Forget about a total rate hike on the power bill of 10% over three years. Residential customers are now looking at almost 7% in each of the next two years — 6.9 and 6.8%, according to additional information filed by Nova Scotia Power with the regulator on Friday.
Nova Scotia Power says its proposed higher power rates are needed to cover rising fuel costs and in order to meet stiffer environmental regulations.
The Utility and Review Board ordered the company to submit answers to 71 questions posed by its lawyer and the consumer advocate and experts representing large and small businesses in the province. The chart below filed by Nova Scotia Power attempts to address the question of how much more ratepayers can expect to pay on the monthly power bill.
And these monthly rate increases do not include $113 million worth of higher-than-forecast fuel costs in 2022, which are being set aside and will be paid over a three-year period beginning in 2023.
In June we learned 2022 fuel costs were more than one-third higher than what Nova Scotia Power had budgeted, which the company attributed to rising prices for coal, oil, and natural gas due to the war in Ukraine. Ratepayers will pony up an extra $14 million in interest to spread those fuel costs over three years.
It’s not clear to this reporter how fuel costs (which also include expenses such as complying with the federal carbon tax expected next year) will affect power rates going forward. It appears from information filed Friday a carbon tax could see rates rise an additional 5.1% in 2024 and 1.8% in 2025, but there is still a lot of uncertainty around that point.
Nova Scotia Power also responded to a question asking for its best estimate on how much retiring coal-fired plants by 2030 would cost ratepayers. The answer is $689 million beginning with Trenton in 2023 and finishing with Point Aconi in 2029. The company is proposing a deferral account be established to pay off those depreciation and decommissioning costs over a much longer period of time.
It is clear the proposed rate hikes would have been even higher if the provincial government hadn’t forgiven $165.6 million Nova Power owed for exceeding its cap or on GHG (greenhouse gas) emissions for the period 2019-2022.
The power company had no Plan B after renewable hydroelectricity from Muskrat Falls was delayed by more than four years. (Newfoundland and Labrador Hydro has a 35-year contract to supply the so-called “NS Block” — the equivalent of 10% of the provincial grid — to Nova Scotia Power). First dibs on an additional 10% from Muskrat Falls at market prices is still many months away from being available.
Nova Scotia Power estimates ongoing delays in receiving 2,700 fewer GWh (gigawatt hours) of market-priced energy from Muskrat Falls will increase fuel costs and financing by $100 million. That fact is on page 612 of the 622-page document Nova Scotia Power submitted Friday. That’s in addition to hundreds of millions of dollars ratepayers have already paid for replacement fuel because the NS Block was delivered late. Nova Scotia Power’s answer to a question posed by the consumer advocate about Muskrat Falls-related costs was redacted.
The reason for the years of delays is software issues with the General Electric system that controls the flow of energy over the Labrador Island Link, a cable connecting Labrador and Newfoundland.
To rub salt in that wound, the same Labrador Island Link that has created so many additional costs for ratepayers in this province is owned partly by Nova Scotia Power’s parent company. Over the years Emera has paid out $410 million to take a 35% ownership position in that faulty transmission system. Is there a conflict of interest here?
Tree trimming and storm costs
Climate change means Nova Scotia can expect to experience more frequent and intense storms accompanied by wind and rain. Fiona and Dorian and Juan have all taught us that, with damages from Fiona certain to outstrip the $39 million clean-up costs associated with Dorian. Nova Scotia Power shareholders picked up $17 million in those costs associated with Dorian.
Nova Scotia Power has proposed a mechanism called a “storm rider” to reduce that risk to its shareholders. It has asked the UARB for permission to apply for a rate increase—not to exceed 2% — if storm costs the previous year exceed the amount the company budgeted in power rates.
A lot of discussion and argument took place over the appropriate level to include in power rates — should it be based on the average cost of storms over the last five years including Dorian? Excluding Dorian? Over the past 11 years? Depending on what the UARB decides, the base amount included in power rates to cover storm damages could range from $15 million to $20 million a year.
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.
Nova Scotia Power senior manager Matt Drover told the public hearing the number one cause of power outages is trees falling on lines. Mahody suggested the company had reduced the amount it was spending on tree-trimming or “vegetation management” in the past couple of years. Drover disputed that, claiming Mahody was missing the full picture.
The UARB asked the utility to supply the total amounts for how much it has spent on tree-trimming over the past ten years.
Prior to Hurricane Arthur in 2014, Nova Scotia Power had been spending between $9 and $10 million on vegetation management. That amount more than doubled after Arthur led to prolonged power outages for many Nova Scotians. (But not nearly as long as the 10-14 day disruptions experienced by thousands in northern and eastern Nova Scotia after Hurricane Fiona.)
Nova Scotia Power reports it spent $22 million on vegetation management in 2017, $24 million in 2018, and $26 million in 2019. Figures provided by the company show spending on tree trimming around right-of-ways and power lines dropped to $14.6 million in 2020 — before rebounding to $20.6 million in 2021. Nova Scotia Power claims restrictions associated with the pandemic in 2020 made it difficult to hire crews and get the work done.
In its submission Friday to the UARB, weeks after the public hearing finished, Nova Scotia Power proposed a sweetener to make the UARB look more favourably on its request for more money (a storm rider) if storm costs exceed what gets embedded in power rates.
The company now says shareholders would absorb the labour and overtime costs of all Nova Scotia Power employees seconded to help with storm-related duties except the crews doing the actual work of repairing power lines and replacing poles.
Of course those crews represent he largest chunk of the storm-related costs when you have hundreds of people brought in from outside the province to help. But the last-minute change shows how desperate the company is to convince the regulator it needs more protection from costs resulting from climate change. Final arguments in the rate hearing have yet to be filed.