The government of Nova Scotia has taken action to protect Nova Scotians from a significant increase in power rates this year.
The proposal put forward to NSP by the government would extend the time ratepayers have to cover a portion of Nova Scotia Power’s (NSP) fuel costs. Without this intervention, NSP ratepayers will be facing an increase of 7 per cent. If the proposal is accepted, ratepayers will see just more than a one percent increase.
The government deems this proposal to be necessary because NSP has a large balance of fuel costs that has accumulated over the past few years due to record high fuel costs and delays in getting renewable energy from Muskrat Falls.
To protect ratepayers, the government is proposing to buy $117 million of the fuel adjustment mechanism balance as an asset. Nova Scotia Power could then collect the cost from ratepayers over 10 years and remit those funds to the government. Nova Scotia Power would continue to manage the remainder.
According to the government, because its cost of borrowing is lower than the utility’s this solution results in a lower cost to ratepayers, in addition to spreading it out over a longer period of time.
“Protecting Nova Scotia ratepayers continues to be our top priority. If we did not take action, Nova Scotia Power would seek another large power rate increase this year. While we would prefer no increase at all, we are proposing a solution that would mean a considerably smaller increase of about 1.1 per cent instead,” said Tory Rushton, Minister of Natural Resources and Renewables. “While we aim to address this unique situation, we will continue to hold the utility accountable for the service they provide.”
Nova Scotia Power filed its proposal for recovering its fuel costs with the NSUARB on January 29; the government’s financial proposal is included in the proposal.
The fuel adjustment mechanism had a balance of about $395 million as of December 31. The utility is not able to finance the full amount over a long period of time, and it would be a burden on ratepayers to repay it in a short period of time. Unless a portion is removed, the utility would need ratepayers to repay the full balance over the next few years. That would require asking the NSUARB for another significant rate increase this year.The actual amount ratepayers owe for fuel costs is included in Nova Scotia Power’s fuel adjustment mechanism. Each year, the utility files its proposal to recover fuel costs with Nova Scotia Utility and Review Board (NSUARB). The board adjusts power rates based on actual versus forecasted fuel costs.Want more information on the fuel adjustment mechanism? Find it here: