Guess how much we’ll pay for power

Brian
Brian Jones
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Add Newfoundland Power shareholders to the list of people who deserve more from life than you do.

Well, that’s according to Newfoundland Power executives, who are asking the Public Utilities Board (PUB) to approve a 7.2 per cent rate hike to its customers.

Such an increase in power bills is necessary, the company argues, to pay for general operations and maintenance … oh, and to boost Newfoundland Power’s return on equity to 10.4 per cent.

The PUB regulates Newfoundland Power’s return on equity. In 2012, it was set at 8.8 per cent.

Apparently, there is no objective method of setting power rates, and thus return on equity. Every few years, the PUB and Newfoundland Power merely hash out what is “fair.”

It would be interesting to try something similar with your financial adviser or portfolio manager.

“Hey,” you could say, “that four per cent return last year … I don’t think that’s fair.”

But as the saying goes, fair ain’t got nothin’ to do with it. Newfoundland Power has a monopoly, and wants more just by asking. It’s not as if they have to go out and earn it or compete for it.

Their ratepayers, in contrast, face all sorts of risks in their personal investments — registered retirement savings plans, registered education savings plans, workplace pension plans and the like.

There is no equivalent to the PUB that you can go to and say, “I’d like a return on equity of 10.4 per cent.”

Anyone who still includes stocks as part of their investment or pension portfolio — “Wow, look at those things plummet; I thought the laws of physics prevented falling objects from surpassing terminal velocity” — must want to curse at Newfoundland Power’s nerve. What do they think they are, a bank?

Life savings lost? Retirement nest eggs decimated? Oh, well … can we please pocket a double-digit return?

If you’ve played it safe with your investing and stayed with bonds, you’re looking at an annual return of about 3.5 per cent these days. That’s roughly seven per cent less than what Newfoundland Power is seeking. If they get it, move your money out of bonds and put it into power poles.

How about real estate? Land means a good deal, as Duddy Kravitz’s grandpa wisely advised him. My most recent statement put real estate earnings at 9.3 per cent — not bad (the coming bust notwithstanding), but still a full percentage point less than what Newfoundland Power wants.

If the PUB approves Newfoundland Power’s request, let’s hope the ruling includes a detailed explanation. “Because we think it’s fair” probably won’t satisfy most ratepayers.

• • •

Speaking of ripping ratepayers, post-sanction Muskrat Falls keeps raising common questions among people of my acquaintance: what is the government thinking?

What is Premier Kathy Dunderdale thinking? What is Jerome Kennedy, until this week minister of natural resources, thinking?

What can possibly be running through their minds as they so arrogantly and self-assuredly foist massive, megaproject debt upon two generations of Newfoundlanders (and Labradorians)?

I have yet to hear or read a satisfactory answer.

One explanation could come, albeit indirectly, from American novelist Kurt Vonnegut, who described all politicians — no matter their nationality — as pretenders, poseurs, “guessers,” as he labelled them. They feign knowledge, special intelligence and decisiveness, but in reality their actions are merely guesses, he wrote.

In “A Man Without a Country,” published in 2005, Vonnegut makes an observation about politics that could usefully be applied to Muskrat Falls: “But the guessers, in fact, knew no more than the common people and sometimes less, even when, or especially when, they gave us the illusion that we were in control of our destinies.”

Brian Jones is a desk editor at

The Telegram. He can be reached at bjones@thetelegram.com.

Organizations: Newfoundland Power, Public Utilities Board, The Telegram

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Recent comments

  • Cold Future
    January 18, 2013 - 12:36

    The cost of power will go up about 50% to pay the average $450 Million to add the Muskrat layer on top of the approximate $500 Million each for NP and NL Hydro. Our regular rates will go up in line with average energy rate escalation in Canada-then add Muskrat. So our rates will balloon to add about average excess cost of $2000 dollars per year per ratepayer. Bottom line is we will have catapouted from having the median of Canadian electricity rates to the highest in Canada.But hey, GFY Quebec-you had your turn, we're giving to Nova Scotia for the coming decades.

    • a business man
      January 20, 2013 - 09:00

      In all seriousness, I am perfectly okay with everything in your post. I am okay with NLers paying those added costs. Of course, I say this as a NLer with many business interests in Nova Scotia. Still, I am a NL voter and taxpayer, and I fully support MF.

  • John Smith
    January 18, 2013 - 10:18

    Why does this guy still have a job?

  • Winston Adams
    January 18, 2013 - 09:02

    Brian, you are in error to say NP is seeking 7.2 percent rate hike. Rate refers to the charge per kwh. For the Domestic, which is the main concern, it is 7.9 percent, for small to medium size business, an average rate DROP of about 1 percent. Larger customers get cheaper rates than domestic and then another 28 percent drop for using more energy--- so much for conservation and minimum use of Holyrood. Your error is that 7.2 is the average domestic COST incease, and cost includes the basic meter charge, which itself is unchanged. This is a slick maniplication of numbers. If the rate hike was 7.2 it would add about 150.00 extra per year for a mid size electric house. At 7.9 it is 165.00. For all house the 7.9 gives almost 4 million in extra revenue. Nice trick hey? And 7.2 sounds less severe than 7.9 , and all the media runs with than number. But check the Application itself, or get back to me and I'll give you the page number. The domestic rate requested is 7.9. So please don't help them with the spin. And have you filed a complaint in writing with the PUB? As of yesterday, they received only 2 written comments opposing the increase from are over the island. And requests for oral presentations, just one. So who cares? And if this topic is of interest , look at the amount of investment into assisting customers for energy reduction upgrades. Nova Scotia, 47 million, here , less than 5 million. Really progressive ,hey?