January 11, 2011
Nova Scotia

NSP gave $1m bonus to wind farm subsidiary

By JUDY MYRDEN, Business Reporter, The Chronicle Herald, thechronicleherald.ca 11 January 2011

Taxpayers shouldn’t be on hook for $1 million payout, consumer advocate says

The only bonus for wind projects handed out by Nova Scotia Power was to a subsidiary company for $1 million.

The bonus was given to Emera Utility Services Inc . (EUS) , an affiliate company of Nova Scotia Power’s parent company, Emera Inc ., for completion of the utility-owned Digby wind farm last year. It is one of six wind power projects that signed power purchase agreements with Nova Scotia Power in 2008.

EUS was also awarded an untendered contract for $25 million for part of the construction costs of the $82.7-million project, which started production of green energy late last year.

“I don’t see where the bonus was a justifiably needed expense to be paid by ratepayers,” said John Merrick, Nova Scotia’s consumer advocate, on Monday.

Merrick raised the issue during a hearing last week into Nova Scotia Power’s application before the Nova Scotia Utility and Review Board to pass along the costs of the Digby wind farm to its 470,000 electricity customers.

Merrick said he doesn’t believe Nova Scotia Power customers should be on the hook for the bonus.

“There was no need when setting up your deal to establish a bonus; all you needed was compliance with your deadlines.”

Merrick said it is “odd” to give an affiliate company a bonus when other wind developers have complained Nova Scotia Power operates on the basis of using the “stick rather than the carrot.”

“I wanted to know how unique it was that they would give a bonus because we have heard about all the penalty clauses that they have they put into their contracts and we’ve heard power producers complain (the penalty provisions are) pretty onerous and draconian,” he said.

For example, Shear Wind Inc ., a Bedford renewable energy company, had to pay $500,000 to Nova Scotia Power for not producing green electricity on time ast year at its project in Pictou County.

Under the contract signed in April 2008, Shear Wind promised to deliver 20 megawatts of wind-generated energy to NSP by the end of November 2009.

Shear Wind met another deadline for producing 20 megawatts by Dec. 31, 2010, and avoided paying an increased fine of $1.5 million to Nova Scotia Power.

Nova Scotia Power says bonus clauses do not exist with other wind power deals, but “if a project delivers energy in advance of the contractually established schedule . . . Nova Scotia Power purchases the energy as it becomes available,” the company said in a response to Merrick’s question about bonuses filed Friday with government regulators.

The utility has ownership stakes in three of the six wind power projects with which it signed power purchase agreements.

The provincial government ordered Nova Scotia Power to have five per cent of its total electricity purchases generated by independent power producers from renewable energy sources by the end of 2011.

The review board can approve the costs proposal, approve it with conditions or reject the application.