Nova Scotia Power is asking for a rate increase for households of 11.6% over three years instead of the 10% it requested in January. The company cites rising fuel costs, higher-than-expected prices for power purchased from other utilities, and the costs of failing to meet greenhouse gas targets.
“The forecast fuel and purchased power costs for the 2022-2024 General Rate Application test period have increased by $681.5 million (including Greenhouse Gas compliance costs) over the amounts forecast in the 2022-2024 GRA Application,” states Nova Scotia Power in the updated forecast it filed with the Utility and Review Board (UARB) Friday afternoon.
That amount is approximately one-third more than what the company predicted when it asked the UARB for a rate increase last January.
Nova Scotia Power’s initial rate application in January meant residential consumers were looking at an average 10% increase in power bills over 2022-2024. That was in the range of an extra $5 a month for the average residential ratepayer. That increase was based on a forecast of fuel costs the company did in May 2021.
The fuel cost update filed yesterday includes actual costs for the first six months of 2022. Nova Scotia Power offers this explanation for why it now is seeking more money from ratepayers:
Since that time, world-wide inflationary pressures and geopolitical events have caused significant cost increases in services and products, including fuel to operate vehicles and fuel to generate electricity. In addition to these cost pressures, NS Power’s fuel costs are also being driven upward by the costs to comply with the provincial GHG emissions program and the lower than forecast availability of market-priced energy from Muskrat Falls.
The Halifax Examiner has reported extensively on four years of delays associated with the delivery of market-priced hydroelectricity from Muskrat Falls that has cost ratepayers well over $200 million already.
Although the province has received most of the hydro power it contracted for in 2022, it counted on an equal amount of market-priced energy from Muskrat Falls to help replace coal-fired electricity and reduce GHG emissions. That hasn’t begun to flow, and ongoing issues with transmission from Labrador to Newfoundland mean it could be another year before it does.
Softening the blow
Nova Scotia Power proposes deferring until at least 2025 projected higher fuel costs for the years 2023 and 2024. But that still leaves this year, 2022, to be dealt with.
Information contained in yesterday’s update shows Nova Scotia ratepayers could be on the hook to pay for fuel and environmental compliance costs that are $251 million higher in 2022 than expected.
Nova Scotia Power’s failure to reduce carbon emissions to meet legislated targets set in 2019 means the company — and by extension the ratepayers — are liable for financial penalties totalling $165 million for 2022. Fortunately for Nova Scotia Power shareholders and ratepayers, the result of negotiations between the company and the Houston government over the past two weeks is forgiveness of those penalties.
“The Province of Nova Scotia has agreed to provide relief to Nova Scotia Power customers for the greenhouse gas (GHG) compliance expense to the end of 2022 which the Company previously forecast as part of its fuel costs (GHG Relief),” says the update filed with the UARB.
If that’s not enough to make you wince, the application goes on to say:
While the GHG Relief assists in making these compliance costs more affordable for customers in the near term, it does not relieve Nova Scotia Power of its ongoing responsibility to meet its emissions targets in the long term.
That’s because there’s more trouble brewing for Nova Scotia Power with the imposition of the federal carbon tax next January.
This week, Ottawa rejected an alternative proposed by Premier Tim Houston that argued Nova Scotia should remain exempt from the carbon tax because it is has passed laws to close coal plants by 2030 and reduce GHG emissions below what has been mandated by the federal government. Federal Environment Minister Steven Guilbeault nixed that proposal because it did not comply with federal legislation requiring provinces to put a price on carbon for companies and consumers. This effectively means the federal government will impose a carbon tax on Nova Scotia, which most other provinces already have.
Under what’s technically called the Federal Backstop Agreement, the federal government would regulate emissions by setting targets and penalties for each individual generating station Nova Scotia Power owns. On Friday, the Nova Scotia government submitted another proposal asking Ottawa to allow the province to take over regulation of carbon emissions. This would allow carbon emissions from Nova Scotia Power to be regulated on the basis of the entire system or grid, instead of individual power plants.
Depending on how Ottawa responds to that plea, ratepayers in Nova Scotia could be on the hook for additional costs in the hundreds of millions of dollars after 2022. The filing reads:
Nova Scotia Power understands that communications between the Provincial and Federal Governments are ongoing regarding GHG implications for the Province beyond 2022. If NS Power were subject to the Federal Backstop Program, the Company estimates the additional cost for emissions compliance in 2023 and 2024 at $116 million and $127 million respectively.
On Friday, Jason Hollett, Nova Scotia’s associate deputy minister for Environment and Climate Change, estimated passing on these costs to Nova Scotia Power customers could add another 7%t to power rates over the next three years.
So there is a lot at stake in these ongoing federal-provincial discussions over how best to reduce Nova Scotia’s carbon footprint. Approximately 200,000 Nova Scotians still use furnace oil to heat their homes. And a political decision made decades ago to use Nova Scotia coal to produce electricity continues to haunt today’s political leaders and have huge financial consequences for ratepayers.