NSP hasn’t delivered reliable service, ratepayers expected to pay for project failures, N.S. government says
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The provincial government has submitted a detailed 19-page critique of Nova Scotia Power’s settlement agreement with customer representatives in the company’s general tariff application on file with the Nova Scotia Utility and Review Board.
“The terms of the settlement agreement are contrary to the purpose and intent of Bill 212,” Daniel Boyle wrote in the Department of Natural Resources and Renewable Energy’s final submission to the Board.
“Accordingly, the board should reject the settlement agreement,” the filing reads. “Although consumer group representatives reached the settlement agreement with NSP behind closed doors and without the province’s involvement, some of the terms go beyond the recommendations experts received from the same consumer group representatives. It remains unclear what caused consumer groups’ representatives to deviate from their expert’s advice, and Natural Resources and Renewables states that the terms of the settlement agreement are not in the best interests of ratepayers.”
The terms of the settlement agreement, if approved by the board, would result in Nova Scotia residential customers facing a 14 percent increase in electricity rates over two years, 6.9 percent over the next year and 6.8 percent in 2024 would have to calculate.
Since NSP first filed its general interest rate proposal in January, “world inflation has risen dramatically, mainly due to high fuel costs,” the ministry’s filing reads.
“For the purposes of this process, these costs are unavoidable because fuel and purchased power are essential to providing a reliable power service. Tariff payers must bear the increased costs of fuel and purchased electricity, but should not alone bear the burden of the additional costs for the service.”
That was what the progressive Conservative government had in mind when it passed Bill 212 in the fall session of the Nova Scotia Legislature. The legislation, an amendment to the Public Utilities Act, capped rate increases at 1.8 percent in 2023 and 2024, excluding fuel and purchased electricity and board-approved demand-side management.
Demand-side management refers to activities and programs aimed at reducing overall consumer demand for electricity or shifting demand to off-peak hours.
“The corporate profits for this regulated monopoly cannot be allowed to grow to the detriment of feepayers, especially when NSP has failed to consistently provide a reliable service to its customers and has left feepayers in the position to pay for expensive fuel to compensate for failures of other projects (the Muskrat Falls project in Labrador) to deliver what they promised,” the department said in its filed document.
“Accordingly, any increase in rates to the 1.8 percent cap must be targeted at improving service reliability and maintained in a separate account to facilitate accountability.”
Bill 212 also stipulated that the allowable return on capital for NSP could not exceed 9.25 percent and that the company should be prohibited from maintaining its proposed profit-sharing mechanism.
“These changes protect taxpayers from higher contributions to NSP’s corporate profits that do not directly benefit taxpayers,” the bill reads.
The department also questioned the Storm Rider included in the settlement agreement.
“Any future review conducted by the Board in relation to an approved Storm Rider should not solely focus on NSP’s efforts to restore service after a storm, but also consider that NSP has made reasonable investment and effort to be.” Strengthen system to mitigate potential harm before it occurs,” the department’s submission said.
In its final submission, NSP asked the board to approve the settlement agreement in its entirety.
“The (Public Utilities Act) changes have real and significant short- and long-term implications for the cost Nova Scotia Power must incur to deliver electricity to its customers,” the company said in its closing statement, referring to a reduction in its stand -alone credit profile and an increase in its business risk status immediately after the passage of the legislation.
The company has said this will make it more expensive to do business and seriously affect its ability to meet environmental targets set by the province.
“The Board’s consideration of whether the Settlement Agreement represents fair and reasonable pricing and is in the best interests of customers must be done through the lens of the changes and consider the increased costs and risks that have resulted from this legislation,” the statement said NSP submission.
Those involved in the interest claim process have called Bill 212 interference in the independent regulatory process.
“Bill 212 undermined the independent regulation of the electricity system and the unintended consequence was a downgrade of NSPI’s credit rating, which will increase future funding costs,” the Affordable Energy Coalition said in its final submission.
“In our view, this disruption has undermined our ability to argue for lower profit levels at this time. We expect to be able to reiterate this argument at future common tax rate hearings.”
In its final submission, the Ecology Action Center said Nova Scotia must stop burning biomass for electricity.
“It’s neither green nor long-term renewable,” the EAC said. “Biomass for electricity creates a multitude of negative environmental impacts as climate targets are not met, local air quality issues arise and habitats are lost as we need more protected land. Endangered species face extinction when wildlife populations are at an all-time low. Economically, we will have lost opportunities for ecotourism, long-term soil erosion negatively impacting future forests or potential cropland, including lost capacity to regulate floods.”
Responses from all parties are due next Wednesday before the board decides whether to accept the settlement agreement.