Port Hawkesbury Paper gets 4-year power rate discount
Mill to get power at rate 25% cheaper than other customers are charged
Nova Scotia Power's largest customer will get another four-year discount on electricity rates.
In a decision released Thursday, the Nova Scotia Utility and Review Board approved an extension of special rates for Port Hawkesbury Paper, which are 25 per cent below what the mill would pay if it was charged on the same cost-recovery basis as all other customers.
The deal means the company will save $20 million per year on its electricity bill.
Known as the "extra large active demand control tariff," Port Hawkesbury Paper will pay about $61 per megawatt hour, well below the full cost of generating the electricity.
Regulators were persuaded to approve the rates because Nova Scotia Power gets control over electricity supplied to the mill, with the right to direct the company to increase or reduce daily consumption.
The utility says controlling the mill's electricity usage will save Nova Scotia Power $6.9 million a year.
Under the arrangement, the mill gets a quarter of those savings, which will reduce its power bill by $1.7 million a year. Those savings make up part of the expected $20 million in reduced rates.
Mill consumes 10% of total system load
Years ago, regulators accepted a basic calculation: that all customers are better off with the mill contributing to the system rather than off it altogether.
The discount was baked into rates back in 2012 when the utility and review board approved a seven-year "load retention tariff" for Port Hawkesbury Paper.
At the time, the miIl was emerging from creditor protection under new owners, the Vancouver-based Stern Group.
Both Nova Scotia Power and the mill argued the new rate system is not a continuation of the load retention rate, but an entirely new design.
Regulators accepted the claim up to a point.
Why the discount is in the public's interest
"It would be unreasonable to deny that the proposed Tariff does not possess certain characteristics of a load retention rate or economic incentive rate," board members Peter Gurnham, Roland Deveau and Roberta Clarke wrote in the decision.
But they said "the fundamental behaviour of the Tariff serves to provide NS Power with a significant tool in the management of its entire system load. While PHP will undoubtedly benefit from the proposed Tariff, compared to a fully allocated cost rate, the greater benefit is that which it can provide NS Power's customers."
The regulators said the rate includes another new provision: a minimum $4 per megawatt hour contribution toward fixed costs, which will provide an average of $10 million annually for other Nova Scotia Power customers.
The rate expires at the end of 2023.
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