Nova Scotia ratepayers will continue to pay almost all of the cost of the Maritime Link this year, despite the fact that hydroelectric deliveries from Muskrat Falls are still only a fraction of what was contracted in 2013.
The $1.76 billion undersea cable built by Nova Scotia Power Maritime Link (NSPML) has been in service since 2018 to bring renewable hydroelectricity from Labrador to Cape Breton.
The 94-page decision issued yesterday by the Utility and Review Board (UARB) recognizes that after four years of delay, consumers are still only receiving part of the NS block (19% from August 15 to November 30, 2021) and that consumers have paid $205.5 million to purchase other alternative energy sources over the past four years.
NSPML officials were unable to provide a specific date when all the power will arrive due to ongoing delays with the software that controls the transmission of electricity from the dams to mainland Newfoundland via the Labrador Island Link.
This uncertainty appears to be a factor in the UARB’s decision to “hold back” $2 million per month from what Nova Scotia Power can charge customers until most of that electricity is received. (That’s a significant amount, equal to 10% of what the provincial grid consumes today.)
“The Board has determined that it is appropriate to maintain some form of holdback to provide continued protection to taxpayers,” the UARB explained in its written decision. “Holdback funds will be used to pay for the cost of any replacement energy that may be required due to the inability to reach 90%, up to a maximum of $2 million per month. Any portion of the $2 million not used to pay for the replacement cost of energy would be donated to NSPML.
The “withholding” begins in April and will be reviewed by the UARB next January.
For the previous two years, the commission had refused to allow Nova Scotia Power to collect $10 million from ratepayers because no power had begun to flow. The board appeared skeptical of the information filed by Nova Scotia Power after the hearing concluded that claimed deliveries from Muskrat Falls had improved to 70-90% by the end of December and the first week of January.
“[T]its covers a period of time measured in days – not a cause for unbridled optimism,” the UARB ruling noted. “This evidence was not cross-examined or sworn and carries little weight. The Board has noted in the past that NSPML and Nova Scotia Power over-promised and under-delivered when describing the benefits of the Maritime Link. At the 2017 Interim Valuation Hearing, while NSPML argued that the Maritime Link was used and useful even in the absence of the NS Block, NSPML and Nova Scotia Power stated that energy and other benefits in excess of $120 million dollars in 2018 and 2019 were expected. In fact, those benefits were less than $5 million per year in each of those years.
At a time when huge cost overruns and delays on energy megaprojects are the norm, the UARB praised NSPML for completing the undersea cable on time and on budget, calling it a “commendable achievement “. And an audit commissioned by the UARB determined that costs related to how the project was funded and managed were “prudent”.
That said, the UARB refused to allow Nova Scotia Power to charge taxpayers $13 million for bonuses and incentives paid to retain senior executives between 2013 and 2018. The intervenors noted that shareholders, and not the taxpayers, cover the salaries of senior executives at Nova Scotia Power and questioned why the same standard established under the Public Utilities Act should not apply to the bosses of Maritime Link.
Unfortunately, Nova Scotia Power Maritime Link is not covered by the Public Utilities Act and was created primarily to meet the eligibility criteria for obtaining a federal loan guarantee. It’s a technicality. Consumer advocate Bill Mahody argued taxpayers shouldn’t be held liable for $13 million in executive compensation.
“Taxpayers paid $650 million in annual assessment and replacement energy costs and received quantified benefits of $17.4 million and 54,000 MWh of electricity. Such a performance does not warrant the consideration of taxpayer-funded incentives and donations,” argued Mahody, backed by the Small Business Advocate, and attorney Nancy Rubin representing large corporations such as Michelin Tire and d ‘others.
In the end, the UARB simply reverted to its previous practice before the changes to the Public Utilities Act and gave NSPML half of what it was asking for. The taxpayers and Nova Scotia Power will share the $13 million equally. NSPML must also cover $700,000 for paying parent company Emera above market rates to rent office space on Upper Water Street and Emera Place.
Regarding the corporate donations that the Maritime Link project has made to various First Nations and communities in Cape Breton, where a substation and overhead transmission lines have been built, the regulator said that these costs can be passed on to taxpayers, as it is important to build community trust when a megaproject is launched in someone’s backyard.
The UARB agreed it was a “reasonable” approach, but then opted to deny or charge Nova Scotia Power about $300,000 of the total $1.4 million in donations. ‘business.
“[T]The Board considers that some of the contributions and donations made by NSPML fall outside the scope of engaging with Indigenous or local communities, or securing a well-trained and diverse workforce, and do not appear to be related only remotely, if at all, to the communities where the construction of the maritime link took place,” the decision reads.
Readers will be pleased to learn that Nova Scotia taxpayers won’t have to pay for contributions to Jr Achievement Newfoundland, the St John’s Board of Trade Association and a women’s film festival in St John’s. Intended irony. Sometimes the small costs are almost as irritating as the big ones. The most significant is the $169.4 million that will be incorporated into 2022 electricity rates, as approved by the UARB, to reimburse the cost of the maritime link.
Burn baby burn
A group made up of municipal utilities in the province (including Berwick, Mahone Bay and Antigonish) reminded the UARB that Nova Scotia Power has committed to withdrawing its coal-fired Lingan 2 plant in Cape Breton once hydropower of Labrador received. Now that this energy has started flowing and many more are expected later this year, the municipal utilities group says it’s time for the coal unit to be shut down. The UARB agreed.
“The Commission advises Nova Scotia Power that it will not allow recovery of operating costs for Lingan 2 beyond August 15, 2022,” the decision reads. “In other words, if Nova Scotia Power proposes to operate Lingan 2 beyond August 15, 2022, it will need to seek specific approval.”
NSPML told the regulator it expects to receive another large amount of electricity from Muskrat Falls – on which the province plans to replace a Additional 10% coal-fired electricity with renewables – from September. This market-priced power is another important part of the original deal that the UARB approved in 2013, because it was the combination of market-priced power and the NS block that determined that the Maritime Link was the cheapest alternative for taxpayers.
So far the market has yet to be held, but the regulator seems confident it will be.
“While there continue to be delivery delays from the Nova Scotia block, Nova Scotia ratepayers will benefit from NSPML’s development of the Maritime Link project, including its continued efforts with Nalcor as they both strive to ensure a significant source of renewable energy for Nova Scotians and our neighbours. in Newfoundland and Labrador,” the decision read.
In the meantime, the UARB is directing NSPML and Nova Scotia Power to continue filing quarterly reports on the condition of Muskrat Falls and the commissioning process for Labrador Island Link. It must also file quarterly reports which must identify costs “associated with the cost of replacing undelivered energy and costs associated with the extended operation of Lingan 2 and any other thermal resources that were to be displaced by deliveries of Muskrat Falls”. Hopefully this will provide more timely and transparent information to both the regulator and the public who pays the bill.
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