Nfld. & Labrador

With no help from Ottawa, N.L. faces significant power rate increases, PUB report says

Public Utilities Board reviewed options to reduce the impact of Muskrat Falls costs on electricity rates up to the year 2030.

Government released rate mitigation report 8 p.m. Friday, 30 minutes after receipt from PUB

The Public Utilities Board reviewed options to reduce the impact of Muskrat Falls costs on electricity rates up to the year 2030 for Newfoundland and Labrador rate payers. (Nalcor Energy )

The provincial government released the Public Utilities Board report on rate mitigation options Friday night, shortly before 8 p.m — 30 minutes after government says it received the report from the board. 

The Board reviewed options to reduce the impact of Muskrat Falls costs on electricity rates up to the year 2030.

The PUB found that if the government of Newfoundland and Labrador wants to hold domestic power rates to 13.5 cents per kilowatt hour in 2021, as was its target, mitigation will have to provide enough funding to offset an increase of 9.38 cents per kilowatt hour as the projected electricity rate is expected to grow to 22.89 cents per kilowatt hour when the hydroelectric project comes online.

"During the course of this review government announced its intention to keep rates at or below 13.5 cents/kWh in 2021. This would require mitigation of over $600 million. Applying the mitigation sources recommended by the Board would still leave a gap of over $400 million in 2021," the report reads.

In a guideline provided by Nalcor to the PUB, the company suggested that an average of $66 million of rate mitigation applied to Hydro's revenue requirement would reduce electricity rates by 1 cent per kilowatt hour, meaning that approximately $620 million would be needed in mitigation in 2021 to keep electricity rates at 13.5 cents per kilowatt hour, the PUB reported.

"Considering the magnitude of the shortfall and given that the financial mitigation sources already require the redirection of significant provincial revenues, it is clear that the outcome of the province's ongoing engagement with the government of Canada will be an important factor in mitigating rates in these early years," the report reads. 

"Other mitigation sources may also have to be considered depending on the level of contribution from the Government of Canada to address the significant gap in revenue available to meet the target of 13.5 cents per kilowatt hour."

The report went on to say, "The financial opportunities identified include the returns and dividends from Muskrat Falls, Churchill Falls and Hydro, Nalcor's share of the export sales revenues, as well as water power rentals related to Muskrat Falls, Churchill Falls and Newfoundland Power. These opportunities represent the most significant source of potential mitigation, ranging from $171 million in 2021 to $526 million in 2030."

For months the province has been in talks with Ottawa to complete a mitigation plan to shelter Newfoundland and Labrador ratepayers from the doubling of their electricity costs.

Premier Dwight Ball said the province and federal government are still working on a rate mitigation deal and will continue to discuss throughout the weekend. (Peter Cowan/CBC)

On Friday, before the report was released, Premier Dwight Ball told reporters that creating a rate mitigation plan is a big task. Ball said the province will go through the PUB report over the weekend while talks are still ongoing with the federal government for coming up with a plan.

"We all know the profound impact that it would have on our province, the impact on rates ... Hopefully through the weekend we'll have an update that we can provide early next week," Ball said.

The premier also didn't say definitively during the Friday news conference that the province will be holding to a 13.5 kilowatt hour rate, but rather told reporters that government is continuing with its plan in which it based its election campaign on. 

The PUB report says it isn't clear whether or not the target rate at 13.5 will be maintained in subsequent years or escalate over the period to 2030. 

However, the report says what is clear is that even with the application of all the PUB's identified rate mitigation opportunities, minus any help from Ottawa, the PUB believes rates will remain well above 13.5 cents per kilowatt hours for a number of years.  

If Ottawa does help with mitigation in the form of $200 million, the PUB report estimates, "this would reduce rates by approximately 3 cents/kWh to between 16 cents/kWh and 17 cents/kWh. This would still leave a gap of approximately $200 million."

Read more articles from CBC Newfoundland and Labrador