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Newfoundland and Labrador Hydro proposes to raise rates to mitigate Muskrat Falls effect

Without rate mitigation, Newfoundland and Labrador Hydro projects power rates would reach 22.89 cents per kWh by 2021, up from the current average rate of 12.26 cents.
Without rate mitigation, Newfoundland and Labrador Hydro projects power rates would reach 22.89 cents per kWh by 2021, up from the current average rate of 12.26 cents. - 123RF Stock Photo

Government’s plan a mystery as ratepayers left in the dark

Take what you’ve heard about proposed power rate increases in the next couple of years. Picture it, now crunch it all up and toss it out the window.

After settling some issues, Newfoundland and Labrador Hydro’s proposal was whittled down to a possible 1.2 per cent rate increase on Jan. 1, 2019. That would have brought power supply costs to an average 12.4 cents per kilowatt hour.

That’s not about Muskrat Falls, since costs for that hydro megaproject are not expected to come into play in local rates until the hydro generation site is fully commissioned. And the estimated date for having the project online is Sept. 1, 2020.

But Hydro has changed gears in its current rate application (hearings continue today in St. John’s).

Now, in considering what local customers can handle, the Crown utility is proposing customers start to pay for the $12.7-billion Muskrat Falls project sooner. The extra money would be set aside by Hydro, to help reduce — though not eliminate — greater power rate increases ahead.

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So, there’s a new proposal for a 7.7 per cent increase in the average power rate as of Jan. 1, 2019 (including a 6.5 per cent rate “rider” specifically for Muskrat Falls), bringing the cost to 13.2 cents per kWh (before taxes).

Consumer Advocate Dennis Browne told The Telegram it’s not something the Public Utilities Board (PUB) is able to entertain even if it wants to.

“They’re still at these concepts where they’re trying to jump the rates in anticipation of Muskrat Falls,” Browne said Monday, calling the latest proposal by Hydro “unacceptable.”

He said rates are meant to be set with figures as exact as possible, with a detailed examination of costs, and not in consideration of costs yet to be finalized, like the construction cost for Muskrat Falls.

“The board cannot sign on to any fictional rate by way of deferral accounts or riders or any other scheme,” Browne said.

The PUB was barred from examining Muskrat Falls costs in rate setting.

And now, Browne said, N.L. Hydro and Nalcor Energy are pushing for an even greater change in how rates are set.

The consumer advocate is calling for a new reference to be made to the quasi-judicial PUB by the provincial government, to allow the PUB and ratepayer representatives to dive deep on Muskrat Falls costs and re-determine all costs and the best way to keep the system from collapse.

For one thing, Browne said, it needs to be better understood at what point power users will flee the local system.

Is it 18 cents per kilowatt hour? Is that when you’d go bust, or off grid?

That’s where Premier Dwight Ball and Natural Resources Minister Siobhan Coady have said they want to keep rates. That requires not just the higher cost for consumers, but big money from the government. Rates are projected to hit just under 23 cents per kilowatt hour with Muskrat Falls. N.L. Hydro is working on the assumption the province will be able to cover anything over 18 cents a kWh, with every extra cent costing about $70 million a year.

That would mean a cash injection of public funds of anywhere from $280 million to $350 million a year. By way of comparison, the province’s last budget estimated all corporate income tax revenue for this year at $201 million.

So, even if ratepayers can collectively afford 18 cents per kWh, where does that money come from to keep that rate stable, year after year?

Last week, protesters outside of the PUB had a simple question for the government: what are you going to do? Proceedings in the PUB hearing room continue with absolutely no answer to that question.

N.L. Hydro’s filing says the cost of keeping rates down to 18 cents per kilowatt hour is simply “assumed to be borne by government.” It offers no more than what The Telegram has previously reported — there is something expected, but who knows what it will be, or when it will actually be offered to the public.

“Government has indicated that rate mitigation will occur to reduce the customer rate impacts. However, no defined plan has been released to inform customers on either the projected cost of electricity or the pace at which electricity rates will increase,” N.L. Hydro has stated.

“Government has stated it wants to be competitive with Atlantic Canadian rates, which it targets to be between 16 cents and 18 cents per kWh. Therefore, for illustrative purposes, Hydro has assumed that government will provide rate mitigation relief for residential rates beyond 18 cents per kWh.”

N.L. Hydro’s president has said he provides information to the province’s rate mitigation committee, established inside the Department of Natural Resources, but offers no insights in the latest proposal to the PUB.

So where are we right now?

Without mitigation, N.L. Hydro projects power rates would reach 22.89 cents per kWh by 2021, up from the current average rate of 12.26 cents. Even with a 1.2 per cent increase that had been proposed, it would leave a more than 10 cents per kWh gap to be covered in roughly two years of future rate reviews and whatever the government might come up with.

Meanwhile, Keith Fillier, an organizer of a power rate protest outside of the PUB office on Torbay Road in St. John’s last week, has said on social media the plan is to do a second round of protesting this Friday from 10 a.m. to 1 p.m.

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