy, not only directly from their employees, but from the indirect supply chain and the induced effects of when people go out and spend their income in the economy.”
Campbell’s assessment found that Saint John Energy contributes $100-million a year to the provincial economy and generates more than $20-million in annual tax revenues for governments. This works out to about 82 cents worth of provincial GDP for every dollar spent on local electricity in Saint John.
The utility is also a driver for jobs. The assessment found that Saint John Energy provides 100 direct jobs, and supports 350 spinoff jobs in the province’s economy.
“Now, a lot of those jobs are supported at NB Power, because NB Power is by far their largest supplier. They actually supply them wholesale power, but still, it’s an important statistic,” said Campbell. “Because if that power is being imported from another province and if the head office was in another province, the economic benefits to the province and Saint John would be significantly lower.”
Campbell also found that Saint John Energy customers pay the lowest electricity rates in Atlantic Canada. A residential customer in Saint John saves around $830 per year compared to a customer in Halifax with the same electricity usage, and almost $800 a year compared to a similar customer in Charlottetown. Overall, Saint John customers save approximately $10-million on their electricity bills each year as a result of Saint John Energy’s lower rates.
“It’s a multi-million dollar saving to the residents of Saint John this year, and that money presumably is turned back into the economy and spent in other ways,” says Campbell. “Whereas if it were spent on power, it wouldn’t be freed up to spent elsewhere.”
Saint John Energy has undertaken some big growth and innovation projects over the last few years, including contracting a private company to build a wind farm and community solar and energy storage initiatives. They have also been working to add additional services and products.
Though these are investments, Campbell says they drive revenue and economic growth for the utility and could allow them to increase its economic footprint without relying on raising rates.
“Most of the increased economic activity forecasted in the presentation is related to the deployment of new services and new products as opposed to just raising rates,” said Campbell. “Which would be a question that I would have, ‘how come their revenues are going up? Is it because they’re just charging more?’ But in this case, it’s mostly about rolling out new services.”
Looking at Saint John Energy’s future in the report, Campbell examined three different growth scenarios tied to their ambitions for the future: low, medium and high.
In the high-growth scenario, Saint John Energy’s GDP contribution rises from $110-million to nearly $155-million by 2029. That’s $1.4-billion worth of provincial GDP created from Saint John Energy’s operations and over $515-million dollars worth of labour income.
Campbell says the high-growth scenario would be driven by Saint John Energy deploying new services and innovation projects. The challenge will be for the utility to do that without jacking up power rates for customers.
“The dynamic is changing in terms of adding more renewable energy to the mix, trying to balance that with the energy storage and trying to do it all in a way that’s cost-neutral, or fairly cost neutral, to the customer. It’s a tricky balance,” said Campbell.
“You can go out and invest in the most swanky new technology, the swanky new electricity generation, but then if it pushed rates through the roof, that wouldn’t necessarily be good for the customers.
There’s been a lot of talk about the value of Saint John Energy to the city and the possibility of selling it to another provider, but Campbell says based on what he learned from doing the report, it would need to a “compelling case” for the city to sell the utility.
“I think if Saint John Energy was not there, you’d be missing a big piece of your energy cluster, he said. “You’d be missing those jobs. You’d be missing that philanthropic spending, you’d be missing much of the tax revenue and much of the employment … I think there would really have to be a compelling case to sell that asset to another utility.”
Cherise Letson is the associate editor of Huddle, an Acadia Broadcasting content partner.
