Right now, the province’s Public Utilities Board is considering a general rate application from Newfoundland and Labrador Hydro that would, among other things, allow the utility to stockpile cash in a fund to soften the blow of price hikes when Muskrat Falls comes on line.
The utility is seeking a rate increase of 6.6 per cent in January 2018 and another 6.4 per cent in January 2019. That would cover the cost of producing the power in the current system, along with covering the costs of maintaining the electrical system.
Hydro would then try to get cheaper power from another source — perhaps recall power from Labrador, perhaps from Nova Scotia — but charge customers the higher price anyway, building up a cash stockpile.
A big power increase, but wait — there’s apparently more.
The PUB asked for more information from Hydro, and it looks like there could be another request for a rate increase in July of next year.
The new information from Hydro forecasts another rate increase next year based on the Rate Stablization Plan (RSP).
Basically, if fuel prices, exchange rates, hydro reservoir levels and customer consumption levels stay close to what Hydro has forecast, the utility would expect to ask for a rate boost of 8.2 per cent next July.
There are a lot of “ifs” — there may be “offsetting impacts from savings from the reduced cost of No. 6 fuel,” for example: “if fuel prices continue their recent trend, the projected rate changes for 2018 … may be lower through savings achieved in the RSP,” according to Hydro’s information submission.
(That’s the sorry state for the province as a whole; in order to not have power rates jump up, we have to hope for oil prices to fall below what Newfoundland Hydro is forecasting — and if oil prices fall, provincial revenues do, too.)
If things go as Hydro forecasts right now, the numbers on the table — 6.6 per cent, 8.2 per cent and 6.4 per cent — would total up to a single-year increase in the price of electricity of 22.7 per cent.
That is, of course, an increase of staggering proportions, especially after we just had an 8.5 per cent increase this July. (If I’m understanding it correctly, the issue with next year’s 8.2 per cent July increase is that the 8.5 per cent increase from this year was originally supposed to be around 18 per cent, but Newfoundland Hydro found a way to mitigate that increase down to 8.5 per cent using funds from another source. Those funds will run out, so next year’s 8.2 per cent hike would be the remainder of the chickens from last year’s original increase coming home to roost. Clear as mud, hey?)
And Muskrat ain’t even here yet.
Newfoundland and Labrador Hydro confirmed the numbers, but emphasizes it’s early days yet: “The cumulative impact for customers to 2019 would be around 20 per cent, however that is a tentative forecast at this time. As indicated in our correspondence to the PUB, there is a large degree of uncertainty in projecting any changes to customer rates,” a Hydro spokesperson wrote. “We would not normally project that impact at this time, however, the PUB required a sense of potential upcoming rate changes at this time, so we provided them with a forecast based on the best information we have available today.”
Cross your fingers that the forecast is wrong.
Just imagine the rate shock that would come with a triple whammy of power price increases in a single year — electricity price increases resonate through the economy like few other costs, except maybe fossil fuels.
Anywhere costs rise, the consumer gets it in the wallet.
Russell Wangersky’s column appears in 35 SaltWire newspapers and websites in Atlantic Canada. He can be reached at firstname.lastname@example.org — Twitter: @wangersky.