Powerful Election Promises

Posted May 15, 2015

A central plank in the successful Liberal election platform included promises to improve the lot of ratepayers by beating up on Nova Scotia Power (NSP). The footings under that plank have been shown to be rather unsound.

“By forcing Nova Scotia Power to pay for Efficiency Nova Scotia, we’ll save you $46 million per year…” That is not what has happened, although the total has been reduced and NSP will pay $3.7 million a year to help low-income households access efficiency services. The rest is still being charged to ratepayers, just not as a separate item.

Regrettably former Energy Minister Younger kept insisting that the charge had been “removed” from power bills, even while he was arguing with the Utilities and Review Board (UARB) about whether the charge should be paid by ratepayers immediately or be amortized over several years.

“Stop asking Nova Scotians to fund Nova Scotia Power’s Profits.” NSP earns its profit by making capital investments. Some of this is financed by debt and the rest by shareholder capital. Ratepayers are charged both for the debt interest and the return on capital, which exceeds 9%. Notwithstanding the election promise to reduce it that rate of return on capital has not changed.

On the other hand, by urging the UARB to spread the cost of efficiency investments over future years the government has sought to add to the amount of capital on which NSP can make its 9%+ profit.

“A Liberal government will give you choice by breaking Nova Scotia Power’s monopoly and creating a heavily regulated, competitive market. This will stabilize and eventually drive down energy prices, much the same way breaking the phone monopoly drove down monthly phone rates.” That has not happened yet and is unlikely to for the next fifteen years. The problem is that, with a stagnant population, growing benefit of efficiency initiatives, and Muskrat Falls coming on stream later this decade, we do not expect to need any significant new investments in new power capacity before perhaps 2030.

The current proposals for a competitive marketplace involve consumers being able to buy directly from suppliers of new renewable power, if necessary using NSP transmission infrastructure. If a project is small it is very unlikely to be cost competitive. If a proposed project is large it will reduce the demand on the main system, so perfectly good generation assets will be idled. To protect other ratepayers, this cost will have to be borne by the new project, making it uneconomic.

So some useful pilot projects can be undertaken but nothing significant is likely to occur on this front for the next fifteen years. It speaks volumes that the government has asked NSP to propose a method for creating the opportunity for competition with itself. Those hoping for real competition will have to be patient, and long-lived.

All of this is context for considering the Electricity System Review released on April 30. It is a useful summary of where we have been, and the source of the comments above about stagnant future demand. But on its own it tells us little about the policy context going forward. That will appear in the Electricity Plan to be released this fall.

We also have a new Minister of Energy. All things considered this is an excellent opportunity to bring the messaging into closer contact with reality.

  1. In the near term little will happen to offer Nova Scotians real competitive choice. In the longer term that can only happen if the ownership of generation assets is separated from assets involved in transmission and systems operation. This is the right time to seek an independent report about whether this is a viable alternative for Nova Scotia, and if so to begin a careful planning process.
  2. Efficiency One wants to spend $40 million on projects next year. NSP thinks it should be half as much. No surprise there—they are competitors. Stop pretending that there can be a meaningful negotiation between them and let Efficiency One just submit its proposal to the UARB. 
  3. Efficiency spending is going to increase rates whether or not it is amortized over a number of years. If amortization is chosen it requires borrowing. Given that the payments come from a virtually guaranteed source of revenue it is needlessly expensive to do so through NSP. Explore other financial instruments. 
  4. Consider whether large corporations, universities, hospitals, and municipalities should be paying for a larger share of the projects that benefit them. That will reduce the impact on rates for others in their rate class who do not benefit from efficiency initiatives.

The 2013 Liberal platform on electricity was a political success. The developments since the election, and the efforts to pretend that the platform was being implemented when in fact it was not, have been an embarrassment.

It is time for a fresh start.

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Reference Material

Power Plays

Nova Scotia Power Inc. 2022-24 Financial Outlook (Redacted)

Nova Scotia Power Inc. 2021 Annual Report to UARB (Redacted)

Halifax Budget Committee 2022/23 Fiscal Framework

Environmental Goals and Climate Change Reduction Act

The Unintended Consequences of the Atlantic Loop

How Canada Intends to Achieve its 2030 Emissions Targets

Nova Scotia Power Integrated Resource Plan

Comments on NSPML Compliance Filing

Nova Scotia Utility and Review Board Decision

Maritime Link Compliance Filing

Comparison of Electricity Prices in Major North American Cities

NSPI 2009 Integrated Resource Plan Update Report

Summary of Existing Generation Plant

Comparison of Demand to Supply

Slides from recent NSPI Presentation

The Power Mess on Long Island

Primer on the Process of Hydraulic Fracturing

Nova Scotia Hydraulic Fracturing Review and Public Consultation

Contributions of Utilities Regulation to Electrical Systems Transformation: the Case of Nova Scotia

Nova Scotia Electricity System Review Report

 

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  • Bill, your article outlines a symptom of a much larger problem. What is the real problem? In my opinion, it can be summed up as politicians lie!!! They mislead us, they make promises they know they cannot keep, they spin and hide the truth and they avoid doing what is best for taxpayers if it does not serve themselves or their friends.
    So why do they lie? There is no transparency in government and there is really no way to hold the government accountable, at least not before the next election.
    We like to think we live in a democracy. The democratic process runs every four years for a period of four weeks. Once the votes are counted the democratic process ends. The premier, also called a dictator, in some Countries, takes absolute control. The Premier names 2 or 3 deputies with whom he/she will run the Province / Country (the inner circle). That means we have 49 or so elected officials (our MLAs) who are only there to vote in accordance with the party directive. Those 49 have no voice and the honest representative will tell you that they have no ability to bring forward the views of their constituents.
    The political parties have worked diligently to insure their “leader” is a party loyalist. No outsiders allowed. What are some of the qualities the party leadership want in its leaders — loyalty to the party, someone without independent thinking, someone who would be dependent on the party insiders, poor leadership skills, weak background in managing a complex organization.
    Who do these elected leaders believe they are accountable to— the party or the voters. They only have to face the voters every four years: they face the party leaders daily and the party reviews their leadership every year. Thus they can be booted out as “party leader” / premier once a year. But we as voters/ taxpayers have no ability to boot them out before 4 years are up. So who has the real power and the ability to enforce accountability. Who is in control????
    Lack of transparency and no ability to hold officials accountable opens the citizens to abuse and to lies. Our elected officials know that, and they exploit that weakness. There are ways to give power back to the citizens– the right to recall elected officials who break promises or abuse the rights of taxpayers; and Referendums which give the citizens power over such things as tax levels, pay and pensions for elected officials, legality/ disclosure of political contributions, transparency , etc…
    Something has to change. Unfortunately those in power know that change reduces their power and they are threatened by it. Yes we can look at the individual decisions made by the government but the willingness of politicians to lie, hide facts, break promises will be part of our lives forever; until procedures are implemented to return democracy and power to the citizens.
    So you are quite correct a “political success” does not guarantee that the citizens are better off; and there is a need for a new start. I might differ as to what that “new start” needs to encompass.

    Barry H | May 16, 2015

  • This is just one more of the many instances wherein the current administration has failed to suitable deliver on campaign undertakings. It does have one benefit however, and that is that it further buttresses the reality that Nova Scotians are now experiencing a one term government…

    bob mackenzie | May 15, 2015

  • Efficiency NS is starting to SMELL . It should never have been rolled into NSP in any way.
    They can’t account for or measure their success.
    My KWH usage has hardly changed even though I have 99% CLF and now LED lighting , low energy TV’s . NSP doesn’t want us consume less and the government can only affect the financial model if they do something to ensure savings in generation are passed on and doubt they can do that .If the government wants to help people lower electricity costs than it should subsidize better meter systems , get into the wind and solar business .

    peter S | May 15, 2015

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