About that Efficiency Tax

Many Nova Scotians will have been surprised by the Liberals’ new found love for the Maritime Link. That affection was not evident in the election campaign.

Yes the UARB’s decision incorporated much of what the government suggested as conditions of its approval. But the deal is still not one supported by any of those advocating for customers at the Utilities and Review Board.

Stranger still is the government’s pirouette on the “Efficiency Tax.” There was a clear election promise to transfer the $46 million cost of Efficiency Nova Scotia from consumers to Nova Scotia Power Inc. (NSPI).

As a policy this lacked much in the way of logic. If Efficiency Nova Scotia’s efforts result in reduced consumption of electricity it hurts NSPI’s revenues. It seems odd to charge them more than 35% of after tax profits for the privilege.

It did make for a winning political message, so far. Now the minister has been advised (did he actually not know beforehand?) that it might hurt NSPI’s credit rating and therefore increase their cost of borrowing. So he is pushing things off to 2015 and muttering about not wanting unintended consequences.

Of course every time a government contemplates something adverse to NSPI Emera can be counted on to give warnings that NSPI will have higher interest expense, to be passed on to customers.

Taken literally this is Emera’s way of insisting that its 9 % rate of return is guaranteed, and any adversities must be passed on to ratepayers.

In fact Emera may be overstating their case. An examination of NSPI’s debt obligations shows almost all of them locked in until well into the next decade or longer.

So any change in rating agency opinion would not much change the interest rates actually payable. Thus an illogical policy is being kicked down the road by an ill-founded response.

Or maybe the minister is playing a very deep game, waiting until the Government of Canada guaranteed borrowing on the Maritime Link is safely in place before proceeding to fulfill his party’s promise. That would be another surprise.


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