Summary Information on Electricity Proceedings and Decisions For the Calendar Year 2016
- M06214 – Renewables to Retail
- M07703 – Fuel Adjustment Mechanism (FAM) Audit and AA/BA Adjustments for 2017 through 2019
- M07348 – Nova Scotia Power Inc. – Fuel Adjustment Mechanism (FAM) – Base Cost of Fuel
- Capital Expenditures (over $250,000)
- M07176 – Annual Capital Expenditure (ACE) Plan – 2016 – $174.4 million (proposed)
- Non-rate Financial:
- M07215 – Nova Scotia Power Inc. – Approval of WACC and AFUDC
- M07254 – NSP Maritime Link Inc. – Approval of AFUDC Accounting Policy
- M07628 – NSPI – 2016 ACE Plan Stakeholder Engagement Report
- M07568 – NSPI – Capital Approval Requirements
- M07387 – NSPI Performance Standards
- Reports Requiring Member Review
- Complaints Requiring A Hearing
Regulation of electricity is a complex and evolving process. The purpose of this webpage is to help provide a clearer view of activities and decisions that affected utility customers in the 2016 calendar year. The following information relates to matters decided by the Board during calendar 2016.
The following information is current as at December 14, 2016.
The following summaries are provided for general information only and are not an official document. The full text of Decisions are available online on the New Decisions page, through our Decision Archive, and in our Matters and Evidence database.
|Type of Matter||Number of Matters decided during the year|
|Capital expenditures (over $250,000)||88|
|Reports requiring Member review||39|
|Complaints requiring a proceeding||11|
M06214 – Renewables to Retail
In a Decision dated March 23, 2016, the Board approved rates and rules for a supplier to sell renewable power directly to customers. This has the potential to introduce new competition in the electricity market. The Decision also:
- Set new rates for Nova Scotia Power Inc. (NSPI) for providing power to competitor’s customers when they are unable to do so and for use of NSPI’s distribution services.
- Set the terms and conditions, for Licensed Retail Suppliers when dealing with NSPI.
- Amended rates for competitors using NSPI’s transmission system and the regulations relating to connection of renewable generation to the NSPI power grid.
- Excluded from regulation generation of electricity that does not require use of NSPI’s transmission or distribution systems.
- Set reporting requirements to monitor the effect of new competition.
More information on “Renewables to Retail” is available here.
M07703 – Fuel Adjustment Mechanism (FAM) AA/BA Adjustments for 2017 through 2019
In a Decision dated December 12, 2016, the Board approved a settlement agreement resulting in the following adjustments in favour of the customers of NSPI:
- $31.5 million in the annual adjustment for actual fuel costs
- $3 million for final settlement of issues arising from an audit of fuel costs over the last two years
The total of $34.5 million will be returned to customers based on actual power consumption during the 2016 calendar year. Interest will be applied until the date the amounts are returned. The return must occur no later than April 30, 2017.
M07348 – Nova Scotia Power Inc. – Fuel Adjustment Mechanism (FAM) – Base Cost of Fuel Reset
In a Decision dated July 19, 2016, the Board set the Base Cost of Fuel (BCF) for 2017, 2018, and 2019. The BCF is the amount NSPI can include in rates for fuel, purchasing power generated by others, and the cost of energy conservation programs run by EfficiencyOne. In addition to setting the BCF the Decision also:
- Confirmed that NSPI could begin to collect the forecast cost for the Maritime Link.
- Approved amendments to the accounting policy and plan for administering the FAM arrangement.
- Confirmed that the requirement to audit the results of the FAM every two years should remain in place as well as regular reporting of FAM results during the year.
- Approved NSPI’s “Hedging Plan” which is intended to stabilize fuel costs during the 2017 to 2019 rate stability period.
- Directed NSPI to consider, at the next rate case, the method currently used to distribute fuel costs between the different classes of customer.
The FAM is an arrangement that ensures customers only pay for the actual cost of fuel over time. Changes to the BCF are included in the FAM adjustment to power rates effective January 1st of each year. (More information on the FAM is available here.) The changes approved to the BCF will result in an increase in residential rates of approximately 1.3% in each of 2017, 2018 and 2019.
Capital Expenditures (over $250,000)
The Public Utilities Act requires all utilities to obtain approval to include the cost of assets such as equipment, plant and machinery in rates. The Board also approves the amount that can be recovered from rates by year for each type of asset (the depreciation or amortization rates). A significant portion of rates relates to recovery of these costs.
At the beginning of the capital spending process utilities request approval for budgeted project amounts. When a project is complete the utility requests approval of the final actual amount spent. Many applications received in a year relate to approving the final amount to be included in rates.
Typically, many routine requests are received in a year. The significant approvals relating to new capital expenditures during 2016 are as follows:
M07176 – Annual Capital Expenditure (ACE) Plan – 2016 – $174.4 million (proposed)
In a Decision dated June 8, 2016, the Board approved new capital spending by NSPI in the amount of $57.2 million and also $81.4 million for routine capital projects. The amounts approved were proposed to the Board by all the parties as a “consensus” agreement. A complete list of projects approved is included in the Decision. In addition to approving the new capital spending the Decision directed the following:
- If any approved projects are cancelled or deferred NSPI is to resubmit them for Board approval.
- In future, amounts proposed for Right of Way widening are to be treated as a separate project and are not to be considered as routine spending.
- Two projects were withdrawn for later submission for approval.
- Two projects over $250,000 relating to the Port Hawkesbury biomass plant were set aside for separate review. Two other projects for this plant with a value under $250,000 were directed to be reviewed by NSPI to determine if it was still prudent to proceed with them.
As capital items may require several years to build or acquire the total value of the ACE Plan submitted by NSPI, including amounts approved in prior years and forecast to be spent on approved projects, had a total value of $279.9 million. Appendix C of the ACE Plan lists a number of projects that will be submitted for separate approval later in the year.
The impact on rates, projected by NSPI, is calculated to be: 2016: -1.3%; 2017: -1.6%; 2018: -1.0%; 2019: +0.5%; and 2020: +1.3%. Adjustments relating to these approvals will not come into rates until approved at a rate hearing.
Any adjustments deferred until a rate application will attract interest using the approved weighted average cost of capital (WACC). WACC is the cost of borrowing money to fund asset purchases and operations. Borrowing can include capital contributed by shareholders.
M07215 – Nova Scotia Power Inc. – Approval of WACC and AFUDC
In a Decision dated April 12, 2016, the Board adjusted the approved rates for borrowing that NSPI can include in power rates. The Decision dealt with two separate items: WACC (weighted average cost of capital) and AFUDC (Allowance for Funds Used During Construction). The WACC is the average cost of borrowing to fund asset purchases and operations. Borrowing can include capital contributed by shareholders. AFUDC is the amount NSPI can add to a capital project or deferred cost and is typically set by using an estimate of the WACC.
There is no immediate impact on rates because of this Decision. The Decision sets limits on the amount that NSPI can add to a capital project or deferral and, as a result, impacts the financial results of the company. The effect of changes in the WACC and AFUDC will be considered as part of the next rate case.
M07254 – NSP Maritime Link Inc. – Approval of AFUDC Accounting Policy
AFUDC is the amount NSPI can add to a capital project or deferred cost and is typically set by using an estimate of the WACC. Late in 2015 NSP Maritime Link Inc. (NSPML) requested approval of a new accounting policy after the previous financial statements were considered by the Board to be non-compliant with existing policy. The new policy requests permission to record actual carrying costs (i.e., interest on project debt) instead of an estimated weighted average cost of capital (WACC). WACC is the cost of borrowing money to fund asset purchases and operations. Borrowing can include capital contributed by shareholders.
The Board approved the new policy in a Decision dated May 16, 2016. The Board noted that it reserved approval of the actual amount to be put in rates to a later proceeding. This Decision impacts the financial results of the company and the overall project cost capitalized although it did not affect current power rates.
M07628 – NSPI – 2016 ACE Plan Stakeholder Engagement Report
In a Decision dated October 8, 2016, the Board approved revisions to the Capital Expenditure Justification Criteria (CEJC). The CEJC sets out the criteria for capitalizing asset purchases, and the planning and approval process for inclusion in rates. This Decision did not affect current power rates.
M07568 – NSPI – Capital Approval Requirements
In a Decision dated November 24, 2016, the Board approved revisions to various filing and accounting requirements related to capital spending. This resulted in further revisions to the Capital Expenditure Justification Criteria (CEJC) and what is permitted in rate base. The rate base is the approved value of the property used by the utility in providing service. The Decision impacts the financial results of the company and project costs. This Decision did not affect current power rates.
M07387 – NSPI Performance Standards
The Electricity Plan Implementation (2015) Act required the Board to establish performance standards regarding:
- electricity service reliability in normal conditions,
- preparation for storms or other bad weather conditions and recovery afterwards, and,
- customer service.
In a Decision dated November 28, 2016 the Board confirmed the standards to be used and how performance targets will be set. The targets are to become effective on January 1, 2017. Some of the targets will be updated annually. The method for setting the standards will be reviewed after the first five year period.
Reports Requiring Member Review
The Board regularly receives reports from utilities on compliance with directives contained in past Decisions. The reports are intended to allow for monitoring of the impact of approvals in the Decisions. They are also intended to provide transparency to customers which both provides confidence in the regulatory process and information for future proceedings. Report reviews do not affect current power rates.
Complaints Requiring A Hearing
The Board can consider complaints concerning:
- non-compliance by a utility with its approved rates or regulations
- rates being unjust or unfairly discriminatory
- regulations for a utility being unreasonable, insufficient or unjustly discriminatory
- a service being inadequate or unobtainable
Many complaints can be resolved without a formal hearing. If informal resolution does not work, or the matter is sufficiently serious, the complaint may be referred for a formal proceeding. Given that complaint information frequently includes a substantial amount of personal information the information is often held in confidence. During 2016 all complaint proceedings were ruled to be confidential.
None of the complaints received during 2016 resulted in a broader impact on rates or regulations.