Nova Scotia ratepayers will continue to be charged almost the full cost of the Maritime Link this year, despite the fact deliveries of hydroelectricity from Muskrat Falls are still only a fraction of what was contracted in 2013.
The $1.76 billion subsea cable built by Nova Scotia Power Maritime Link (NSPML) has been in service since 2018 to bring renewable hydroelectricity from Labrador to Cape Breton.
The 94-page decision issued by the Utility and Review Board (UARB) yesterday acknowledges that after four years of delay, consumers are still receiving only a portion of the NS Block (19% from August 15- November 30, 2021) and that consumers have paid $205.5 million to buy other sources of replacement energy over the past four years.
Officials with NSPML have been unable to provide a firm date when all the energy will arrive because of ongoing delays with the software that controls the transmission of electricity from the dams to mainland Newfoundland via the Labrador Island Link.
That uncertainty appears to be one factor in the UARB’s decision to “hold back” $2 million each month from what Nova Scotia Power can bill ratepayers until most of that electricity is received. (That’s a significant amount, equal to 10% of what the provincial grid consumes today.)
“The Board has determined it is appropriate to continue a form of holdback to provide some continued protection to ratepayers,”explained the UARB in its written decision. “The holdback monies will be used to pay for the cost of any replacement energy that may be required as a result of the failure to achieve the 90%, to a maximum of $2 million per month. Any portion of the $2 million not utilized to pay for replacement cost energy would be paid over to NSPML.”
The “holdback” starts this April and will be reviewed by the UARB next January.
In two previous years, the board refused to allow Nova Scotia Power to collect $10 million from ratepayers because no energy had started to flow. The board appeared skeptical about information from Nova Scotia Power filed after the hearing concluded that claimed deliveries from Muskrat Falls had improved to 70-90% during late December and the first week of January.
“[T]his covers a time period measured in days — not cause for unbridled optimism,” noted the UARB decision. “That evidence was not subject to cross-examination nor submitted under oath and is entitled to little weight. The Board has noted in the past that NSPML and Nova Scotia Power have over-promised and under-delivered when they describe benefits from the Maritime Link. In the 2017 interim assessment hearing, when NSPML was arguing that the Maritime Link was used and useful even in the absence of NS Block, NSPML and Nova Scotia Power stated that energy and other benefits in excess of $120 million in 2018 and 2019 were expected. In fact, those benefits were less than $5 million per year in each of those years.”
Executive Compensation
In an era where huge cost overruns and delays on energy megaprojects are the norm, the UARB praised NSPML for completing the subsea cable on time and on budget, calling it “ a commendable achievement.” And an audit commissioned by the UARB determined that the costs related to how the project was financed and managed were “prudent.”
That said, the UARB refused to allow Nova Scotia Power to stick ratepayers with $13 million for bonuses and incentives paid to retain senior managers between 2013-2018. Intervenors noted that shareholders, not ratepayers, cover the salaries of senior managers with Nova Scotia Power and questioned why the same standard established under the Public Utilities Act shouldn’t apply to bosses with the Maritime Link.
Unfortunately, Nova Scotia Power Maritime Link is not covered by the Public Utilities Act and was created primarily to meet eligibility requirements to get a federal loan guarantee. It’s a technicality. Consumer Advocate Bill Mahody argued ratepayers should not be on the hook for $13 million in executive compensation.
“Ratepayers have paid $650 million in annual assessment and replacement energy costs and received quantified benefits of $17.4 million and 54,000 MWh of power. Such performance does not warrant the consideration of ratepayer funded incentives and donations,” argued Mahody, supported by the Small Business Advocate, and lawyer Nancy Rubin representing large companies such as Michelin Tire and others.
In the end, the UARB simply went back to its previous practice before changes to the Public Utilities Act and gave NSPML half of what it asked for. Ratepayers and Nova Scotia Power will split the $13 million 50-50. NSPML must also cover $700,000 for paying parent company Emera above market rates to rent office space on Upper Water Street and Emera Place.
As for the corporate donations the Maritime Link Project made to various First Nations and communities in Cape Breton, where a sub-station and overhead transmission lines were built, the regulator said those costs can be passed on to ratepayers because building community trust is important when a megaproject is thrust in someone’s backyard.
The UARB agreed that was a “reasonable” approach but then chose to disallow or make Nova Scotia Power pay for about $300,000 of the $1.4 million total in corporate donations.
“[T]he Board considers that some of the contributions and donations made by NSPML fall outside the scope of engagement with Indigenous or local communities, or securing a well-trained and diversified workforce, and appear only remotely connected, if at all, to the communities where construction of the Maritime Link took place,” reads the decision.
Readers will be thrilled to learn Nova Scotia ratepayers will not have to pay for contributions to Jr Achievement Newfoundland, the St John’s Board of Trade Association, and a women’s film festival in St-John’s. Irony intended. Sometimes the small costs are almost as irritating as the big ones. The big one is the $169.4 million that will be rolled into 2022 power rates as approved by the UARB to pay down the cost of the Maritime Link.
Burn Baby Burn
A group composed of municipal utilities around the province (including Berwick, Mahone Bay, and Antigonish) reminded the UARB that Nova Scotia Power had committed to retire its Lingan 2 coal-fired generating station in Cape Breton once hydroelectricity from Labrador was received. Now that that energy has started to flow and a lot more is expected later this year, the municipal utilities group says it’s time that coal-fired unit is shutdown. The UARB agreed.
“The Board advises Nova Scotia Power that it will not permit recovery of operating costs of Lingan 2 beyond August 15, 2022,” reads the decision. “In other words, if Nova Scotia Power proposes to operate Lingan 2 beyond August 15,2022, it will need to seek specific approval.”
NSPML told the regulator it expects to receive another large amount of hydro from Muskrat Falls — that the province is counting on to replace an additional 10% of coal-fired power with renewables — starting this September. That market-priced energy is another important component of the original deal the UARB approved back in 2013 because it was the combination of the market-priced energy plus the NS Block that determined the Maritime Link was the lowest cost alternative for ratepayers.
So far, that has bargain has yet to be kept but the regulator appears confident it will be.
“While there continue to be delivery delays of the NS Block, NS ratepayers will benefit from NSPML’s development of the Maritime Link Project, including its continuing efforts with Nalcor as they both strive to secure an important source of renewable energy for Nova Scotians and our neighbors in Newfoundland and Labrador,” reads the decision.
In the meantime, the UARB is ordering NSPML and Nova Scotia Power to keep filing quarterly reports on the status of Muskrat Falls and the Labrador Island Link commissioning process. It must also file quarterly reports that are to identify costs “associated with replacement cost of undelivered energy and costs associated with extended operation of Lingan 2 and any other thermal resource that was intended to be displaced by Muskrat Falls deliveries.” Hopefully, that will provide more timely and transparent information for both the regulator and the public stuck paying the bill.
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