Nova Scotia’s utilities regulator has approved significant rate increases for customers of the province’s monopoly power company, in apparent defiance of the provincial government.
The electricity provider, Nova Scotia Power, struck an agreement in November with parties representing residential consumers, small businesses and industry. The deal allowed rate increases averaging 6.9 per cent in each of 2023 and 2024 across those customer groups. The regulator, the Nova Scotia Utility and Review Board, approved the increase on Thursday.
The Nova Scotia government stood alone in opposing the agreement. It complained in a closing submission to the utility board that “during harsh economic times, it is unreasonable to impose further hardship on ratepayers to enhance corporate returns.”
Utilities across the country are contending with government pressure to reduce their greenhouse-gas emissions, often at great expense. At the same time, many are dealing with the costs of increasing damage from extreme weather events.
Nova Scotia Power faces federal and provincial requirements that compel it to retire its coal-fired power plants, which have lately made up slightly more than half of its total installed generation capacity. The board noted in Thursday’s decision that the company faces federal greenhouse-gas emission compliance charges estimated at $116-million in 2023, and $127-million in 2024.
The board also approved a “storm rider,” for a three-year trial period. This extra charge would be levied only following certain extreme weather events, to help fund recovery costs. The utility argued that its poststorm restoration costs have risen substantially in recent years. In September, Hurricane Fiona spurred the largest recovery effort in its history.
The rate hikes end a period of relative price stability. The utility’s last increase to non-fuel rates was approved roughly a decade ago.
“Nova Scotia is on the brink of unprecedented change in the energy sector,” the board said in its decision. “Government, regulators, and utilities will need to work collaboratively to mitigate the risks of this rapid change, and to ensure they meet the aggressive decarbonization goals set by federal and provincial governments.”
The utility’s relationship with the Nova Scotia government deteriorated after it first applied for higher rates, in January, 2022. In October, the government intervened, amending the Public Utilities Act to bar the board from permitting rate increases above 1.8 per cent over two years. But that cap didn’t include costs related to fuel or energy efficiency programs.
Nova Scotia Minister of Natural Resources and Renewables Tory Rushton told reporters Thursday that although the government is disappointed by the decision, it would review the details before taking any action. He added that the government respects the board’s independence. In a statement, Nova Scotia Power said it was also reviewing the decision.
In justifying the rate hike, the board emphasized its role in maintaining fairness for ratepayers while allowing the monopoly utility to earn a reasonable profit.
“The Board is keenly aware that electricity rates are already challenging for many customers and any rate increase will be difficult, especially for those with low or fixed incomes,” it said. “However, the Board does not have the authority to provide special rates for these customers.”
“The Board cannot simply disallow NS Power’s reasonable costs to make rates more affordable,” it added.
The province’s intervention prompted bond-rating agencies S&P Global and DBRS Morningstar to lower Nova Scotia Power’s credit ratings late last year. DBRS Morningstar downgraded the utility to BBB (high) from A (low) in December, citing what it described as “heightened and adverse political interference” that might harm the utility’s financial performance.
The intervention also cast “greater uncertainty” on Nova Scotia Power’s ability to shutter coal-fired power plants and meet targets for adding renewables, the agency said.
In Thursday’s decision, the board said the downgrades were “a relevant factor” in its move to approve the rate hikes, “because they heighten concerns around NS Power’s credit metrics and the risk of further downgrades, resulting in the potential imposition of even more costs on ratepayers.”
The board rejected several aspects of the November settlement agreement, including four capital projects associated with the Maritime Link, a transmission project under which Nova Scotia imports power from the Muskrat Falls hydroelectric station in Labrador.
The board said it would defer approving those projects “until benefits to ratepayers have been demonstrated.”
With a report from the Canadian Press
Matthew McClearn