Could it be that Nova Scotia Power Inc. is starting to clue in to the consequences of higher power rates?
The provincial power monopoly announced Monday that it had reached an agreement with advocates who act on behalf of consumers and industry on its latest rate application.
Not surprisingly, the negotiated rate increase is less than its initial application in May.
If the deal is ultimately approved by the Nova Scotia Utility and Review Board, it would mean that residential customers will see their power rates increased by an average of about five per cent next year, which someone has calculated would mean $6 added to the average monthly residential bill.
The revised increase is down from the 7.2 per cent the utility had originally asked for in its rate application to the review board.
The agreement would also defer until its next rate application the power company’s recovery of any fixed costs that may come about as a result of the indefinite closure of the NewPage Port Hawkesbury Ltd. paper mill in Cape Breton.
Ratepayers couldn’t be blamed for being fed up with what seem to be yearly power rate increases and had been bracing themselves for another boost this fall.
Nova Scotia Power is a monopoly and one of Nova Scotia’s largest employers, so it isn’t a stretch to suggest that what’s good for Nova Scotia is probably good for Nova Scotia Power. Vice versa isn’t necessarily true.
Even though the utility is regularly put through a wringer by the regulator to justify the increase it requests, ordinary ratepayers see the company’s return on equity, which is its profit margin, and they automatically think that number is too high.
In the past, that criticism was brushed aside with a number of explanations, such as the Nova Scotia Power rate is similar to what other utilities were making or the regulator set the rate of return and the power company has little authority to change it.
In the agreement announced Monday, the increase in the rate of return Nova Scotia Power will be seeking has been reduced to 9.2 per cent instead of a range of 9.35 to 9.6 per cent in the initial application.
When NewPage, one of Nova Scotia Power’s largest customers, sought protection from creditors recently, citing the high cost of electricity as one of the biggest reasons, it was a wakeup call for the power company and, frankly, everyone in the province.
Perhaps the management at Nova Scotia Power realized it wasn’t prudent business practice to continually ask the regulator to increase rates, even though those increases could be justified in some way, because it forced people to use less power.
Higher rates may appear to pay off for the power company’s bottom line, but it doesn’t make sense if it means Nova Scotia Power could be forcing many of its customers out of business or to seek lower energy prices in other provinces.
If Nova Scotia Power had not been part of a regulated industry in its home province, it could be argued the power company would be less likely to jack up power rates simply because it felt the need to provide a certain rate of return. In that case, the utility would have to be conscious of the potential for competitors to swoop in and take away market share by offering a more competitive price for electricity.
http://thechronicleherald.ca/Business/1264189.html
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