A question from the consumer advocate at a Utility and Review Board public hearing on fuel costs Monday revealed another benefit or possible subsidy to Port Hawkesbury Paper, as well as the added cost to Nova Scotians.
The question forced Nova Scotia Power to disclose that ratepayers are charged $7 million each year for a biomass plant that reduces the cost of electricity for Port Hawkesbury Paper.
The $7 million is on top of a $124-million provincial bailout package that included more than $50 million in forgivable loans to the mill.
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Port Hawkesbury Paper in Point Tupper, owned by Stern Partners, convinced the previous provincial government it would not reopen the shuttered NewPage mill unless the biomass plant on the same property also ran full time. The $200 million boiler is owned by Nova Scotia Power, but the mill supplies bark, chips and wood to fuel it.
Darrell Dexter's New Democratic government passed a law ordering the biomass plant to generate electricity for the grid at a price that is higher than large wind farms.
Cost predicted 3 years ago
"There is an additional cost to customers of $6 million to $8 million a year," said Sasha Irving, a spokesperson for Nova Scotia Power.
"It's because the biomass plant is designated as 'must run' by provincial legislation. That means the facility needs to run at all times to contribute to a base load for Nova Scotia Power — as opposed to using it when it is the best cost for customers compared to other renewable energy sources."
Mark Drazen, an expert consultant for a group of the province's largest businesses, predicted the $7-million cost at a public hearing three years ago when the regulator approved a special, discounted power rate for Port Hawkesbury Paper.
In its August 2012 decision, the Utility and Review Board said it would cost ratepayers more to maintain the grid without a mill in Cape Breton than with it. Port Hawkesbury Paper contributes $2 million annually to the upkeep.
"This is not the forum to debate the merits or appropriateness of government policy," Bill Mahody, a lawyer and consumer advocate, told the board.
"But it is the position of the consumer advocate that the cost of such programs that is imposed on ratepayers should be identified and put on the public record."
Rising fuel costs, increased power rates
Rising fuel costs are expected to mean increases in power rates of about three per cent next year for large and medium-sized businesses and six municipally-owned electrical utilities in the province.
Residential and commercial customers will see no increase to their power rates because of adjustments made from previous years.
But a steady supply of steam to reduce one paper mill's power bill comes at a price to ratepayers saddled with a higher bill for renewable energy.
Since the closure of the Bowater Mersey paper mill in Queens County, the biomass plant has never needed to run to comply with the province's goal of 40 per cent renewable energy by 2020.
The subsidy from ratepayers to continuously operate the biomass plant is on top of the special power rate that caught the attention of the U.S. Department of Commerce earlier this year.
Slapped with countervail duty
The department slapped a 20 per cent countervail duty on the mill, claiming it's saving $24 million a year on maintaining the grid compared to the mill's previous owner, NewPage.
NewPage, which went into receivership, is now owned by Verso. Verso is one of two American paper mills that launched an unfair competition complaint with the U.S. Department of Commerce against Port Hawkesbury Paper.
The complaint was expanded to include Irving Pulp & Paper in New Brunswick and Resolute Forest Products in Quebec.
Some of their supercalendered — or glossy — papers have also been hit with countervail duties of 19 and 18 per cent.
Port Hawkesbury Paper is promising to fight the negative trade decision through the American courts and the North American Free Trade Agreement.
Starting in December, the export duty could cost the Cape Breton mill close to $50 million a year.
About 700 direct and indirect jobs rely on the mill.