Nova Scotia Power’s request for ‘storm cost recovery rider’ could mean additional hike in power rates

It’s hurricane season and with the prospect of a lashing from Fiona this weekend, Nova Scotia Power explained to regulators on Tuesday why the company wants a new way to get money from ratepayers if big storms exceed its annual budget. The mechanism is called a “storm cost recovery rider” and would apply only to large storms and hurricanes. Consultants hired by the consumer advocate, the province, Dalhousie University, and large businesses have all expressed concerns about what would amount to an additional charge for consumers above the 11.6% proposed increase in power rates.

“It’s not the company’s objective to have the rider every year. It’s the objective to make the application when it’s only absolutely necessary,” said Eric Ferguson, Nova Scotia Power’s senior director for pricing and transformational regulatory initiatives.

Here’s an example of how that might work if the UARB approves this new mechanism. Included in the proposed power rate for 2023 is about $17 million for storm costs. Suppose large storms exceed that estimate by $15 million. In that case Nova Scotia Power could apply to add that to power rates the following year — an amount that would increase rates by another 1%.

The storm rider proposal by Nova Scotia Power would not raise power rates by more than 2% a year. The most expensive storm on record (Hurrican Dorian) cost $39 million to clean up and Nova Scotia Power shareholders absorbed $17 million of that.

The storm rider as currently designed by Nova Scotia Power has drawn sharp criticism from most intervenors. Several questioned why the UARB would allow the company to charge consumers when storm costs exceed forecasts, but not refund consumers when storm costs come in below budget. Good question.

Consumer advocate Bill Mahody is concerned that if Nova Scotia Power is permitted to apply to recover storm costs on an annual basis, the utility may have less incentive to employ best practices to avoid those costs. Mahody used tree-trimming costs as an example. Earlier in the proceeding, a senior manager with the company said most power outages during storms are caused by “tree contacts” or what most of us would describe as trees falling on power lines.

Mahody noted that in the past two years, Nova Scotia Power’s operating and maintenance budget for tree-trimming dropped from $8 million a year to $4 million a year. The company fired back saying that budget doesn’t represent the entire amount it spends on tree-trimming because since Hurricane Arthur, it also allocates a large pot of money to tree-trimming right of ways.

Both Nancy Rubin, the lawyer for the industrial group representing large companies, and the consumer advocate expressed concerns the language in the proposed rider is too vague. Unlike storm cost tools that utilities in British Columbia and Alberta use, Nova Scotia Power’s does not indicate it would apply only when events are beyond the company’s control nor does it say what expenditures would qualify as “storm” costs. Ferguson suggested overtime, as well as lodging and food associated with bringing in crews from outside the province, are the obvious ones.

In years where Nova Scotia Power earns its maximum allowable profit — currently set at 9.25% and which the company wants raised to 9.5% — the company testified it would not ask to recover additional storm costs from consumers.

But before anyone gets too excited about that gesture, it’s worth noting the company has also submitted a Plan B. In the event the board rejects its proposed storm cost recovery rider, Nova Scotia Power is asking the UARB to allow it to increase the $17 million a year it has already included in power rates to cover storm costs to $20 million a year. If at first you don’t succeed, there seems to always be another way to get a hand in your pocket.

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