Internal Email Suggests Proposed Rate Hikes Will Fuel Major Profits At Nova Scotia Power
HALIFAX–When Nova Scotia Power applied to raise its rates last winter, it caused a public and political backlash.
Most of that backlash was in response to new fees NSP wanted to charge solar users and the company’s proposed general rate increase of 10 percent over three years.
Now, a newly discovered internal government memo sheds new light on some of the corporation’s possible motives. The memo was discovered by the Nova Scotia Liberal Party through a freedom of information request. It highlights the profit NSP is looking to gain through its rate application.
The memo takes the form of an email, drafted by a manager of electricity for the Department of Natural resources and Renewables. It suggests that more than half of NSP’s proposed rate hike would go towards bigger profits. The note was sent as bullet points on the issue to be used by the Progressive Conservative caucus.
Those bullet points suggest that, should NSP’s proposed rate increase go through, the company would increase its profits from $130 million a year in 2020 to $213 million a year by 2024. That’s a 64 percent profit increase over four years.
NSP Claims Numbers Are ‘Not Accurate’
Huddle asked Nova Scotia Power for an interview to discuss the memo. The company sent a written response, denying that it is looking to dramatically increase profits through higher electricity rates.
The utility is looking to gradually increase rates, spreading out the 10 percent increase over three years. A spokesperson for NSP says that, out of the current 3.6 percent increase on the table, only 0.3 percent is for “equitable financing.”
“Out of respect for the regulatory process, generally we do not speak to matters before the NS Utility and Review Board. However, the claim that over 50 percent of the rate increase is related to increases in profit is simply not accurate, and it is important that accurate information be used,” reads the emailed statement.
Huddle spoke to Liberal Leader Iain Rankin, who said the numbers contained in the memo were a surprise to his party. Given that NSP is claiming the math to be wrong, Rankin was asked if the party was able to verify it. In response, Rankin said these government staffers are reliable sources of information.
“These are public servants who are looking at the numbers and I think they have credibility,” said Rankin. “I think most Nova Scotians would be upset to hear that the utility’s asking for an increase for their shareholders…”
Liberals Claim Rate Increase Is Only About Profit
The Liberal Party is calling out the government for not introducing legislation to stop the increase. It says the date on the memo, February 1, proves the government had plenty of time to do something.
“As Nova Scotians struggle with the cost-of-living crisis, new information provided to the Liberal Party shows the Houston government knew Nova Scotia Power (NSPI)’s request for a rate increase was about one thing – more profit for the utility,” reads a Liberal press release.
“The document even goes on to imply that media’s attention had been almost distracted with the pinch on solar customers while the company’s profit ask slid in under the radar.”
Indeed, one of the bullet points notes that “media attention has been focused on the solar access charge (which has no identified rate impact).”
The Liberals are also criticizing NSP for claiming that the 10 percent rate hike was needed to offset the costs of transitioning to greener energy sources.
“NSPI has routinely misled people by saying the impetus for the rate increase is to position the utility alongside the province’s climate change goals; the COO for the company admitted at a Public Accounts meeting in May that ‘there’s never a good time to ask for a rate increase,’” states the party’s press release.
NSP Seeks Greater Shareholder Returns
Nova Scotia Power spent much of its written application highlighting this shift as the main reason for needing an increase.
“In order to enable this transition, an adjustment to NS Power’s electricity rates and its rate design is required,” claimed NSP. “The cost of electricity includes three main components: costs for electricity efficiency and conservation programs…”
But in the application, the company does highlight its desire for more return on its investment. NSP forecasts that, if the rate application is approved, there would be a “return on equity” jumping from $153.4 million in 2022 to $213.5 million in 2024.
Also, NSP is looking to increase its “common equity ratio” from 38.8 percent to 45 percent.
According to BDC.ca,when explaining what “common equity ratio” is: “The higher the percentage, the greater the return shareholders are seeing on their investment.”
Then, of course, there is the controversial guaranteed profit NSP receives. It is currently set at 8.75-9.25 percent. The company wants to change the range so it can earn a guarantee as high as 9.5 percent.
In response to the Liberals’ critiques, Tory Rushton, Minister of Natural Resources and Renewables, said the government remains opposed to the rate hikes. He also notes the PC government passed legislation to hold NS Power to higher performance standards.
“We will protect ratepayers by being an active intervenor in the UARB process. We have confidence they will deliver a fair decision,” said the Minister.
“In the spring session of the legislature, we amended the Public Utilities Act to better hold NSP accountable to ratepayers. We continue to look at all the options for further steps we could take.”
Derek Montague is a Huddle reporter in Halifax. Send him your feedback and story ideas: [email protected].