Energy politics and energy policy in Nova Scotia

Larry Hughes

If the results of the latest provincial election have demonstrated anything, it is that supporting Nova Scotia Power will do little to improve a party’s chance of winning. The NDP failed to understand this, whereas the PCs and Liberals played it to their advantage.

For the victorious Liberals, this consisted of an energy policy based on three promises:

First, to break NSP’s monopoly by “creating a heavily regulated, competitive market” that will “stabilize and eventually drive down energy prices” and allow consumers to “choose who you get your power from, including... local providers of renewable energy” because “regulated power companies will be compelled to compete for your business by keeping their rates low”.

Letting consumers choose their electricity supplier does not guarantee stable or low prices: electricity users in England and Wales have seen near continuous increases in electricity prices since the state-run electricity supplier was privatized in the early 1990s; Alberta, which deregulated its electricity market in 1996, saw its residential rate rise faster than elsewhere in Canada between 1998 and 2008, and the price of electricity has been volatile over the past few years.

Electricity demand varies throughout the day, with overnight lows and early evening highs. NSP’s size and structure allow it to handle these variations, while it is unlikely that an independent electricity provider (IEP) could afford to do so. In jurisdictions where there are multiple providers, a common solution is for all electricity to be supplied to a “power pool” which is then sold to electricity retailers who sell it to customers; if this were to occur in Nova Scotia, most consumers would still be purchasing a portion of their electricity from NSP.

IEPs producing electricity from variable, renewable sources that require backup sources of electricity; ideally their own hydroelectric or natural gas facilities. However, because Nova Scotia has limited resources for backup, the simplest and probably lowest-cost solution for a renewable provider would be to have a long-term agreement with an electricity provider that could supply the backup — such as NSP.

Nowadays, natural gas is the fuel of choice for most IEPs that generate electricity from non-renewable sources. Natural gas prices have increased over the past year (as NSP has discovered); unless the provider is able to find a long-term source of inexpensive natural gas, they will be subject to the same price increases as NSP.

There are undoubtedly things that NSP could and should do to improve its service, introducing competition may be one of them; however, there are others that will benefits Nova Scotians more directly, given NSP’s evolution over the past decade, such as the introduction of smart meters and time-of-use billing to ensure that a customer’s bill reflects the true cost of producing the electricity consumed.

Second, to “save you $46 million per year” by “forcing Nova Scotia Power to pay for Efficiency Nova Scotia”.

Electricity in Nova Scotia is subject to a consumption tax which pays for Efficiency Nova Scotia’s electricity-related programs; it is a flat-rate tax that varies between rate groups. The Liberals quite rightly object to the fact that not everyone who pays the tax can benefit from Efficiency Nova Scotia’s programs.

However, by forcing NSP to cover the cost of Efficiency Nova Scotia, the Liberals will miss an opportunity to improve upon both the tax and NSP’s environmental record:

If competition breaks NSP’s monopoly, all electricity providers should be forced to contribute to the $46 million payment.

Third, to “refuse Nova Scotia Power’s return on investment of more than 9% annually and reduce the rate of return” by making NSP “look inward for their own savings”.

In 2012, NSP’s consolidated net income was $126 million. If NSP is forced to cover the cost of Efficiency Nova Scotia, its consolidated net income will fall to $80 million — more, if revenue is lost to competition. The impact of this promise will be greater than simply a reduction in NSP’s rate of return.

Before introducing any legislation that changes Nova Scotia’s electricity market, the Liberals should present evidence to demonstrate that such changes will result in measurable, long-term benefits to Nova Scotians.

For all the faults associated with the electricity-market legislation introduced by the two previous governments (both PC and NDP), much of it addressed social and environmental issues — something the Liberals have failed to address in their energy promises.

Perhaps even more troubling is the fact that the Liberal’s election platform equates “energy” with “Nova Scotia Power”, thereby overlooking:

While the Liberal promises were undoubtedly good politics, it is debatable whether they will result in good energy policy.

Published in 18 October 2013.