As the Halifax Examiner reported on Monday, Nova Scotia Power anticipates it will spend an extra $174 million this year to buy more fossil fuels and more carbon credits to offset GHG emissions that are higher than permitted under Nova Scotia’s cap-and-trade legislation.
“Due to reduced availability of Muskrat Falls energy as compared to what was forecast in 2018, Nova Scotia Power has estimated a $111.8 million expense associated with GHG compliance,” Nova Scotia Power spokesperson Mina Atia told the Examiner.
The power company blames delays in receiving market-priced hydro — as well as a similar amount of hydro under contract — for having to replace it with more coal, oil, natural gas, and biomass. Over the last two years, fuel costs and carbon credits are now close to $270 million over budget, which the company expects to recover through Nova Scotians’ power bills.
Nova Scotia Power suggests these costs be spread out over a longer period of time, similar to paying down a mortgage, so ratepayers won’t have to swallow them over the next three years. That’s when the power company has applied for a 10% rate hike as well as changes that would reduce its risk for paying storm costs and mothballing coal-fired power plants. In response to a question from a group of four municipally-owned electric utilities, Nova Scotia Power didn’t rule out the possibility of asking for a larger increase to power rates to cover these Muskrat Falls-related costs.
“Nova Scotia Power will continue its engagement with intervenors regarding the magnitude of this impact and potential options to mitigate the manner in which the Fuel Update will impact the proposed rates is contingent on the outcome of these discussions,” the company replied to the municipal utilities.
Yesterday the Examiner asked each of the three major political parties this question: What action would your party take to protect ratepayers from even higher power bills associated with delays in receiving hydro from Muskrat Falls?
Under the current legislation, Nova Scotia Power is allowed to recover all “costs of service” from ratepayers, and an independent body called the Nova Scotia Utility and Review Board decides which costs are reasonable and which are not. Ratepayers are not supposed to pay for poor decisions by management.
The Examiner reached out to the Progressive Conservations and received this reply from Patricia Jreige, spokesperson to the Minister for Natural Resources and Renewable Energy Tory Rushton.
We are concerned about the rising cost of living and know that many Nova Scotians are struggling. Protecting Nova Scotia ratepayers is our top priority and that’s why we are an active intervenor on this file. Being an active intervenor in the Utility and Review Board (UARB) process carries weight and this action should not be diminished. We are speaking up for ratepayers and monitoring the rate application process closely.
Because the general rate application process is ongoing, it’s not appropriate to offer further comments beyond the contents of materials that have been filed with the UARB on behalf of the department. We have confidence the UARB will hear all the information and deliver a decision that is fair for ratepayers.
One of the consultants hired by the Houston government to present an argument on behalf of the province is Christine Runge, an employee of the Power Advisory Group. Runge is an economist who previously worked for the electricity regulator in Alberta. Her evidence doesn’t get into whether residential consumers ought to be charged an extra $5 a month for electricity. Instead Runge makes a number of recommendations to the UARB to try and protect ratepayers from other additional increases.
For example, Nova Scotia Power wants to reduce its risk for paying for cleanup after major storms that cost more than it has budgeted. As proposed, ratepayers would pay the difference if storm costs go over budget. Runge, an expert witness for the province, says Nova Scotia Power should also then refund ratepayers if storm costs come in under budget. She argues this proposal must be revised to reflect that or the UARB should reject it.
Runge says Nova Scotia Power should not be allowed to set up a Decarbonization Deferral Account to spread out the costs of closing coal plants — ballpark estimate is in the range of $700 million to $1 billion — until the company provides more precise information about the costs and how they would be depreciated. And she says trying to include in the Deferral Account the cost of “new” renewable generation such as wind farms and battery storage projects should be rejected because that’s “business as usual” for any power company.
Last but not least, the Runge objects to changes requested by Nova Scotia Power that would allow shareholders to increase their profits by at least $4 million a year and retain a larger share of over-earnings when the company makes more than the allowable rate of return — a generous 9.25% — which happened between 2014-2019. Runge calculates if what is currently being proposed was in place during those years, Nova Scotia Power shareholders would have made an extra $42 million.
What the Liberals and NDP have to say
Here’s the response the Examiner received from the Liberal Caucus office:
“Nova Scotians deserve a government that is ready to take action against the 10% rate hike proposal from Nova Scotia Power and take the threat of climate change seriously. Nova Scotia Power is positioned be a significant financial beneficiary from the clean energy transition; there is no justification for the utility to be asking to dramatically increase their profits on the backs of Nova Scotians during a cost-of-living crisis.
Our Liberal caucus has put forward several solutions to address this impending issue such as limiting the utility’s rate of return and equity share, and we are looking to the government to act before it is too late,” said Iain Rankin, Liberal MLA for Timberlea-Prospect.
During the spring session of the legislature, the Liberals introduced a bill called the Ratepayers Protection Act, which attempted to put the brakes on Nova Scotia Power profits. But until and unless a government changes the current Public Utilities Act, politicians don’t have the authority to determine that or to decide how much people pay for electricity. Those decisions rest with the appointed members of the Nova Scotia Utility and Review Board.
During the spring session of the legislature, the New Democratic Party proposed a series of bills that would make significant changes to the current regulatory framework. One bill would amend the Public Utilities Act to give the UARB authority to consider creating a separate power rate for eligible low-income consumers. Another bill tied how much Nova Scotia Power could earn in profit to meeting performance standards that would be determined within the next 12 months. All Opposition bills were voted down by the Progressive Conservatives.
“Any increase in power rates will be completely unmanageable for the thousands of families already struggling to make ends meet,” said Susan Leblanc, NDP spokesperson for the Department of Natural Resources and Renewables. “The Houston government has had a lot to say about renewable energy and power rates but has done nothing to actually stop Nova Scotia Power from increasing rates or to make sure they meet their legislated renewable energy targets.”
Nova Scotians need a government that will stand up for them and stop the 10% rate hike, help them retrofit their homes to lower their power bills and improve energy efficiency, and create performance-based regulations so Nova Scotia Power’s rate of return is tied to energy efficiency, reliability, and affordability targets.”
The public hearing on Nova Scotia Power’s application for higher power rates and higher profit margins gets underway September 7.