Nova Scotia Power, consumer advocates and industry stakeholders reached a deal regarding a power rate increase of three per cent over each of the next two years (CBC)

The president of Nova Scotia Power told government regulators Wednesday a three per cent rate increase in 2013 and 2014 will proceed despite a last minute announcement by the Dexter government to cap executive salaries at the utility.

"We've entered into a settlement agreement here and we will comply," Rob Bennett testified at a Nova Scotia Utility and Review Board hearing into rates.

The provincial government said Thursday that it will introduce legislation to cap Nova Scotia Power executive salaries at senior public service levels, leaving the utility to make up the difference.

Nova Scotia Power spends $3 million per year on executive compensation. Ratepayers are not being asked to pay for corporate bonuses.

Bennett gave no indication Nova Scotia Power will cut executive pay, saying the utility will have to make up the difference.

"It adds very significantly to the challenge that I face next year," Bennett said.

In the settlement agreement reached Friday between Nova Scotia Power and several stakeholder groups the utility agreed to drop its request to recover $27.5 million in deferred costs.

That's money the utility said it must now find in savings and efficiencies.

It is not clear if the executive pay it will now have to eat will be added to those savings it must find.