The government is protecting Nova Scotians from another significant increase in power rates this year.
Nova Scotia Power has a large balance of fuel costs that has accumulated over the past few years. Record high fuel costs and delays in getting renewable energy from Muskrat Falls since 2018 have created an unprecedented situation that calls for swift action to protect ratepayers.
A proposal to extend the time for ratepayers to cover a portion of Nova Scotia Power’s fuel costs would mean a rate increase of just over one per cent. Ratepayers would face a 7% per cent increase without government action, and industrial customers would see 13%.
“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.”
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 makes adjustments to power rates based on actual versus forecasted fuel costs.
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.
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.
The government also continues to work with federal partners to make sure Nova Scotians have clean, reliable and affordable electricity.
Quick Facts:
– Nova Scotia Power filed its proposal for recovering its fuel costs with the NSUARB today, January 29; the government’s financial proposal is reflected in it
– if the board approves the utility’s proposal, then the purchase will proceed through Invest Nova Scotia
– the government’s cost of borrowing is lower than the utility’s, so this solution results in a lower cost to ratepayers, in addition to spreading it out over a longer period of time
Additional Resources:
Explanation of the fuel adjustment mechanism: https://nsuarb.novascotia.ca/sites/default/files/fam_faq.pdf
Natural Resources and Renewables on the X platform, formerly Twitter: https://twitter.com/NS_DNRR
Via Provincial Release