24 Jul Merrick: NSP didn’t expect opposition

Why did Nova Scotia Power come to the Utility and Review Board with what the board called, “an incomplete, poorly documented application?” In an email exchange with contrarian, Consumer Advocate John Merrick offers a couple of theories:

They didn’t expect as much opposition and questioning because they thought it was such a win-win scenario (using a renewable energy source other than coal; helping keep NewPage viable and thus an employer in the province; giving woodlot owners and sawmills a source of revenue) they would be applauded from all corners of the province.  Once into the hearing it was too late to change course.

They really were trying to shift some risk from shareholders to ratepayers.  We (Consumer Advocate) have been expressing increasing concern that NSPI is looking to shift as much risk as possible to ratepayers and thus turn NSPI and its parent into a more attractive investment.  Their evidence on this point was remarkably candid.

The issue of risk is critical. The regulated rate of return NSP receives on its investment includes a premium intended to compensate its shareholders for the risk inherent in ensuring that the company’s expenses are prudent and its service adequate. The purpose of this arrangement is to ensure that company managers have skin in the game, an incentive to negotiate the very best deals.

In the biomass deal, NSP sought the board’s prior blessing for a 25-year contract to  purchase electricity from Strait Bio-Gen. NSP has never done that before. Prior approval would have shifted the risk inherent in the 25-year deal from NSP’s shareholders to its customers. At the urging of Merrick and others, the board balked. Wisely.