Hydro says fuel costs a concern, Muskrat Falls is necessary
Few forecasts are perfect. That is why, between general rate applications setting out electricity rates, made years apart, the Board of Commissioners of Public Utilities (PUB) is open to considering yearly adjustments, to reflect changes in key factors used in forecasting the cost of power.
Power lines. — Photo by Joe Gibbons/The Telegram
Rates are based on the expected need for power and what it is expected to cost utilities to meet that need.
If there is a significant change in the price of oil, for example, the PUB can adjust the amount being charged to power customers in Newfoundland and Labrador, between general rate applications.
According to a statement from Newfoundland and Labrador Hydro issued this morning, the utility has filed for an increase in power rates as of July 1.
The request, now under review, comes after Hydro received an update fuel price forecast, according to a statement released by the utility.
“We adjust electricity rates every year based on the annual amount of hydroelectric generation experienced and the price of oil used to generate electricity at the Holyrood Thermal Generating Station. This adjustment ensures that rates reflect the actual cost of fuel for electricity generation from Holyrood,” said Rob Henderson, Hydro’s vice-president, in a statement.
“The cost of fuel is volatile and subject to long-term increases. The current rate change is consistent with Hydro’s long-term projection of continued increases in prices and growing oil use at Holyrood due to the increasing electricity demand,” he said.
“The development of Muskrat Falls will avoid future exposure to volatile oil prices and move this province to 98 per cent clean renewable hydropower.”
Hydro does not determine if there will be any change or how significant the rate change will be, but changes to oil prices tend to be directly passed to customers.
Hydro’s stated expectation from the price of oil forecasts is for a two to three per cent increase for Newfoundland Power customers and Hydro’s customers on the island.
“Customers can reduce their overall cost of electricity through taking steps to conserve.” notes Hydro’s statement.
The utility notes the increase in power rates would have been more, but hydro power plants have been producing a “higher than normal amount” of hydro power over the last year.
More hydroelectric power means less power from the burning of costly fuel at Holyrood.
In 2012, rates for customers on the island’s main power grid were raised by about 6.6 per cent, largely due to the increased usage of Holyrood, along with higher fuel prices.
In 2013, for its general rate application, the first since 2006, Hydro proposed a decrease in rates for the same customers.
The application for an annual adjustment in this year does not address increases expected to come given Hydro’s planned increase in capital spending, including a proposed $292-million cost for a new power line from Bay d’Espoir to the Avalon Peninsula and an expected $119-million cost for an additional 100 MW generator Hydro wants to purchase this year.