2. Select the appropriate provinces for comparison
The purpose of the Large Industrial Renewable Energy Purchase Program is to make New Brunswick’s export-oriented pulp and paper sector competitive with their competitors in other Canadian provinces.
The relevant selection criterion for the pulp and paper sector is the dollar value of the exports of pulp and paper products. Those provinces with pulp and paper product exports greater than $100 million in the previous calendar year (as stated annually by Statistics Canada) will be included in the calculation of the Canadian average rate for this sector.
3. Calculate the Canadian average rate
The proxy customer profile calculated above is applied to the published rate tariff in place on April 1 in each Canadian province included in the calculation, to determine the average large industrial firm electricity rate that would apply to that “proxy” customer if it were located in a particular province.
To reflect the fact that some provinces export much more than other provinces (and therefore represent increased competition to our New Brunswick companies), the electricity rates for each province are weighted according to the dollar value of that province’s exports for the pulp and paper sector. An appropriately weighted Canadian average rate is then calculated.
A small number of provinces do not offer fixed, regulated large industrial rates. In Ontario and Alberta, electricity is sold on a competitive supply basis, which means prices (rates) vary from day to day depending on market pressures such as supply and demand. For these jurisdictions, the calculated “average” large industrial rate will be based on the average market rate for the previous four calendar years (a four year average is used to better smooth short term rate volatility inherent in market based rates).
In Ontario, there is a global adjustment mechanism (“Global Adjustment A”, or “GA-A”) to reflect costs imposed on the bulk electric system by large industrial customers. The GA-A cost is allocated to large industrial customers based on their contribution to the top five coincident system peak hours for the year. This presents an opportunity to the large industrial customers in Ontario to shift peak demand away from the system peak hours, yielding a lower average cost of electricity. NB Power maintains Interruptible (and Surplus) rates that provide similar opportunities to NB large industrial customers.
The proxy customer consumption is assumed to have a 63% firm and 37% interruptible split for the purposes of the Ontario rate calculation. This firm/interruptible ratio is used along with NB Power’s large industrial firm and 4-year average of interruptible rates to convert the Ontario average rate (based on “GA-A”) to a comparable “firm” rate. NB Power’s annual average interruptible rates are available here: https://www.nbpower.com/en/products-services/business/rates/historical-interruptible-prices/
The calculated “average” firm rates in place in each province and the resulting Canadian average rate for the pulp and paper sector using rates in effect as of April 1, 2024 are: