Power strug­gle

The Southern Gazette - - Editorial - Rus­sell Wanger­sky Rus­sell Wanger­sky’s col­umn ap­pears in 39 SaltWire news­pa­pers and web­sites in At­lantic Canada. He can be reached at [email protected]­gram.com Twit­ter: @wanger­sky.

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.

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 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 re­cently, 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.

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