Nova Scotia Power, province discussing how to reduce rate shock from soaring fuel costs

The Utility and Review Board (UARB) has approved a request by Nova Scotia Power to delay the filing of its 2022 fuel cost update from August 19 to September 2 to allow the company and provincial government to continue discussions on how electricity bills can be prevented from going up to the 10% already proposed.

First reported in the Halifax Examiner on Aug. 8, fuel costs for 2022 are expected to be $174 million higher than forecast due to delays in Labrador renewable hydropower, as well as higher oil, natural gas and biomass prices. Those fuel costs ⁠ — on top of a $92 million overrun for 2021 ⁠ — will eventually flow through our utility bills to, or be reclaimed from, ratepayers.

The UARB insisted that Nova Scotia Power present a fuel cost update based on current market conditions ahead of a public hearing scheduled for September 7 to request a 10% average rate increase over three years. The application of the General Rate of Interest (GRA) did not include these higher fuel costs for the last 12 months, but it does include changes to increase shareholder returns and reduce business risk or exposure when it is unable to Comply with environmental regulations on carbon emissions.

Nova Scotia Power is requesting an extension of the deadline

Last week, Nova Scotia Power sent a letter to the UARB asking for a two-week extension to the 2022 fuel cost update filing deadline. The company gave the following reason:

As the board is aware, the fuel and reference electricity forecast on which the GRA is based was prepared in May 2021. Fuel and reference electricity costs have increased significantly since May 2021. The province of Nova Scotia is represented in this proceeding by the registered participation of the Department of Natural Resources and Renewables (NRR).

The province is seeking further immediate discussions with NS Power on the nature and extent of the fuel and electricity cost increases to reduce the impact on customers by reducing fuel-related costs that would otherwise be included in the fuel update. To the extent that some of these fuel costs can be mitigated as a result of these efforts, it would reduce the fuel costs being considered by the Board for inclusion in NS Power’s proposed 2022-2024 tariffs.

So perhaps some sort of taxpayer relief is in the works, although it’s not clear what that deal would look like, beyond ramping up the cost later for future generations.

The province also submitted a letter to the UARB supporting the utility company’s request to extend the fuel cost update, which would also move the hearing date for the electricity tariff request to September 12. Here is part of the letter, filed by attorneys on behalf of the Department of Natural Resources and Renewable Energy:

Since NS Power’s GRA filing, there has been an unprecedented global increase in fuel costs that will directly impact electricity costs in Nova Scotia. The province’s first priority in this process is Nova Scotia’s taxpayers. As such, it has engaged with NS Power on potential solutions for Nova Scotians and understands the need for timely action in the weeks ahead. The Province is committed to continuing this engagement and to reviewing and evaluating every reasonable opportunity that might mitigate the impact of increased fuel costs. The additional time requested by NS Power for the submission of the Fuel Update and for the Board’s oral hearing to begin would allow these important discussions to proceed and should not interfere with the Board’s or other participants’ ability to consider NS Power’s motion .

The consumer advocate and lawyers representing a group of big business owners in the province certainly don’t like the change in schedule because it makes their preparation more difficult. However, the UARB accepted Nova Scotia Power’s proposal to address fuel costs at the end of the Public Hearing on Electricity Prices to give other participants ample time to prepare.

If not, the UARB has indicated that it could possibly be persuaded to allow a brief hiatus. For its part, Nova Scotia Power has promised to be “flexible” when it comes to future planning. Therefore, the UARB determined that it is willing to give the company and the Houston government time to work out an agreement to address these rising fuel costs. Here is the written decision released by the UARB on Monday:

In the circumstances, the Board believes that the extension requested by NS Power and the delayed start of the hearing are reasonable and NS Power’s requests are granted. The nature of the ongoing discussions between NS Power and the Province, the potential impact of an increase in fuel and electricity costs on the electricity tariffs set in this proceeding, and the possibility that information could be filed in the proceeding if the original schedule is maintained in the relatively short term Will be substantially revised in time, it is appropriate to delay the submission of the fuel update.

Eventually, while there will be a delay in filing the fuel update, the Board expects that a full update will be provided in this process, so there should be no transparency concerns. However, to the extent that NS Power and the Province manage to mitigate the impact of fuel and purchased electricity on customers, the Board directs NS Power to highlight the gains made by providing versions of the fuel update that reduce the cost of fuel and electricity purchased both with and without the mitigation measures achieved, including the full extent of any costs associated with any shift in fuel and electricity purchase costs.

September could be a very interesting month. The fuel cost update is due September 2, and the public hearing, which will discuss arguments for and against Nova Scotia Power’s proposed 10% rate hike over two to three years, will now begin September 12. Stay tuned.

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