Power play: N.S. government buying NS Power debt to keep rates low

The Nova Scotia government is using its significant financial muscle to wrestle down power rates in the province — at least for this year.

The government is taking on a sizable portion of the utility's massive fuel debt for a 10-year term.

"Right now, the size of the fuel bill is truly too hard to swallow," said N.S. Minister of Natural Resources and Renewables Tory Rushton during a news conference Monday.

Costs are typically passed-on to customers every year through what's known as a "fuel adjustment mechanism."

The utility's balance was about $395 million as of Dec. 31.

A news release from the department explained the issue.

"Nova Scotia Power has a large balance of fuel costs that has accumulated over the past few years. Record high fuel costs and delays in getting renewable energy from Muskrat Falls since 2018 have created an unprecedented situation that calls for swift action to protect ratepayers," said the release. "A proposal to extend the time for ratepayers to cover a portion of Nova Scotia Power’s fuel costs would mean a rate increase of just over one per cent.

“Ratepayers would face a seven per cent increase without government action, and industrial customers would see 13 per cent.”

Instead, the government is proposing to buy $117 million dollars of that debt, exercising a preferred interest rate it gets.

The utility will pay it back at the lower rate over the next decade, keeping rate increases this year to 1.1 per cent.

"This has no negative impact on the taxpayers of Nova Scotia, and ratepayers achieve a substantial savings, bringing the effective rate increase down from what would have been at least seven per cent down to about one per cent for most customers," said David Miller, the department's Electricity Projects executive lead.

"This is a collectable expense that Nova Scotia Power has, so this is an account that ratepayers pay back the fuel costs through, and so by government making this investment, we're acquiring a part of that receivable," he said. "Nova Scotia Power will collect the funds to cover the cost for that, and some of those funds will go to the province to cover the cost of the loan that has been made."

Nova Scotia's Consumer Advocate, who was consulted on the plan, says it's a good idea.

"I think it's the best solution that's come forward to deal with this problem of the mounting debt related to the fuel purchase that Nova Scotia Power makes," said David Roberts. "And it seems to lessen what could be a very sizable impact for all ratepayers, and in particular the residential rate class that I represent."

Asked if he was concerned about public money being used to purchase debt, Roberts said he wasn't.

"They're doing it in the interest of the public from our perspective, so yes, I think it's an opportunity that probably won't come from any other source, let's put it that way," he said.

But the opinion isn't shared by everyone.

"I think any time you're borrowing money into the future is a bad idea," business professor Ed McHugh told CTV News.

"We can't undo the past, but I want to know how we got here, and I want to make sure we don't get here again," said McHugh, noting he'd like to see a review of Nova Scotia Power's cost infrastructure.

"I get the dilemma: it's hard to come in with a full frontal increase especially on something as political and as necessary as power rates. I think some action is needed, but how did we get here, and how do we make sure we don't get here again?", he said.

For its part, the utility insists it’s been at the mercy of uncontrollable world events.

“We have seen unprecedented volatility in fuel costs in recent years due to global events," said NS Power president and CEO Peter Gregg via email.

"For example, in 2022 the actual cost of natural gas was 47 per cent higher than forecasted due to impacts from the war in Ukraine and the resulting disruption to natural gas markets. NS Power uses purchased fuel as part of our overall supply to deliver electricity to our customers," said Gregg.

"Like all costs, fuel costs are subject to rigorous oversight and approval from the Utility and Review Board. This global market volatility has been a challenging situation, and the solution outlined today by government will help Nova Scotians avoid paying more.” 

The executive director of the board told CTV News no timeline has been set to deal with the proceeding yet, but he expected information on the process later this week.

The filing is a public document and can be found on the NS Utility and Review Board’s website. Select ‘Matters and Evidence’ and enter the matter number (M11393) into the search.

For more Nova Scotia news visit our dedicated provincial page.