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The following article was sent to the Chronicle-Herald and Daily News on 5
January. Neither paper was willing to publish it. However, today the
news has broken of the provincial government's secret deal SO2 deal with
NSPI.
Larry.
Larry Hughes, PhD
Professor Visiting Fellow [Sep 04 - Mar 05]
Department of Electrical and Science and Technology Policy
Computer Engineering Research Unit
Dalhousie University University of Sussex
Halifax, Nova Scotia, B3J 2X4 Brighton, BN1 9QE
Canada England
v: 902.494.3950 v: 44.1273.686758
f: 902.422.7535 f: 44.1273.685865
e: larry.hughes@dal.ca
u: http://www.dal.ca/~lhughes2
===============================================================================
(c) Larry Hughes 2005
About 625 words
Who runs Nova Scotia?
Nova Scotia Power's announcement in mid-December that it would
'substantially' reduce its proposed rate increase from an average of
12.4 percent to 7.3 percent was greeted with surprise by most Nova
Scotians.
This reaction was understandable, given that NSPI had spent much of 2004
preparing for this rate submission, using their new "positive energy"
approach of "working more closely with our customers and key
stakeholders" (as described in their 2003 Annual Report). During the
early part of 2004, NSPI held 'technical conferences' with its customers
and stakeholders. NSPI initially proposed an average increase of 8.6
percent in May, increasing it to 12.4 percent in June after the Federal
tax ruling was announced. The proposed increases were explained and
justified with detailed calculations and projections. Throughout the
UARB hearings held in the autumn, NSPI stuck to their proposed
increases, despite serious objections from many interveners; yet in the
space of just over two weeks in late November and early December, NSPI
backed down, offering an average rate increase of 7.3 percent.
Which raises the question: if NSPI is willing to accept an average
increase of 7.3 percent, why didn't they approach the UARB with this
request in the first place?
To answer this question, it is necessary to consider what took place in
December 2001, when NSPI last filed for a rate increase, asking for an
average increase of 8.9 percent. Following months of bitter wrangling
between NSPI and a variety of interveners, as well as the public
criticism of a number of NSPI and Emera executives for failing to attend
the hearings, the UARB granted NSPI a three percent increase in October
2002.
Clearly, NSPI has learned a great deal from their last rate hearing.
They have employed the age-old negotiating tactic of asking for an
inflated amount, and then, after extracting concessions, appear
magnanimous by agreeing to a lower amount. As a result, NSPI has
skillfully obtained a rate increase with which both they and their
shareholders will be pleased.
Shortly after NSPI's announcement, Premier Hamm was taking credit for
NSPI's apparent change of heart, first telling reporters that he was
"was concerned about what was going to happen to major employers"; then
proclaiming that his government "Didn't hitch our wagon to the power
corporation. We hitched our wagon with the people and the industries of
Nova Scotia". Such a claim rings hollow, given that residential
customers (the people of Nova Scotia?) are facing an 8.7 percent rate
increase (the maximum possible in the proposed settlement) and the only
concession granted by NSPI is a token inverted block rate.
By claiming to have stood up to NSPI, the Hamm government is cynically
masking its relationship with NSPI. Ever since the release of the
provincial Energy Strategy in 2001, the Hamm government has gone out of
its way to help NSPI; for example, the new Electricity Act makes NSPI
compliant with U.S. FERC (Federal Energy Regulatory Commission) rules,
thereby allowing it to sell electricity to the United States.
In the government's letter of support for NSPI's new rate structures,
Energy minister Cecil Clarke wrote that "the Province is demonstrating
its commitment to the settlement process ... and is simply extending
implementation of the 2005 SO2 [sulphur dioxide] reduction by two
months". It is unclear how the Premier can claim that his government,
"Didn't hitch our wagon to the power corporation" when his Energy
minister has made concessions to NSPI over Nova Scotia's air quality
regulations that were to have come into effect on 1 January 2005.
Although the Hamm government has seemingly 'done a deal' with NSPI, the
UARB could demonstrate its independence and issue its own decision on
NSPI's original submission. Whether or not it does will go a long way
in determining who runs Nova Scotia.
- 30 -
Larry Hughes is a Visiting Fellow at the Science and Technology Policy
Research Unit of the University of Sussex in Brighton, England. For
more information on Nova Scotia..s energy picture, visit
www.dal.ca/~lhughes2/environment.
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