N.S. government proposal would limit additional power rate hike this year

The provincial government has proposed a plan it says will protect Nova Scotia Power customers from an additional seven per cent rate hike this year to cover fuel costs.

“We have an immediate problem, one that calls for swift action to protect ratepayers from another large power rate increase this year,” Tory Rushton, minister of natural resources and renewables, said at a news conference Monday.

Rushton said the department’s plan, if accepted by the Nova Scotia Utility and Review Board (NSUARB), will result in residential ratepayers seeing an additional one per cent hike in 2024 as opposed to the potential seven per cent increase.

“There are essentially two buckets of costs that go into your power bill: the cost of fuel and the cost of everything else,” Rushton said. 

“We all know the cost of fuel has skyrocketed over the past few years, due to the war in Ukraine and other factors on the global market. That’s not something any of us here in Nova Scotia can control.”

Rushton said Nova Scotia Power has been buying more fossil fuels than planned to generate its electricity production because of delays in delivery of expected clean energy by way of the Maritime Link between Newfoundland and Labrador and Nova Scotia. NSP was buying those fuels at a higher market price, he said.

“The bill for all the excessive fuel has come due,” Rushton said. 

“Typically what happens when actual fuel costs are different than forecast is that Nova Scotia Power files the status of their fuel adjustment mechanism (FAM) with the UARB and if necessary they ask for an adjustment in power rates to reflect the actual cost, which is paid for by the ratepayers.

“I know that is a hard pill for all of us to swallow.”

‘Too much’

Rushton said the size of the current fuel bill, $395 million for accumulated 2023 fuel costs, is too much for NSP to swallow.

“That is too much for Nova Scotia Power to finance in a short period of time,” the minister said. 

“More importantly for us, that is too much for the ratepayers to repay in a short amount of time. Power rates would have to go up again by about seven per cent for most customers and as much as 13 per cent for industrial customers.”

Rushton said that would be on top of the more than 14 per cent rate increase over the past year.

“Now is not the time for another significant increase of power rates,” Rushton said, pointing to the solution his department has proposed to the NSUARB through NSP, which filed its annual fuel cost recovery application with the board on Monday.

“Government proposed to buy a portion of the FAM balance as an asset,” Rushton said, referencing the $117 million that NSP identified in its application as the portion of the FAM balance it has to recover. 

Rushton said the government can finance a loan for the $117 million at a lower borrowing cost than is available to the utility.

NDP Leader Claudia Chender said the government is offering a fix for a problem it originally created.

“My understanding is that last year because the government decided, instead of changing the legislation, to actually intervene in an independent arm’s-length process, the credit rating of Nova Scotia Power was downgraded,” Chender said.

Chender was referencing Bill 212, which passed through the legislature by the majority Progressive Conservative government in the fall of 2022 and limited the NSUARB from approving any NSP rate increase beyond 1.8 per cent for the next two years, unless that increase is based on fuel or grid-reliability costs.

10-year financing

“So, in many ways in this instance we see that the government is theoretically solving a problem of their own making and meanwhile Nova Scotians are still going to end up paying that money and are still going to struggle to afford power.”

Rushton said the proposal in the NSP application would have the company “manage the rest” of the fuel costs beyond $117 million.

 “Then, through the regular power bills, ratepayers would pay off the $117 million over 10 years instead of just a few.”

Nova Scotia Power would remit those funds to government.

Ruston said he has heard from Nova Scotians and government agrees that it, too, does not want to see additional increases in power bills but one per cent is preferable to seven. 

“We have to face reality,” Rushton said. “We are doing what we can with this creative solution to keep the increase as low as possible.”

Protect ratepayers

Rushton said the government solution wasn’t proposed to protect NSP’s bottom line or to protect the company’s shareholders.

“Our government is doing this for one reason and for one reason alone and that is to protect Nova Scotians from an unaffordable rate increase,” he said. 
“This is an unprecedented situation and it demands an unprecedented government action to protect ratepayers.”

Chender said if it is true that everything government does is to protect the ratepayer, “then it’s also true that they are not doing enough.”

She said the province could have a low-income energy rate in the province if the government changed the legislation.

“We could have a system where Nova Scotia Power charges us for the power that we actually use and the reliability and the efficiency of that power is built into the rate structure,” she said.

“We don’t have that. We need the government to do more.”

Chender said that while some measure like the one proposed by government to ensure that rates don’t go even higher is necessary, “it still doesn’t address the core problem,” that many Nova Scotians can’t afford to keep the power and lights on.

“The heating assistance rebate is still being cut, we know from the Efficiency One report . . . that people are still struggling to afford power right across this province.”

The Natural Resources Department said the NSUARB’s decision on the utility’s application filed Monday will determine if the proposal goes forward. 

The application process is likely to include a paper hearing and, if approved, the one per cent increase would take effect 10 days after the decision is handed down.

The cost of the $117 million to ratepayers will not result in additional annual increases beyond the initial one per cent.