The province’s consumer advocate expressed several concerns with a Nova Scotia Power Inc. request to pass on to ratepayers its $93-million share of the cost of building a Lunenburg County wind farm.
The utility holds a minority stake in three wind projects, all slated to be operational by Jan.1, 2015, that were awarded in August by the province’s renewable electricity administrator.
In December, the utility asked the Nova Scotia Utility and Review Board to include its investment in the 102-megawatt South Canoe wind project, which it has a 49 per cent stake in, as part of its $336.9-million capital plan for 2013.
The $196-million South Canoe project will consist of 30 to 50 turbines on two wind farms, a 78-megawatt project being developed by Oxford Frozen Foods, and a 24-megawatt one proposed for a neighbouring property by Minas Basin Pulp and Paper.
A third project in which the utility holds a minority stake is Sable Wind, a six-turbine, 13.8-megawatt wind farm near Canso that is being proposed by the Municipality of the District of Guysborough.
In addition to the capital costs on South Canoe, the utility will also spend $23 million for transmission and system upgrades. Most of the money would be spent in 2014.
In remarks to the provincial regulator, the consumer advocate submitted some concerns surrounding the application, which it said gives the utility a “competitive advantage over other independent third-party producers.”
“Because NSPI has the opportunity to recover increases in its capital costs, it is exempt from the pressures of the competitive marketplace when initially setting the price under the (power purchase agreement),” the consumer advocate said in its opening statement.
However, the utility defended its application, stating that its participation is “instrumental in delivering the best value for ratepayers.”
“Nova Scotia Power’s low cost of capital, tax advantages and experience as a generation developer were key factors in achieving the favourable economics.”
In addition, the utility wrote that it has entered into several agreements, including turbine supply, foundations, construction services, operations and maintenance and warranty agreements with Acciona that ensure the “best value for customers.”
But small business advocate Nelson Blackburn said in his opening statement that while those steps taken by the utility “may assist some risk stabilization … any warranty is subject to it being honoured, and if the warranty provider should become insolvent or refuse to honour it, the ratepayers could be on the hook.”
Last week, six participants in the request for proposals process said that the utility passing on the costs to consumers “undermines the (administrator’s) efforts to achieve the best value for the ratepayer.”
In a letter of comment posted to the regulator’s website, the group indicates that passing on the capital costs to the rate base was not a provision of the request for proposals.
“Rate-based projects have their own merit, but the intention to rate base the South Canoe project was not declared in the (request for proposals) process and therefore the (independent power producer) bidders had to price in costs and risks that the winner did not,” wrote representatives of Dalhousie Mountain Wind Farm Inc., Sprott Power Corp., Renewable Energy Systems Canada Inc., Shearwind Inc., Innergex Renewable Energy Inc. and Natural Forces Wind Inc.
“This gave NSPI an appearance of being the lowest-cost bidder, which it is possibly not.”