Port Hawkesbury Paper's new power rate generating cost savings for all
Under the new tariff, mill pays for utility's power and fixed costs, but gives up some control over production
The consumer advocate for Nova Scotia Power's residential ratepayers says a year-old deal between the utility and its largest customer seems to be saving everyone some money.
Last March, Port Hawkesbury Paper struck a deal with the utility to replace the former load retention rate, which was a lower fee for electricity that helped the mill climb out of creditor protection.
Under the new deal, the mill pays for the cost of power and for a portion of the utility's fixed costs.
In exchange, Nova Scotia Power can control how much electricity the paper plant gets to take advantage of when the cost of power generation is lowest.
In a recent filing with the province's utility and review board, the power company said the new deal was expected to achieve about $6 million in savings in the first year.
In fact, it said, the amount was $7.3 million.
Benefits exceeded estimates
Bill Mahody, an independent lawyer and the consumer advocate representing residential customers, said the mill gets 25 per cent of the savings under what's known as the extra large industrial active demand control tariff, and the remainder goes to the rest of the utility's customers.
"In the first year of the rate, it would appear as though the anticipated levels of benefits for other customers exceeded to a small extent the initial estimates," he said.
Mahody said he was initially concerned about the accuracy of projected savings under the deal, but it seems to be working as planned for both the mill and Nova Scotia Power.
"So long as that level of co-operation continues, I think the rate will be given a chance to operate the way it should, and the rest of us ratepayers will receive the types of benefits that were anticipated when the rate was established."
'Beneficial to all'
Port Hawkesbury Paper is the power company's largest customer, using about 10 per cent of the total load.
Bevan Lock, a co-manager of the mill, said the new tariff has been described as a discounted rate, but that's not the case.
He said the mill is paying for its power, but is buying it at a lower cost when the utility's costs are lower.
To get that benefit, the mill adjusts its production according to the amount of power available from the utility.
"We had some trepidations about handing the keys over for our production, but a year in — and a year that's seen such unprecedented change in our industry as well as society — it's been extremely resilient and beneficial for all," Lock said.
"A year in, we feel that it still gives a very good rate for the mill that provides us with predictability and security of supply, while allowing the utility to optimize that for other ratepayers and ourselves."
Lock said the mill has had to make some adjustments, especially with delivery methods used to get paper products to customers.
Tariff runs until 2023
The mill has also occasionally bought power at higher rates to meet production demands.
Overall, though, the deal is working out, Lock said.
"It has not significantly impacted our ability to serve customers in a timely way and we believe it is functioning very, very well."
The tariff is set to run until 2023 and is expected to generate savings of up to $10 million a year.
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