‘Just and reasonable’ or ‘unmanageable burden’? Nova Scotia Power rate hike goes before public hearing

Nova Scotia Power says its proposal to raise rates over the next year by more than eight per cent for most customers is “just and reasonable,” as it heads into a public hearing that will determine whether the changes can go ahead.

The utility will try to convince the Nova Scotia Energy Board the rate changes are justified, while opponents will try to convince the board the changes present too great a burden for households already struggling with the high cost of living.

Energy demand is increasing, Nova Scotians are looking for reliable service in the face of extreme weather and decarbonization goals are looming, Nova Scotia Power noted in its opening statement, which it submitted in writing ahead of the hearing.

“While meaningful progress has been made, we have significant work ahead to meet our customers’ evolving needs and government climate targets,” it said.

The hearing begins Wednesday and could continue for as many as eight days. The board will hear from several officials from the utility, expert witnesses and interveners including customer representatives and the provincial government.

Under the utility’s proposal, residential customers would see rates go up 3.8 per cent immediately and an additional 4.1 per cent on Jan. 1, 2027. Together the increases would compound to about 8.1 per cent. Some non-residential customers would also see increases, while others — including large commercial customers and some industrial customers — would see rates go down.

If approved, the rate changes would generate an additional $180 million in revenue for Nova Scotia Power over two years, according to evidence submitted by Morrison Park Advisors, one of the board's consultants.

Nova Scotia Power consulted with consumer representatives prior to making the application and reached a settlement agreement on the proposed rate changes. The utility has argued that this consensus among customer groups strengthens its case. However, there are several interveners in the hearing who were not part of the consultation and take issue with the proposal.

Among them is the Affordable Energy Coalition, which said it’s concerned about low-income Nova Scotians, who “are suffering from intolerable costs of living.”

“Rate increases are yet another unmanageable burden,” the group said in its opening statement for the hearing.

The outcome of the rate application could determine what happens next with Nova Scotia Power’s credit rating, Morrison Park Advisors said.

The utility’s credit rating took a hit in 2022, dropping to just above junk bond status. If it drops again, the utility could default on the terms of some existing financing agreements and the cost of new borrowing would go up markedly.

The consultants told the board that in the near term, a credit downgrade could cost the utility — and ultimately ratepayers — $25 million or more per year, “but also much more in the future.”

The need to maintain Nova Scotia Power’s current credit rating “appears to be an argument in support of rate increases,” the consultants said. But, they added, the proposed rate increases could be brought down “marginally” without putting the rating in great risk.