Take the power rate increases approved Thursday by the Nova Scotia Utility and Review Board with a big grain of salt.
The increases of 6.9% this year followed by 6.9% next year might seem hard to swallow but it’s likely rates could be increased even more than that a year from now.
That’s because the rates don’t include hundreds of millions of dollars in projected fuel costs that could be incurred over the next two years, as well as $100 million in deferred fuel costs for 2022 which just ended.
Nova Scotia Power has forecast fuel costs in the range of $700 million for 2023 and for 2024. Rate hikes announced yesterday won’t cover nearly that amount, and some of the difference (nobody can predict how much) may have to be recovered through higher power rates next year and the year after.
“Yes, there is a likelihood the fuel costs have not been completely captured within the 6.9% increase,” said Bill Mahody, who is leaving his role as consumer advocate to take a new job as the lawyer for the UARB.
“But I think what the UARB and customer representatives had to come to terms with was ‘where’s the balance?’ Are we comfortable deferring that risk into the future? And the answer is ultimately, yes.”
Bruce Outhouse has been the lawyer for the UARB for more than 35 years. He’s leaving for retirement and notes Nova Scotia Power’s fuel forecasts have often been “notoriously inaccurate.”
Let’s hope he’s right. But the factors that led to a $200 million difference between what was forecast in January 2022 and what turned out to be the reality in October are still around, The war in the Ukraine continues to drive higher prices for coal and oil. And under-deliveries of cheap hydro from Muskrat Falls have resulted in Nova Scotia Power paying big bucks to buy replacement fuel.
Mahody supported the settlement agreement worked out between Nova Scotia Power and several interest groups after the Houston government passed Bill 212. Mahody said while the rate hike will be difficult for ratepayers, he considers it is “reasonable” given the challenges facing the province.
“It’s hard to term this as a ‘good’ or ‘positive’ outcome from a rate perspective,” admitted Mahody. “But put it in the broader context and you realize what is driving that increase — over 80% of the rate increase is being driven by fuel and energy efficiency costs — on which Nova Scotia Power doesn’t earn any money. And when you see how the decision sets us up for a future which is going to be more challenging than the past, I think it’s reasonable, although these rate hikes are going to be tough pills.”
The province responds
“We’re disappointed by the decision today,” said Natural Resources and Renewables minister Tory Rushton after a cabinet meeting. “We’ve always been very clear that we were standing by ratepayers right from the get go. But we also respect the independent body of the UARB in their decision today.”
Will the Houston government bring forward legislation to halt the decision? asked CBC reporter Mike Gorman.
“There’s always legislation that’s in the works around the electric utilities act. But right now we’re going to review the whole document. It’s fairly new to us as of this morning,” said Rushton..
Premier Tim Houston was not available. Late in November Houston urged the UARB to reject the 14% rate hike recommended in a settlement agreement.between Nova Scotia Power and various interest groups. Houston is unlikely to be pleased by yesterday’s decision. In the letter he wrote to the UARB, Houston wrote:
Bill 212 was introduced to protect ratepayers from significant shock based on unprecedented global inflationary pressures. The terms of the Settlement Agreement increase rates and contravene the purpose, spirit, and intent of Bill 212…
The UARB has ruled the 6.9% rate hike each year is not inconsistent with the 1.8% increase contained in Bill 212, the amendment to the Public Utilities Act. That amendment specifically exempted “fuel costs and an increase in Demand Side Management (DSM)” also known as energy efficiency programs. Nova Scotia Power pays for these but the programs are delivered through Efficiency Nova Scotia.
The UARB decision says the board and the province disagree over the “statutory interpretation” of the phrase “increase in DSM costs.” The disagreement involves 2.7 percentage points of the 6.9% rate hike ratepayers will pay in 2023; it’s worth about $35 million to Nova Scotia Power. This could turn out to be a significant issue and one where the UARB spends numerous pages defending its reasoning.
The UARB said that because none of the spending it approved last fall for energy efficiency programs in 2023-2024 had been included in Nova Scotia Power’s application for a rate hike, Nova Scotia Power is entitled to treat the entire amount as an increase that can be included in power bills for this year. The province argued because these programs had been paid for through power rates since 2015, the word “increase” should apply only to a top up of $4.4 million.
It remains to be seen whether Houston might be tempted to roll the dice and appeal this portion of the UARB decision to the Supreme Court of Nova Scotia. Or possibly recall the legislature and make another amendment to the Public Utilities Act that more clearly states the government’s purpose.
NDP and environmentalists react
NDP leader Claudia Chender told reporters the decision by the UARB shows Houston was “speaking out of both sides of his mouth” when it came to his handling of the power rate issue.
“The premier came out and he said, ‘We have saved Nova Scotians from this rate increase, rates will not go up more than 1.8%.’ That wasn’t true at the time,” said Chender. “We now understand that that wasn’t true. And we always knew that that wasn’t true. Bill 212 didn’t deal with fuel. This agreement is all about fuel. And so it was a good sound bite at the time, but it wasn’t true. And so Nova Scotians are still faced with incredibly unaffordable power.”
Meanwhile,, environmentalists were not impressed by the UARB’s decision directing Nova Scotia Power to “engage in a consultative process” to come up with a climate adaptation plan.
“We’ve been talking with the CEOs of Nova Scotia Power about ways to accelerate the transition to clean renewable energy for 10 years now,” said Gretchen Fitzgerald, the National Programs Director for Sierra Club Canada Foundation. “They claim to be all over it, but at the end of the day, very little has changed. We’re basically jogging on the spot when it comes to getting off coal.”
The Sierra Club notes Nova Scotia Power failed to meet its 40% renewable energy requirement for 2020–2022, and according to documents it filed with the UARB last June, the utility plans to add an additional 850 MW of natural gas generation over the next six to seven years.
Yesterday’s UARB decision offers some hope to the Affordable Energy Coalition, a group that for 20 years has been advocating for some form of rate relief for low-income people stuck with the highest electric bills in the country.
The decision directs Nova Scotia Power to engage with the Affordable Energy Coalition and the consumer advocate “to review and to evaluate the impact of the changes approved in 2013 to bill payment, credit, and collection matters” to see if further changes are needed.
“This rate increase reinforces the need for a systematic program to provide bill relief for low income customers,” said Brian Gifford with the Affordable Energy Coalition. “We are very pleased that the UARB endorsed a review of regulations regarding bill collection procedures that we requested. In 2013, this led to improvements such as a longer time period to repay arrears. The UARB endorsement adds weight and urgency to this work. It could lead to the design of a systematic program for low-income energy bill relief.”
In the meantime, Gifford notes a recent increase by the province to provide low-income consumers with up to $1,000 in assistance for home heating bills this winter is most welcome on a day when temperatures are dropping and power bills are rising.