Nova Scotia Power defends adding charges to cover storm damage at hearing into proposed rate increases

With Hurricane Fiona bearing down on the province, Nova Scotia Power is defending its heads-we-win, tails-you-lose proposal for a new storm charge at rate hearings this week.

As part of its application to the Nova Scotia Utility and Review Board (UARB)  for a general 11.6 per cent rate increase, the company is also asking for a "storm cost recovery rider" that would allow it to collect up to two per cent more per year from ratepayers to pay for extreme weather events.

Eric Ferguson, senior director for pricing and transformational regulatory Initiatives at N.S. Power, said Tuesday in Halifax the storm rider would be used sparingly.

"It's not the company's objective to have the rider every year, it's the objective to make the application when it's only absolutely necessary,'' Ferguson said.

In testimony on Wednesday, Ferguson said if the storm rider is approved it would not be used before 2025.

Why customer groups are wary

Here's why lawyers and consultants representing NSP customer groups are suspicious.

Nova Scotia Power wants to charge customers $10-million to pay for severe storm-related damage next year. That amount would be embedded in rates.

The proposed storm rider would allow it to recover any money spent above embedded rates related to severe storms.

The rider only goes one way — to the benefit of the company. If storm costs come in below what is set in rates, the company keeps the difference. There is no refund for consumers.

Company wins either way

In regulatory terms it is considered an "asymmetrical" mechanism.

"The criticism about the asymmetric nature was that it unreasonably favours [NSP Inc.] shareholders. That was articulated in the consultants' evidence," said Nancy Rubin, representing NSP's large customers.

"Yes," acknowledged Ferguson. "The company could recover over expenditures, but there wasn't a provision for refund of under expenditures."

Ferguson said NSP would not apply for a storm rider if the revenue it brings in would exceed its approved earnings or rate of return currently set at nine per cent.

The limitation is not in the company's application.

But NSP finance director Craig Flemming said the company ate $17-million in unanticipated costs from Hurricane Dorian in 2019 because it was still able to earn its approved rate of return that year.

If the Nova Scotia Utility and Review Board rejects its bid for a storm rider, the company is asking to embed $20-million per year in rates to pay for storm damage.

Keeping trees off lines

NSP promised to provide a "full picture" of vegetation management — regulatory speak for tree trimming — after consumer advocate Bill Mahody noted the amount it spent in 2020 and 2021 dropped to an average of $4.2-million — half the average between 2010 and 2019.

The company said tree trimming costs show up in a variety of areas of the business and committed to a breakdown.

NSP ratepayers on hook for $3M settlement with Eastlink, Rogers

NSP disclosed Tuesday it expects ratepayers to cover the $3-million a year it lost in revenue because of its settlement with Eastlink, Rogers and Xplornet. The telecommunications companies were fighting a proposed 165 per cent increase in the attachment fee charged for using NSP owned poles.

NSP was counting on getting $7.5-million from raising the fee from $14 per pole per year to $37.

Michael Willett, director regulatory finance for N.S. Power, said the fee increase was based on flawed information, including double counting overtime, an inaccurate pole count and expenses added that were not part of the pole attachment fee last approved by the board in 2002.

The  recent settlement of $22 per pole reduced the take to $4.5-million.

"That incremental $3-million gap, is that to be recovered from other customers," asked Mahody.

In response, Willet said, "We operate on a cost-of-service model so that is correct. Those costs would need to be recovered.

The hearing resumes Wednesday.