Hydro says otherwise

When it comes to future electricity rates, don’t worry. Be happy. That’s one of the messages to come from former premier Danny Williams during his time on the witness stand at the Muskrat Falls inquiry.

Williams’ comments echo the position of the current Liberal government, which has steadfastly maintained that, despite the $12.7-billion hole blown in our electrical system by Muskrat Falls, electrical rates won’t rise, and taxpayers won’t pay more.

Meanwhile, this province’s public electrical utility is casting a cold hard eye on how those increases will come, and what they will look like. And, unlike the provincial government or Williams, Newfoundland and Labrador Hydro is explaining exactly how the coming electrical rate increases will work.

According to the documents filed with the province’s Public Utilities Board (and updated in August), Newfoundland Hydro still does not know how the government plans to mitigate electrical rate increases.

But right now, even if mitigation occurs, Hydro is only expecting that mitigation to clip roughly five cents a kilowatt hour off the 23 cents per kilowatt hour that 2021 electricity would otherwise cost.

And that rise is going to be a financial hit for customers.

To cover its costs, if mitigation holds electricity costs at 18 cents per kw/h, Newfoundland Hydro would have to implement a 28.3 per cent rate increase in 2020, and another 13 per cent increase in 2021.

Hydro points out that increases of that magnitude aren’t something the PUB traditionally accepts, so the utility expects a 10 per cent increase in 2020, a 10 per cent increase in 2021, another 10 per cent increase in 2022 and a 9.1 per cent increase in 2023.

Even doing that will leave the utility in the hole for $476 million in deferred revenues, along with another $73 million in interest to cover the borrowings that would cover those deferred costs. All of that $549 million would still have to come from customers in the form of future rate increases beyond 2023. Or, as Hydro puts it, “The cumulative deferred supply costs at the time when customer rates equal the targeted rate mitigation level would need to be amortized over the longer term for future recovery from customers.”

So, Newfoundland and Labrador Hydro is being pretty thorough in how it describes the upcoming increases.

Remember being told that rates wouldn’t go up because of Muskrat Falls? Hydro points out, “material increases are required to increase customer rates in spite of the level of rate mitigation that may be provided.”

But don’t worry.

Be happy.

Politicians of many stripes are saying your electricity rates won’t rise.

And they can be believed, right? Probably the experts at Newfoundland and Labrador Hydro — as Danny Williams reiterated under oath, world-class experts — are the ones who are wrong.