Get ready for rates to go up — again

The Aurora (Labrador City) - - EDITORIAL - Rus­sell Wanger­sky

You have to ask just how many shoes there are to drop.

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.

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