Nova Scotia Power parent company expected to detail impact of power rate cap

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HALIFAX — The fallout from the Nova Scotia government’s imposed rate cap on the province’s privately owned electrical utility is expected to be detailed during Emera Inc.’s earnings call today.

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The parent company of Nova Scotia Power says it will provide an updated rate base investment forecast and funding plan during its third-quarter call.

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The utility had applied for a nearly 14 per cent rate hike over two years with the provincial regulator earlier this year.

But the province stepped in and passed legislation to limit the power rate increase to 1.8 per cent over the next two years, excluding increases linked to fuel costs.

The changes to the Public Utilities Act also took aim at the utility’s profit by preventing the regulator from approving a rate of return on equity any higher than 9.25 per cent, down from the 9.5 per cent requested.

Nova Scotia Premier Tim Houston said last month on Twitter his government would “take the necessary steps to protect you from unfair rate increases while helping to ensure your lights stay on.”

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The Oct. 19 announcement sent Emera shares tumbling more than 10 per cent following a temporary trading halt, before recovering to just under five per cent down at close at $51.68 a share.

Nova Scotia Power said the cap has restricted its ability to invest in power grid upgrades and renewable sources of energy.

“This legislation prevents us from investing a planned half a billion dollars in clean energy projects in Nova Scotia,” Nova Scotia Power spokeswoman Jacqueline Foster said in an email.

“It will take time to fully assess the implications of the legislation,” she said. “In the meantime, we’ve pressed pause on our team’s work on the Atlantic Loop.”

The Atlantic Loop is a proposed $5-billion transmission megaproject, which would give the region more access to Labrador and Quebec hydroelectricity.

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It’s a key part of efforts to end the region’s reliance on coal power.

Both Nova Scotia and New Brunswick have committed to phasing out their coal-fired generation by 2030, while Nova Scotia has enshrined in law its goals to reduce greenhouse gas emissions to at least 53 per cent below 2005 levels by 2030 and to achieve net-zero emissions by 2050.

Federal Natural Resources Minister Jonathan Wilkinson has said Nova Scotia has limited options to meet its goal of getting off coal asides from the Atlantic Loop, but called the conflict between Emera and the province a “bump in the road.”

RBC Dominion Securities Inc. analyst Maurice Choy said in a client note that the cap could prompt Emera to limit investments in Nova Scotia Power and “redirect the capital to other parts of its business, including Florida.”

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Emera is the parent company of Tampa Electric, which operates on the west coast of Florida.

Choy also noted that Emera could cut 60 new reliability-related jobs outlined in the utility’s 2022 general rate application filed in January as part of a broader effort to rein in operating costs.

Energy analyst Bill Marshall said the government shouldn’t interfere in the work of the provincial regulator.

“The entity that exists, that is empowered to decide whether the application is fair or not, is the the Nova Scotia Utility and Review Board,” said Marshall, president at WKM Energy Consultants Inc. in Fredericton, N.B. “They’re the entity that has the power and responsibility to ensure Nova Scotia Power’s investments are prudent and in the best interests of customers in Nova Scotia.”

He added: “The government has overstepped its authority here by handcuffing the regulator from doing its job.”

This report by The Canadian Press was first published Nov. 11, 2022.

Companies in this story: (TSX:EMA)