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You are right about NSPI and capital projects in so far as these are approved by the URB. Since the power company has an approved rate of
return on capital, it has to go under the microscope at URB where every scrap of capital spending has to be haggled over.
But what about the other regulated energy company – Heritage Gas? Why
does Heritage with 17 or so years left on its franchise to build out a distribution network of pipes get such an easy ride? Higher rate of return than NS Power, low risk, allowed to use equity for half its capital.
Most people spend twice as much on space heat as on power so what matters to them is getting as good a deal as possible on their space heating options – of which natural gas is by far the best.
So lets chase up Heritage Gas (and its Alberta based owner AltaGas) as much as we chase up NS Power/Emera.
A final note: Of course, it is not bulking up capital spending to add to total profits that matters. The correct metric is profit per share. So bulking up only pays off if you can pull the wool over the
eyes at URB with respect to the long term mix of borrowing and equity that
Michael Poulton | November 28, 2012 | Reply
I read your piece in the morning paper and had to ask myself – “ok they are spending money on capital expansion (capex) but how do they make money off of this?” I know they are not autonomous so they have to get their money from “Dad” (Emera). Then it struck me “Does all Emera have to do is “authorise” more stock, and issue it ? Thereby picking up 9% from NSP and paying 3% on the market?
Gary H. Blaikie | November 27, 2012 | Reply
I agree that policy is the problem. How little we have learned!
When I was a young CA articled student a half-century ago, one of my
first assignments was the Nova Scotia Light and Power Co. audit. The
senior on the job told us that, unlike other audits where we had to be
alert to management charging payments to expense, at NSLP they would be inclined(!) to capitalize everything they could. I think that the
monopoly on generation and distribution, together with almost a
guaranteed return on capitalized payments is a serious problem for our
taxpaying citizens. I believe Jamie Baillie is on the right track.
Keep up the good work
Jim Radford | November 27, 2012 | Reply
Just wanted to say, this is a great common sence assesment of this NSPI dilema NS faces. No one, even the province, cares to discuss the real options for more affordable power. The numbers behind muscrat falls never added up. What case can be made to sell our new found hydro power to new england, when Quebec will do the same at less than half our price? In all it does come down to the guaranteed profits on investment, NSPI being the only beneficiary in this deal, while the rest of us receive annual power rate increases for the privilege. Frankly, it’s absolutely ridiculous.
Clark Swimm | November 27, 2012 | Reply
Yes, anytime we discover that ‘earning’ could be taking the place of public ‘wanting’, then we would be headed in the correct direction.
However, ever since the days of “rural electrification” there has been an expectation that all this ‘infrastructure’ can be provided (by power companies across the land) but we are finding out that energy has become costly – everywhere.
So, as you suggest, public policy could be improved; but my point is, that standing in our way, is that we do seem to want to blame the power company.
In Nova Scotia we experimented with public ownership and found it wanting. The private company that resulted is at the ‘monopoly’ of the Government. If that Government is capable of ‘adjusting’ that arrangement – it is ‘ours’ to do.
None of us want the lights to go out, and we’ll need more power if we are to prosper, so somewhere in all the controversy there must be some form of competition which will allow for ‘measuring’ of result, plus the innovation that will usher in whatever new era we are trying to enter.
Gordon a.... | November 26, 2012 | Reply
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