Examining the impact of Saint John Energy’s Growth Strategy

As we transition off fossil fuels in the years ahead, having Saint John Energy headquartered in the city makes for a valuable player in growing this cluster well into the future.

By David Campbell, June 8, 2020

I recently had the opportunity to undertake an economic impact assessment of Saint John Energy and to evaluate the utility’s strategy for growth and innovation.

In the context of the recent flurry of attention around the company and the role it plays within the community, I thought readers might be interested in the findings.

The impact assessment covers the period of 2015 to 2018, looking at both the operational and capital spending associated with the firm. It also examines the future growth potential and the economic impacts of the firm over the next 10 years based on different scenarios for growth.

The assessment looks at the total spending of Saint John Energy and estimates how that spending is impacting not only the economy of the city but the Saint John region and the province as a whole.

To calculate this, I looked at three types of impacts – direct, indirect and induced.

The direct economic impact is the influence of direct spending by the company, such as wages and salaries for its employees while the indirect impact is the firm's supply-chain spending – any purchases it makes from other businesses to keep itself running.

Savings for Saint John

The induced impact is the household spending that is generated from the company’s spending that ends up in the pockets of workers, whether that be employees of Saint John Energy or other firms it does business with. Household spending includes spending on restaurants, grocery and hardware stores, at malls and hotels.

“Spending on electricity, unlike spending on goods, generally recycles back into the local community.”

Another economic benefit that citizens enjoy because of Saint John Energy is its lower electricity rates, the lowest in Atlantic Canada.

Because of that, a typical residential customer in Saint John would save 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.

That is a significant saving for people in Saint John – collectively, it amounts to about $10 million a year in savings – that can in turn be spent on other purchases.

It is important to note that spending on electricity, unlike spending on goods, generally recycles back into the local community. This is particularly true in the case of Saint John Energy because the head office is in Saint John, the electricity generation assets are in the region, and most of the company’s supply chain is in the region.

Because of this, every dollar spent on local electricity in Saint John creates 82 cents worth of provincial GDP. In other words, almost all of the value of that spending is staying in New Brunswick.

Strategy for growth with new investments

The 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.

“Saint John Energy is committed to a strategy of building the utility of the future that will aid in the economic recovery of Saint John and New Brunswick.”

The firm is also a significant force for jobs in the region. For every job at Saint John Energy, a total of 4.5 jobs are supported directly or indirectly across the provincial economy. In other words, its workforce of approximately 100 full-time jobs leads to another 350 full-time jobs for the region and the province.

The firm is pursuing a strategy for growth, with significant new investments and services, which will have a positive impact on the economy in the years ahead. These investments and services include energy storage, wind energy, community solar and additional business from utility services and consumer products.

It's not about raising rates on existing customers but about building a suite of new services and new investments and, ultimately, new customers that will drive revenue growth for the firm as well as drive and increase the size of the economic footprint.

It is my understanding from talking to executives of Saint John Energy that they remain committed to this strategy of building the utility of the future, and that it will aid in the economic recovery of Saint John and New Brunswick.

I looked at the impact of Saint John Energy under three different growth scenarios tied to their ambitions for the future: low, medium and high. For the purposes of this piece, we'll talk about the high-growth scenario.

Under that scenario, the company’s provincial GDP contribution rises to nearly $155 million by 2029. Over the coming decade, then, that’s $1.4 billion worth of provincial GDP created just from Saint John Energy's operations with more than $515 million dollars worth of labour income.

Job creation for the future

Remember, much of that recycles back into the economy. Consumer spending tied to Saint John Energy climbs from $30 million this year to almost $43 million in 2029. Over the 10 years, that’s a total of more than $380 million consumer spending in the Saint John region.

“As we transition off fossil fuels in the years ahead, having Saint John Energy headquartered in the city makes for a valuable player in growing this cluster well into the future.”

We're also looking at significant job creation and future expansion of employment over the decade, both directly and through the supply chain.

Based on the high-growth scenario, nearly 700 jobs will be supported specifically as a result of Saint John Energy's operations, both in the city and across the province, while the tax benefits to governments rise to nearly $306 million over the 10-year period.

If Saint John Energy were headquartered elsewhere, we'd be looking potentially at a loss of millions of dollars in head office and support services spending over time.

You’ll recall that NBTel used to be headquartered in Saint John before it merged with the other regional telecommunications utilities and then was purchased by Bell Canada.

Most of that head office activity over time left the region, leaving basically a rump of employment in Saint John. It's still a very important employer in Saint John but it has a far lower economic impact than when the head office was here.

If Saint John Energy was taken over by another firm headquartered elsewhere, there is a real risk that its spending would migrate the suppliers outside the region as would the significant economic activity around the generation of power currently supplying Saint John Energy. And, of course, lower electricity rates for customers could be in jeopardy if Saint John became part of just a broader utility.

Saint John Energy is part of a significant energy cluster in the region today. It’s notable that the Saint John region has one of the highest concentrations of employment in electricity generation, transmission and distribution of any urban centre in the country with 1,100 workers. The vast majority of those are employed by NB Power, generating and distributing power to Saint John Energy and to other customers in the region and across the province.

As we look to transition off fossil fuels in the years ahead, electricity will play an even more important role in our energy system. Having Saint John Energy, an innovative electrical utility with a proven track record of reliability and fiscal discipline, headquartered in the city makes for a valuable player in growing this cluster well into the future.

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