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Russell Wangersky: A power play where you pay and pay


Published on July 29, 2017

You know those furniture commercials that say “Buy now, pay later”?

Well, for next year’s electric bill, you may well be asked to pay now, and buy later.

Russell Wangersky
File photo

Here’s why: Newfoundland and Labrador Hydro is applying for a pair of rate increases over the next two years: an increase of up to 6.66 per cent in 2018, and another 6.4 per cent in 2019. That’s to cover the costs of generating electricity and maintaining the electrical grid.

But what may happen, once the power line from Labrador and the Maritime Link are in place, is that Newfoundland and Labrador Hydro may be able to source power for less than it currently pays for the energy. That’s particularly the case if it uses power that the utility is allowed to recall from the Upper Churchill facility — instead of doing what it does now, which is selling that recall power into electricity markets.

But if the utility does manage to save money, you won’t.

Instead, you will continue to be billed as if the only thing available was the higher-cost power, and Newfoundland and Labrador will bank the extra money, and later, use your own money to soften the blow of power hikes after Muskrat Falls comes online.

Why should Frank in 2018 pay money on his electrical bill to ease the rates for Janice in 2021?

Here’s Hydro’s rationale for the move: “It is well known that Muskrat Falls will have a significant impact on electricity rates. To help offset future rate impacts for customers, the application proposes that any savings gained by bringing less-expensive power to the island on new transmission lines from Labrador, or Nova Scotia, be set aside and given back to customers in future rates when Muskrat Falls comes into service.”

It’s going to be an interesting question of utility regulation: can you legitimately bill next year’s power user an extra amount, and then hand the savings over to a future energy user, whoever that user might be?

Not to get too picky here, but the problem is that the person who’s paying in 2018 and 2019 might be different from the ratepayer receiving the benefit of that extra money in the future.

Why should Frank in 2018 pay money on his electrical bill to ease the rates for Janice in 2021? Frank could be dead, or might have moved. Why is Frank subsidizing Janice’s power bill?

For the whole peculiar idea to work, there might even have to be legislative changes: the province’s Electrical Power Control Act specifies that “all sources and facilities for the production, transmission and distribution of power in the province should be managed and operated in a manner … that would result in power being delivered to consumers in the province at the lowest possible cost consistent with reliable service.” Furthermore, “all power, sources and facilities of the province are to be assessed and allocated and re-allocated in the manner that is necessary to give effect to this policy.”

That’s in section 3 of the Act: in order for Hydro to put the new rates in place, it will have to have permission from the province’s Public Utilities Board, and the board, right now, isn’t allowed to deviate from that. Section 4 of the same act says, “the Public Utilities Board shall implement the power policy declared in section 3.”

Not “might” or “could” or “may,” but “shall.”

Meeting that “lowest possible cost” standard would be impossible if money is being saved to fund a Muskrat Falls offset account.

(Interesting aside? There are four commissioners at the PUB, several of whom are reaching the end of their appointments. That means 43 years of regulatory experience could be replaced with new Liberal-appointed faces dealing with a complex application.)

The bottom line? You’ll pay every bit as much for Muskrat Falls power as you would anyway. You’ll just pay it sooner, and mitigate part of the cost yourself.

It’s a shell game. If you put the money in quicker, hopefully you don’t notice it as much later and decide to turf a whole bunch of politicians right out of office.

Russell Wangersky’s column appears in 30 SaltWire newspapers and websites in Atlantic Canada. He can be reached at rwanger@thetelegram.com — Twitter: @wangersky.