Nova Scotia Power heads into a potentially contentious regulatory hearing Monday over its business dealings with fellow Emera subsidiaries.
At issue is whether Nova Scotia Power is looking for the lowest price for ratepayers or looking to maximize profits for the affiliated company.
Consultants for the Nova Scotia Utility and Review Board have delivered a damning verdict in an audit of NSP's compliance with the affiliate code of conduct.
The code is intended to ensure NSP does not slip inside information to affiliates that is unavailable to third-party bidders. In a review spanning 2015 and 2016, NorthStar Consulting Group concluded NSP violated the code repeatedly.
"NS Power did not comply with a number of the Code Protocols," the NorthStar report said. "This was often apparent when reviewing documentation supporting affiliate transactions, the lack of separation of NS Power's organization from its affiliates, and the refusal to provide information related to corporate governance."
Nova Scotia Power denial
In an statement filed ahead of the hearing, NSP president and CEO Karen Hutt fought back against the NorthStar audit.
Hutt said it was "disheartening" that NorthStar claimed "NS Power wishes to maintain the current state of affiliate relationships and transactions unencumbered by regulatory oversight."
"I want to assure this Board that this is simply not true," Hutt said in her statement.
Contract in detail
NorthStar says NSP could not demonstrate that the required analyses preceded the majority of NSP transactions with affiliates.
The auditors highlighted one affiliate contract where NSP selected Emera Utility Services to test 10,000 to 45,000 transformers.
The audit revealed:
- "Broad, unrestricted" communication between NSP and Emera Utility Services sharing commercially sensitive information.
- Overpayment for agreed costs.
- Failure to analyze alternatives.
- The final bill exceeded NSP's in-house estimate.
The dollar values were blacked out in the audit.
In her statement, Hutt said affiliate transactions provide value to NSP customers.
"When we engage in transactions with an affiliate, or any other company, we choose the option that delivers the best value to customers," Hutt says.
Same bosses run the company
The audit spells out the intertwining management between NSP and the parent company.
The chair of NSP is supposed to be an "independent director."
Emera chief operating officer Scott Balfour was appointed chair of the NSP board in May 2016. He is also chair of the board of Emera Maine, Emera NB and Emera Utility Services.
The Emera chief financial officer also fulfils that role for NSP.
The Emera corporate secretary is also the NSP corporate secretary.
The Emera vice-president of finance is also the NSP vice-president of finance.
The Emera chief human resources officer is also the NSP chief human resources officer.
The Emera chief legal officer is also the NSP chief legal officer.
Findings are 'concerning'
In a pre-filed statement, the consumer advocate representing NSP residential customers said he was worried about how much the utility spent on affiliate transactions in 2016.
"The findings are very concerning," said Bill Mahody, the consumer advocated representing NSP residential customers.
"The findings are the result of a significant amount of work by the auditors and a number of recommendations have been made by the auditor for improvements," Mahody told CBC News.
NSP claims good governance
NSP's Hutt defends the company's corporate structure, saying it is consistent with the code and practices of other utilities.
She also defended the role of Emera.
"Emera is a nationally recognized leader in corporate governance and NS Power is proud to be part of a broader organization that takes governance so seriously."