Delays in the receipt of hydroelectricity from Muskrat Falls in Labrador have cost Nova Scotian ratepayers more than $200 million over four years to replace it with other sources of energy.
That information was finally made public by Nova Scotia Power on Friday, December 24, after being ordered to disclose the amount by the regulator, the Utility and Review Board.
The power company had initially failed to disclose the figure after it was requested by the consumer advocate, Bill Mahody, during a public hearing earlier this month to determine how much ratepayers ought to be charged in 2022 to cover the cost of the Maritime Link, the subsea cable built to deliver renewable energy from Newfoundland to Nova Scotia.
Nova Scotia Power is requesting approval for $169 million but so far the company has received only a small fraction of the amount contracted. The energy from Muskrat Falls is often referred to as “the NS Block.”
Here’s the information submitted by NS Power, under duress, to the regulator on Christmas Eve:
Replacement energy costs related to non-delivery of the NS Block (including base and supplemental) have been estimated by multiplying the weighted average cost of dispatchable generation (solid fuel, natural gas, Heavy Fuel Oil, diesel, and imported electricity) for each month by the undelivered NS Block volume… [following] NSPI’s standard fuel accounting practices. Using this methodology, replacement energy costs were estimated to be $49.2 million in 2018, $52.0 million in 2019, $57.0 million in 2020, and $47.3 million from January through October 2021.
The back story
The first power from Muskrat Falls to Nova Scotia began flowing August 15, 2021 nearly four years after it was contracted to begin. Disruptions took place during the full month of October and are expected to continue from time to time well into 2022 while General Electric continues to fine-tune the software that controls the flow of electricity from Labrador to Newfoundland. The software issue has created a bottleneck for more than two years.
Senior officials with Nova Scotia Power told the UARB that between August and the end of November 2021, the Muskrat Falls project delivered about 19% of the total hydro Nova Scotia had been counting on to help meet its renewable energy targets. No estimate has been provided for when full power will begin flowing to Nova Scotia.
Nova Scotia Power has a 35-year, fixed price contract with Nalcor Energy (since folded into Newfoundland and Labrador Hydro) to supply 10% of the province’s energy needs and the option to buy an additional 10% at market price. What isn’t available today will be “banked” and made up at the soonest possible future date. The deal appears to be a solid one with the prospect of weaning Nova Scotia off coal if and when the full amount of hydro arrives.
Consumers have already paid for the replacement costs incurred in 2018 and 2019 through a process known as the Fuel Adjustment Mechanism (FAM). An audit every two years checks or verifies what Nova Scotia Power projected it would pay for all types of fuel against the actual cost paid out for the fuel. There is usually a two-year lag in the calculation so the impact on consumers of the Muskrat Falls delays may not be felt until next year or in 2023. In 2021, Nova Scotia Power returned $100,000 (yep, very small potatoes) to customers through the FAM for the calendar years 2018 and 2019.
An application by Nova Scotia Power for a general rate increase is expected within the next couple of months.
Meanwhile, the UARB has reserved its decision on how much Nova Scotia Power may charge ratepayers in 2022 towards the cost of a transmission system that still has no firm ETA on when it will take full delivery of badly needed renewable energy.