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Russell Wangersky: Power struggle

Hydro Place in St. John’s, headquarters of Nalcor Energy and subsidiary Newfoundland and Labrador Hydro.
Newfoundland and Labrador Hydro HQ. — Telegram file photo

Hydro’s bid to hike rates by 23 per cent just hit another obstacle

The province’s consumer advocate has a new ally in his argument that Newfoundland and Labrador Hydro can’t justify a 23 per cent hike in power rates by January 2019.

 

Russell Wangersky
Russell Wangersky

 

And that new ally is a company that knows more than a little about electricity sales.

 

In a Jan. 15, 2018 submission to the Public Utilities Board, Newfoundland Power says Newfoundland Hydro’s evidence “does not appear to provide sufficient information” to prove its proposed rates are reasonable.

Newfoundland Power not only agrees with consumer advocate Dennis Browne that Hydro hasn’t supplied enough information, but also argues that a past court decision by the province’s Court of Appeal suggests electrical customers should not be on the hook because of bad business decisions made by Newfoundland Hydro.

Newfoundland Power cites a 1998 Court of Appeal decision about the way utilities are regulated by the PUB that says, “the utility nevertheless remains subject to business risks and the effects of management decisions. To that extent, the financial risks associated with the operation of the utility, just as in the case of any private business, are to be borne by the investors in the enterprise, not the consumer of the service.”

In its submission to the board, Newfoundland Power also says that part of Hydro’s plan for rates may violate an order by the provincial cabinet.

Hydro’s current plan is to ship recall power from the Upper Churchill project to island customers on the new Labrador-Island Link (LIL) — spending $78 million, over two years, for the use of the LIL, and billing customers as if the power was generated burning oil at the Holyrood Generating Station. In the process, Hydro would “bank” $72 million to soften the rate hike when Muskrat Falls comes on stream.

Newfoundland Power says cabinet order 2013-343 specifically says the LIL’s owners can’t charge ratepayers for using the link until the Labrador power project is completed.

Perhaps it’s telling that they can’t even agree on the basic numbers.

In its submission to the board, Newfoundland Power also says that part of Hydro’s plan for rates may violate an order by the provincial cabinet.

In the current battle over power rates, the consumer advocate and Newfoundland Power say customers face a 23 per cent increase by January 2019, while Newfoundland Hydro says they’re only asking for 13 per cent.

Truth is, both sides are right: in the current round of hearings, Hydro is asking for a general rate increase totaling 13 per cent, but a different kind of increase set for this summer will bring the total hit to customers to the 23 per cent figure.

But if they can’t even agree about what numbers they are looking at, it’s not surprising the sides can’t agree about whether or not Newfoundland and Labrador Hydro has provided enough information to justify its requested rate hike.

In a submission filed with the PUB last week, Newfoundland Power was blunt: “This is not the first time that the board has had to address the lack of reliable information related to the Muskrat Falls project.”

Both Newfoundland Power and the province’s consumer advocate are asking the province’s Public Utilities Board to compel Newfoundland and Labrador Hydro to provide information about where it plans to buy power, what it plans to spend, and how Muskrat Falls’ bills will eventually fit into the equation.

For its part, Newfoundland Hydro says getting that kind of information would mean a delay of six months in the rate hearing process, and argues that the information can come during evidence in public hearings. Providing the information now, Hydro says, would be a change in the ground rules.

“Hydro submits that it is entitled to have the board hear its case, as filed, and that it should not be forced to refile its (general rate application) with proposals and frame its proposals in a fundamentally different way than it has proposed in the application currently before the board,” Hydro’s submission says.

The utility also says delaying the hearings would cost Hydro $53.3 million in lost revenue.

Then, they get snippy: “With all due respect to the Consumer Advocate, Hydro’s (general rate application) is not the Consumer Advocate’s application, and is it (sic) not for the Consumer Advocate to dictate to Hydro how to manage the company or what relief it should seek from the board.”

Others are on the fence; the province’s industrial electrical users told the PUB they have some issues with shortfalls in Hydro’s evidence, but don’t feel a six-month delay would help matters.

But back to Newfoundland Power’s intriguing argument about who should pay for business errors. Newfoundland Hydro, after all, essentially signed a blank cheque with its parent company, Nalcor Energy, promising to buy Muskrat Falls power at a rate that would cover all of the project’s construction and financing costs, whatever those costs turned out to be.

In some ways, an argument about who pays the bill for Muskrat Falls is like deciding whether to put on your right shoe first or your left one first.

Either ratepayers pay for the project in electrical rates, or the provincial government and taxpayers (Hydro’s shareholders) are the ones who end up on the hook.

The difference, as far as Newfoundland Power is concerned, is that if it’s the ratepayers, it’s Newfoundland Power that will have to actually send increased bills to customers, and deal with those who can’t pay.

“It appears that Newfoundland Power’s customers will ultimately bear a significant portion of the costs associated with the Muskrat Falls project in the rates they must pay. The magnitude of those costs indicate that there is merit in a full and thorough investigation of options available to mitigate the customer rate impacts,” Newfoundland Power’s filing with the PUB says.

Government’s pockets may well be better able to pay for Muskrat power than individual ratepayers. And wanting more information?

It would have helped a lot more when we were first diving into the Muskrat mess. It can’t hurt now.

 

Russell Wangersky’s column appears in 39 SaltWire newspapers and websites in Atlantic Canada. He can be reached at rwanger@thetelegram.com — Twitter: @wangersky.

 

 

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