Emera defends charging $326M before Maritime Link delivers as planned
Energy consultants say Emera shouldn't collect full amount of fees from ratepayers until all power is received
Emera Inc. is pushing back against critics who say it's unreasonable to charge Nova Scotia Power customers $326 million over two years to finance the $1.7-billion Maritime Link project before it goes into service as promised.
The issue revolves around whether ratepayers should start paying the full cost for the hydro transmission project two years before it starts to deliver the electricity for which it was built, while Emera reaps a nine per cent rate of return amounting to $100 million.
Through its subsidiary, NSP Maritime Link Inc., the regional energy giant warned regulators this week it would "not have proceeded with its investment" if the initial approval could be revisited.
The company said its costs were prudently incurred and the transmission system — including a 170-kilometre subsea cable between Newfoundland and Nova Scotia — will be completed on time and on budget by the end of this year.
'Unreasonable for Nova Scotia ratepayers'
Emera was responding to comments from consultants hired by the Nova Scotia Utility and Review Board's consumer advocate.
"The central bargain of the Maritime Link project was payments by ratepayers in exchange for energy from Nalcor," said consultant Pelino Colaiacovo.
"That will not begin until 2020, according to publicly available information."
He said it's "unreasonable for Nova Scotia ratepayers to bear the the full cost of the project delay."
Public hearings to be held
Later this month, the review board will hold hearings on the proposal to collect $162 million in 2018 and $164 million in 2019 from ratepayers.
The board has already approved electricity rates to cover those costs in 2018 and 2019.
The consultants urge regulators to disallow a portion of those costs because ratepayers would be paying for benefits they are not receiving.
Colaiacovo said regulators should disallow costs on the grounds the transmission system will not be fully "used and useful" until electricity from Muskrat Falls starts flowing in 2020.
Emera said when the Maritime Link is completed at the end of 2017, electricity will flow in and out of Newfoundland.
The amount of electricity and value has been redacted in public evidence filed to regulators.
Unclear how much energy will flow to Nova Scotia
Consultant Paul Chernick said it will not be anywhere near the energy and supplemental energy contracted between Nalcor and Emera.
Under the terms of the Maritime Link agreement, Nova Scotia Power is entitled to 20 per cent of the output from Muskrat Falls.
"If Nova Scotia Power builds a large warehouse and uses it to store a handful of tools, the building would be used and at least slightly useful, but it would not be much more valuable to ratepayers than an empty unused building," he said.
Colaiacovo was hired by the board in 2013 to examine the project's financing.
He said it wasn't anticipated that ratepayers would be asked to pay for the Maritime Link assets before the entire project was ready.
"This is a strategy that we had not modelled or discussed in 2013," he said.
Emera rejects consultants' arguments
Emera said adopting the position of the consultants would unfairly reopen an approval after the company has already spent $1 billion.
"An after-the-fact disallowance of costs prudently incurred in accord with the UARB approved ML [Maritime Link] Project budget could negatively impact the financial market's view of Nova Scotia regulated utility infrastructure investments," the company said in a May 31 regulatory filing.