The Province of Nova Scotia is looking to take on $117 million of Nova Scotia Power’s fuel-related costs incurred in 2023 to avoid a large increase in electricity rates this year.
Nova Scotia Power finds itself burdened by a substantial balance of fuel costs amassed over the past few years, exacerbated by record-high fuel prices and delays in obtaining renewable energy from Muskrat Falls since 2018.
Minister of Natural Resources and Renewables Tory Ruston while speaking with reporters said, “Without this unprecedented move, we would be looking at a rate increase of seven per cent,”. “We’d like to see a rate increase of zero but the reality is this fuel needs to be paid for by doing this we can keep this year’s rate increase around 1 per cent,”.
Nova Scotia Power’s fuel adjustment mechanism, which determines the amount ratepayers owe for fuel costs, is crucial to understanding this issue. Annually, the utility submits its proposal to recover fuel costs to the Nova Scotia Utility and Review Board (NSUARB), which then adjusts power rates based on actual versus forecasted fuel costs. As of December 31, the fuel adjustment mechanism had a balance of approximately $395 million.
Minister Rushton explained that the government will need to borrow to cover the fuel cost, however, he does not expect it to impact taxes. The $117M in costs (plus interest) would be recovered by the government over 10 years by funds remitted to the government from NS Power.
On January 29, Nova Scotia Power filed its proposal for fuel cost recovery with the NSUARB, incorporating the government’s financial proposal.
Pending approval from the board, the purchase will proceed through Invest Nova Scotia.
The government’s lower cost of borrowing compared to the utility’s results in a solution that not only minimizes the cost to ratepayers but also extends the repayment period.
If the NSUARB does not approve the proposal the government could legislate it through anyway, however when asked about that possibility Minister Rushton was unwilling to comment, noting he didn’t want to presuppose what the review board will do.
