January 6, 2011
Nova Scotia

NSP customers asked to pay for untendered wind contract

By JUDY MYRDEN, Business Reporter, The Chronicle Herald, thechronicleherald.ca 6 January 2011

Nova Scotia Power customers are being asked to pay for an untendered $25-million construction contract, along with a $1-million bonus, to an affiliate of its parent company, Emera Inc. The contract is for the development of the Digby wind farm.

The utility has failed to get the lowest price for its customers, John Merrick, Nova Scotia’s consumer advocate, said during the first day of a hearing before the Nova Scotia Utility and Review Board.

“I’m not sure they kicked the tires hard enough to make sure they got that best possible price,” Merrick told reporters outside the hearing room. “Nova Scotia Power really has to be thinking about the ratepayers and not just (Emera) shareholders.”

Emera Utility Services Inc., a subsidiary of Halifax-based Emera, was awarded the $25-million contract to oversee construction of the $82.7-million Digby wind farm project last year.

The 20-turbine wind farm is currently operating and produces enough electricity to power 10,000 homes.

The power utility is seeking board approval to pass along the construction costs to build the green project to its 470,000 customers. The review board can approve the expenditure, approve with conditions, or reject the request.

Board vice-chairwoman Margaret Shears raised concerns about the $82.7-million wind farm deal and the lack of evidence presented by the utility to prove that the $25-million construction contract was the best deal for ratepayers.

She said the board has little evidence, other than the utility’s opinion “that it’s the best price Nova Scotia Power could have gotten.”

She said the board brought in the affiliate code of conduct years ago after Nova Scotia Power failed to properly tender contracts to ensure the lowest prices for its customers.

The board needs to ensure these big expenditures are in the best interest of ratepayers because they will “shoulder the cost of it,” she said.

Nova Scotia Power president Rob Bennett defended awarding the contract to a sister company, saying the project was built on time and on budget.

“Nova Scotia Power’s engagement of affiliates provided demonstrable benefits to our customers,” Bennett said in an opening statement to the board.

Merrick said Nova Scotia Power executives argue the contract provided customers with the “equivalent” price in the marketplace.

“Asking someone to match the price is not the same as asking someone to give their best price. They’re lowest price, that’s the test that should be applied.”

Merrick wants the board to determine whether Nova Scotia Power has not complied with the affiliate code of conduct, which stipulates the lowest price must always be reasonable and justifiable, especially when dealing with other related companies.

He also called the “bonus” suspicious, considering it was to be awarded as an incentive to have the work completed before the Dec. 20, 2010, deadline. Some of the turbines started generating power in late November and the remainder were installed by the contract completion date of Dec. 20, 2010.

Emera originally picked up the struggling wind farm project in 2009 and took full control in February 2010 from Interwinds Corp. (formerly SkyPower) and Scotian Windfields, using a numbered company, 3240384 Nova Scotia Ltd., headed by Emera president Chris Huskilson.

In June, Emera transferred the assets of the numbered company to Nova Scotia Power, which now is looking to have these costs picked up by its customers.