Rate Increase Limit Will Cost Nova Scotia Power $150 Million
HALIFAX — The head Emera says government legislation limiting rate increases will cost his company $150 million next year and stop it from investing in new green energy initiatives.
Scott Balfour is the president and CEO of Emera, the private company that owns Nova Scotia Power, as well as other utilities in Florida and the Caribbean.
On November 11, Balfour told investors Bill 212 will mean less investment from the company and higher rates in the long term.
“As you would expect, and from comments we’ve made on the record, we’re very concerned about the government’s unprecedented decision to override the role of the Nova Scotia Utility and Review Board (UARB). Political interference in the rate-setting process is unprecedented in North America and it’s unprecedented for a reason,” Balfour said.
Nova Scotia Power is regulated by the independent UARB. Earlier this year, Emera applied to the board to raise its rates by almost 14 percent over two years.
As the UARB was deliberating the request, the provincial government stepped in with Bill 212. The bill limits any rate increases at NSPI to 1.8 percent, excluding increases related to fuel costs.
The bill also ensured the UARB can’t approve an increase to the amount of profit Emera is allowed to make off of Nova Scotia Power customers.
Right now, the company is allowed to funnel as much as 9.25 percent of the rates it collects into shareholder profit. Emera had asked to bump that rate of return up to 9.5 percent, but Bill 212 bans the UARB from approving that request.
When he first announced the bill, Premier Tim Houston said his government would “take the necessary steps to protect [customers] from unfair rate increases while helping to ensure [their] lights stay on.”
“It’s been well-proven that the long-term interest of customers is best and most effectively served by the adjudication and setting of electricity rates by an independent and expert body like the UARB, which benefits from direct engagement and evidentiary input from customer advocates and interveners,” Balfour told investors during the November 11 call.
“We remain deeply concerned about the long-term impacts of this decision on Nova Scotia Power’s customers as it delayed the clean energy transition and will ultimately result in higher, not lower costs for customers.”
Bill 212 also requires that Emera use revenue from any non-fuel-related rate increase only to improve the reliability of service to ratepayers.
During his call with investors, Balfour said Emera is changing its capital spending based on the legislation. The company will drop $500 million it had planned to spend on green energy products through its “Eastern Clean Energy Initiative.”
“Given the restrictions imposed by Bill 212, these cleaner energy investments have been forced to put on hold, as our capital investments in Nova Scotia Power are required to only focus on maintaining system reliability,” Balfour claimed.
Balfour also admitted that Bill 212 spurred at least one credit agency to revise its outlook on the company from “stable” to “negative.”
During the November 11 call, investors pressed Balfour and other Emera executives about why the company is not selling off some of its assets to shore up its books in the face of the unfavorable credit outlooks.
But the company says it has no plans to do that as of now.
Despite the millions in missing profits and Emera’s choice to stop investing in green energy, the company is adamant it will not do anything to jeopardize shareholder returns.
Balfour reiterated the company’s commitment to a 4.2 percent increase in its dividend and an extension of the company’s dividend growth guidance of 4-5 percent through to 2025.
“We’re as committed to our divided and to our divided growth guidance today as we were when the [increase] was announced in September. So no change in our level of commitment to both things,” Balfour said. “From our perspective, nothing has changed that causes us to have any hesitation to reaffirming our commitment to [our dividends].”
A more detailed picture of Emera’s profits and returns is available in its latest consolidated financial statements.
Trevor Nichols is Huddle’s editor, based in Halifax. Send him your feedback and story ideas: [email protected].