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

Beginning today, residential ratepayers will see power bills rise 6.9% or, on average, about $12 a month.

Power rates will take another 6.9% jump next year.

Small businesses will see their bills go up 16% this year.

The rates have been approved in a decision released by the Utility and Review Board this morning. Nova Scotia Power made the application in January 2022 which was followed by legislation passed by the Houston government to limit non-fuel increases to 1.8% a year. Nova Scotia Power and groups representing consumers, businesses, and environmental groups then negotiated an agreement late in November that has been largely endorsed by the regulator today.

Here is part of the UARB’s written decision:

The Board is satisfied that the negotiated average rate increases across all customer classes of 6.9% in each of 2023 and 2024 are reasonable and appropriate. The Board also finds that it is reasonable to defer part of the increased fuel costs to later years. The Board is keenly aware that any rate increase has an impact on ratepayers, particularly low-income customers and those on a fixed income. No rate increase is ever welcomed by ratepayers. However, the Board places significant weight on the fact that all major customer classes have negotiated these rate increase levels.

The request for increased rates by the Company, and the amount of the negotiated increase, must also be considered in the context that NS Power has not had a non-fuel rate increase since 2014. During the period 2014 to 2022, inflation has risen over 20%. Moreover, various federal and provincial environmental provisions require NS Power to retire coal assets and invest in infrastructure to meet 80% renewable goals by 2030 and net-zero GHG emissions requirements by 2050.

Highlights of the decision

• Implementing a Storm Cost Recovery Rider for a three-year trial period (this has the potential to add 2% a year to power bills if storm cleanup costs exceed $10.4 million in each year;

• The Board endorses an agreement between the Affordable Energy Coalition, the Consumer Advocate, and Nova Scotia Power to consider possible changes to the bill payment, credit and collection rules for low-income customers.

• Agreeing in principle to the establishment of a Decarbonization Deferral Account to address the retirement of coal plants and related decommissioning costs, subject to a further consultative process (costs are estimated at $700 million and would be spread over a long period of time, similar to a mortgage, but there is no agreement on what costs qualify);

• Implementing a Demand Side Management (DSM) Cost Recovery Rider; (this country for energy conservation programs run by Efficiency Nova Scotia)

• The monthly customer charge for “fixed costs” rises from $10.83 to $19.17 each month . (this represents a 25% reduction from NS Power’s original ask)

UARB and Premier Tim Houston

Premier Houston’s letter of November 28, 2022 asked the three members of the UARB panel to set aside the settlement agreement reached between Nova Scotia Power and the Consumer Advocate and various interest groups. Houston said in his opinion the agreement “was not in the best interest of ratepayers” 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 be explaining to the premier the legislative and legal framework in which it operates:

The Board is satisfied that the negotiated average 6.9% rate increases in each of 2023 and 2024 are reasonable and appropriate, and that the increases comply with recent amendments to the Audience Utilities Act introduced through Bill 212.

Consistent with the principles of utility rate regulation recognized by the Supreme Court of Canada, the Board cannot simply disallow NS Power’s reasonable costs to make rates more affordable. These principles ensure fair rates and the financial health of a utility so it can continue to invest in the system providing services to its customers. While the Board can (and has) disallowed costs found to be imprudent or unreasonable, absent such a finding, NS Power’s costs must be reflected in the rates paid by customers.

Nova Scotia Power’s profit margin

The UARB decision continues to allow Nova Scotia Power to make an average 9% profit, setting the allowable earnings band between 8. 75% to 9.25%. The company consistently earns over $120 million a year.

While the Board maintains the status quo on the annual rate of return, it allowed for an increase in the company’s equity thickness from 37.5 to 40.0%. The power company had been seeking a phased-in change to 45%.

The UARB has refused to allow Nova Scotia Power to include $45 million in spending for four Maritime Link assets until ratepayers receive benefit from the Muskrat Falls hydro contract. Ongoing under-deliveries of hydro from Labrador have pushed hundreds of millions of dollars in fuel costs on to the shoulders of ratepayers, a large portion of which has been punted down the road.

The power company with draw its original proposal to keep 50% of any earnings above its allowable 9% profit.

This is a developing story.

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