Utility’s major client billed mostly for thermal power; others pay more for renewables
Nova Scotia Power Inc.’s largest customer, Port Hawkesbury Paper LP, is being shielded from mounting fuel costs falling on other ratepayers.

While Port Hawkesbury Paper is billed primarily for cheaper thermal power, the rest of us pay for the boutique stuff coming from small-scale renewable energy projects.

The utility made this clear in a document filed Monday with the Nova Scotia Utility and Review Board to support an increase in the base cost of fuel for 2016. Nova Scotia Power predicts the base cost will rise $111.4 million above the previous base rate of $450.7 million set in 2014.

Due to outstanding debts and credits in the fuel accounts managed by the utility, this overall increase in fuel costs will have varying effects on ratepayer classes. Industrial ratepayers and larger commercial classes will likely see increases of up to four per cent in the fuel component of rates, while smaller commercial class and residential ratepayers will see slight reductions.

The paper mill in Point Tupper, however, has a favourable contract with the utility that protects it from the escalating cost of premium-priced renewable energy being supplied to the utility through the Community Feed-in Tariff Program, which the province cancelled on Aug. 6 due to pressure on power rates.

About two-thirds, or $77 million, of this forecast increase in base fuel costs reflects a tenfold increase in the amount of electricity sourced through the feed-in tariff program.

Because the formula for calculating the mill’s cost of fuel excludes renewable energy and is heavily weighted to cheaper fuels, other “customers are therefore responsible for costs associated with more expensive generation from renewables such as COMFIT,” Nova Scotia Power stated in its application.

According to the utility, energy from this program in 2016 will cost about $144.7 per megawatt hour, compared with costs in the range of $40 to $60 per megawatt hour for power generated or imported by Nova Scotia Power. About five per cent of electricity in 2016 will come from this program, which will makes up about 15 per cent of total fuel costs.

Under the cancelled program, handsome tariffs of up to 49.9 cents per kilowatt hour for small-scale wind projects were intended to encourage non-commercial or community-based production of electricity. They did that, while providing a vehicle for investment capital from outside the province to back local cash investments, mostly in wind turbines.

Port Hawkesbury Paper’s power agreement also buffers it from the expensive electricity generated at the biomass plant, which is adjacent to the mill and owned by Nova Scotia Power.

Under provincial regulations, the utility uses this power even though it is more costly than thermal power, generated chiefly from coal.

Just as Port Hawkesbury Paper’s power agreement with the utility shields it from the cost of adding renewable energy to the electricity system and allows it to avoid significant fixed costs associated with the grid, it also protects it from the cost of energy efficiency programs, which are required by provincial law.

In another turn of events this week, the review board set targets for energy efficiency programs and pegged their total cost from 2016 to 2018 at $102.15 million. Under law, the utility must buy these services from EfficiencyOne, a not-for-profit corporation with the sole provincial franchise to deliver energy efficiency programming. The review board settled on a cost that was 10 per cent below what EfficiencyOne had proposed, but with the same targets for curbing energy use and peak demand.

The ruling forces the utility to pay more than it had wanted, but less than has been invested in demand-side management in recent years.

Critically, the review board decided that spending on energy efficiency, when added on top of all other costs for electricity, would keep power rates in an affordable range. But the latest fuel forecast from the utility may undermine such optimism.