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Nova Scotia

UARB approves 6.9% power rate increase for households, effective immediately

Starting today, home electric bills will increase by 6.9%, or an average of about $12 per month.

Electricity tariffs will rise another 6.9% next year.

Small business bills will increase by 16% this year.

The tariffs were approved in a decision by the Utility and Review Board this morning. Nova Scotia Power filed the application in January 2022, which was followed by legislation passed by the Houston government to limit non-fuel increases to 1.8% per year. Nova Scotia Power and groups representing consumers, businesses and environmental groups then negotiated an agreement in late November, which was broadly endorsed by the regulator today.

Here is part of the UARB’s written decision:

The Management Board is convinced that the negotiated average interest rate increases across all customer classes of 6.9% each in 2023 and 2024 are reasonable and reasonable. The Board also believes it is appropriate to defer some of the increased fuel costs to later years. The Board is very aware that any interest rate increase has an impact on interest payers, particularly low-income and fixed-income customers. No tariff increase is ever welcomed by tariff payers. However, the Board attaches great importance to the fact that all major customer classes have negotiated these rate increases.

The company’s request for higher rates and the amount of the negotiated increase must also be viewed in the context of the fact that NS Power has not increased non-fuel rates since 2014. In the period from 2014 to 2022, inflation rose 20%. In addition, various federal and provincial environmental regulations require NS Power to phase out coal plants and invest in infrastructure to meet 80% renewable energy targets by 2030 and net-zero greenhouse gas emissions requirements by 2050.

Highlights of the decision

• Implemented a Storm Cost Recovery Rider for a three-year trial period (this has the potential to increase electricity bills by 2% per year if storm clean-up costs exceed US$10.4 million per year);

• The Board approves an agreement between the Affordable Energy Coalition, the Consumer Advocate and Nova Scotia Power to review potential changes to bill payment, credit and collections policies for low-income customers.

• Agreement in principle to establish a decarbonization accrual account to address coal plant closures and associated closure costs, subject to further consultation process (costs are estimated at $700 million and would be spread over a long period, similar to a mortgage, but there is no agreement on which costs are eligible);

• Implement a Demand Side Management (DSM) Cost Recovery Rider; (this pays off for energy saving programs run by Efficiency Nova Scotia)

• The monthly customer fee for “fixed costs” increases from $10.83 to $19.17 each month. (This represents a 25% reduction from NS Power’s original request)

UARB and Prime Minister Tim Houston

In his letter dated November 28, 2022, Premier Houston requested the three members of the UARB Panel to vacate the settlement agreement reached between Nova Scotia Power and the Consumer Advocate and various stakeholders. Houston said the agreement was “not in the best interests of taxpayers” and “does not protect Nova Scotians and is likely to harm lower-income Nova Scotians and small businesses.”

In its 202-page decision released this morning, the UARB appeared to explain to the Prime Minister the legislative and legal framework in which it operates:

The Board believes that the negotiated average interest rate increases of 6.9% each in 2023 and 2024 are reasonable and appropriate and that the increases are consistent with recent changes in the Public supply law introduced by Bill 212.

Consistent with the principles of regulating utility charges recognized by the Supreme Court of Canada, the Board cannot simply reject NS Power’s reasonable charges in order to make the charges more affordable. These principles ensure fair tariffs and the financial health of a utility so it can continue to invest in the system that provides services to its customers. The Board can (and has) dismissed charges found to be imprudent or unreasonable, but in the absence of such determination, NS Power’s charges must be reflected in the tariffs paid by customers.

Nova Scotia Power profit margin

The UARB decision continues to allow Nova Scotia Power to achieve an average profit of 9%, with the allowable profit range being set at between 8.75% and 9.25%. The company regularly earns over $120 million a year.

While maintaining the status quo of annual returns, the Board allowed the company’s equity strength to increase from 37.5% to 40.0%. The energy company had sought a gradual change to 45%.

The UARB has refused to allow Nova Scotia Power to include $45 million in spending on four Maritime Link plants until taxpayers benefit from the Muskrat Falls hydroelectric contract. Persistent shortfalls in hydroelectric power supply from Labrador have placed hundreds of millions of dollars in fuel costs on taxpayers’ shoulders, much of which has been lost on the streets.

The energy company withdrew its original proposal to keep 50% of all revenue above the 9% allowable profit.

This is an evolving story.

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