Guest commentary by Ron Marcolin, Canadian Manufacturers & Exporters.

This commentary first appeared in the Telegraph Journal on September 18, 2024. It is shared with the author’s permission.

Climbing energy costs are a major impediment to growth in the province, with repercussions on jobs, tax revenue and overall economic health. Following record high increases to energy rates by NB Power, with more proposed, its clear a rethink is needed. Hanging in the balance is a robust, growing industrial sector that is competitive across national and international jurisdictions, allowing it to strengthen the New Brunswick economy.

NB Power filed its steepest rate hike to date in March, with the industrial rate jumping an unprecedented 15.3 per cent. Amid high debt, ongoing costly infrastructure investments and lackluster sales growth, it is expected NB Power will continue to increase rates, making an uncompetitive situation for industry even more untenable.

Industrial energy rates in the province are already high compared to other Canadian jurisdictions. In 2024, the rate of $93.43 is well above the Canadian average of $72.68 and is projected to only worsen with a proposed rate of $117.91 by 2028. Added up, by 2028, industrial rates will have increased by over 50 per cent since 2023.

Through Canadian Manufacturers & Exporters, we provide a voice for industry, advocating on behalf of more than 2,500 companies across the country on matters important for their business success. Our members make up many Energy Intensive & Trade Exposed (EITE) industries, which include sectors like construction material production, food and beverage, paper manufacturing and petroleum products.

In New Brunswick, EITE companies are competing with those in other jurisdictions across Canada and worldwide, restricting their ability to absorb rising energy costs through consumer pricing. Without policy change and the ability to compete on a national and international scale, EITE companies in New Brunswick face strong headwinds when it comes to making investments into their business and spurring economic growth in the province.

Our own research bears this out. In a 2019 report “Unlocking Atlantic Canada’s Growth Potential in Manufacturing,” the cost of energy was identified as the number one policy change manufacturers would like to see governments take to boost their competitiveness.

Five years on, the impacts of rising energy costs on competitiveness have only worsened in the province. New Brunswick industrial energy rates went from 10 per cent above the Canadian average to now 22 per cent, a trend that is expected to continue without policy change.

Compare that to NB Power’s residential rates, which are 25 per cent lower than the Canadian average. Meanwhile, residential sales were the only type to increase for NB Power in the last decade. Both overall load growth and industrial sales remained stagnant over the same period, following a major drop 15 years ago due to the closure of the pulp and paper mills and chemical mill in northern New Brunswick.

Against this backdrop, New Brunswick exports have been on the decline over the last 16 years. A recent New Brunswick Business Council report written by the former provincial chief economist David Campbell paints a dire picture: New Brunswick can’t grow its economy without addressing its mounting trade deficit, which has ballooned to $8 billion due to weak exports compared to imports. Furthermore, GDP growth, according to the report, has averaged just 0.5 per cent per year since 2006, dropping from a 10-year average of 3.3 per cent.

The report makes clear that the province’s economic performance depends on bolstering its exporters and attracting new industrial players. A rethink on energy rates is key in achieving this, and solutions already exist.

NB Power has only to look at Ontario’s Northern Energy Advantage Program (NEAP), which for seven years has supported EITE companies in northern Ontario through a $20 per megawatt hour credit. Recipients must show they are actively working to become more energy efficient and reduce emissions. More long term, NB Power should consider implementing a truly competitive EITE large industrial energy rate.

Until change is made, energy rates will continue to be the top concern for exporters and manufacturers at a time when supporting these industries is vital to growing the New Brunswick economy. In order to foster this growth, New Brunswick needs policies that will enable existing industries to thrive and attract new ones. We can’t afford not to.

Ron Marcolin is the Divisional Vice President of Canadian Manufacturers & Exporters (CME)