Nova Scotia Power has filed an application that would see power rates rise 1.5% a year for residential customers in each of the next three years, if approved by the Utility and Review Board (UARB).
The increases are related to rising fuel costs and purchases of imported power. Commercial and industrial class customers will see larger increases, so the average rate increase over the 2020-2022 period is estimated at two percent.
The rates above include an amount of $160.8 million customers overpaid for fuel in 2018 as well as $53.6 million associated with the Maritime Link built to bring in hydroelectricity from Labrador.
Fuel Cost Pressures
According to the rate application document filed with the UARB:
Total solid fuel costs for 2020-2022 have increased approximately $100 million compared to the forecast 2017-2019 Fuel Stability Period due to a significant increase in market pricing.
Import costs are expected to increase over the period, primariIy due to increased forecast volume of surplus energy from Muskrat Falls and energy imported through the interconnection between Nova Scotia and New Brunswick, and will offset decreased volume of energy generated by solid fuel and natural gas.
Foreign exchange (FX) expense related to US Dollar fuel transactions is expected to increase costs by approximately $129 million over the 2020-2022 Fuel Stability Period as compared to the 2017-2019 Fuel Stability Period…
Independent Power Producer (IPP) costs will decrease compared to the 2017-2019 Fuel Stability Period due to canceled and delayed Tidal Feed-in Tariff (Tidal FIT) projects, which had costs previously forecast at $530/MWh.
… [T]he cost of fuel increases from $64.58/MWh in 2019 to $64.92/MWh in 2020, and $65.34/MWh in 2021, and then decreases to 21$64.91/MWh in 2022.
In layperson terms, fuel cost increases appear tied to paying more for coal at the same time we are paying to bring in clean energy from Labrador to move away from fossil fuels. Provincial legislation requires 40% of electricity to come from renewable sources by 2020. The rate application from NS Power says “NS Power’s average cost of purchased renewable energy during the 2020-2022 Fuel Stability Period is approximately $93/MWh as compared to anticipated costs for non-renewable energy of approximately $54/MWh.”
And fuel costs would have been much higher had the Cape Sharp tidal project succeeded in generating commercial amounts of electricity. Additionally, the US dollar is not our friend when it comes to importing natural gas to replace supply that used to be available locally from offshore fields before they were depleted.
The average 2% annual increase for all customer groups includes a deferred amount of $44 million (about 2% of projected fuel costs and purchase of imported electricity) that ratepayers will pay after 2022. The deferral is a way of smoothing out higher rate increases and was also used in the past three years.
The application says the largest single component of the fuel cost increase from 2019 to 2020 is related to the first five months of 2020, when hydro from Muskrat Falls will not be available. NS Power is projecting June 1, 2020 as the date when power from Labrador will begin to flow. NS Power has budgeted an additional $68.9 million to buy fossil fuels. Construction delays and major cost overruns at Muskrat Falls have delayed the delivery of power to customers in Nova Scotia and affected revenue Nova Scotia Power had hoped to make from the undersea cable known as the Maritime Link.
The Utility and Review Board will hold a public hearing into the fuel cost/rate application beginning October 15. Submissions from citizens must be filed no later than October 9.