Open Access and Stranded Costs in Nova Scotia

On September 6, 2012, the Nova Scotia Utility and Review Board (the “Board”) denied Nova Scotia Power Inc.’s request for authorization to recover some or all of the embedded fixed or stranded costs should municipal electric utilities seek to become market participants and use the Nova Scotia Open Access Transmission Tariff (OATT). Since the Board approved the OATT in 2005, the municipal electric utilities have had the right to opt out of purchasing electricity from Nova Scotia Power Inc. (NSPI) and instead take transmission service under the OATT.

In its decision, the Board found that the imposition of a substantive cost payment upon the municipalities would jeopardize their ability to pursue third party electricity supply. The Board’s decision was based in part on the review of a 2005 Consensus Proposal filed with the Board prior to its approval of the OATT, in which NSPI accepted the risk that the municipalities might exit the system without contributing to stranded costs.

In Nova Scotia, the price signal does create an incentive for municipal electrical utilities to go to market. In Québec, however, the price signal does not have the same effect, yet nine municipalities and one cooperative have the status of market participants owning networks, and are able to purchase electricity from third parties other than Hydro-Québec. The Act respecting municipal and private electric power systems empowers all municipalities to establish and manage an electricity system. Also, the possibility of becoming a market participant in Québec is not limited to municipalities that already own an electricity system.

Read the Nova Scotia Utility and Review Board’s decision.

Atlantic Provinces and the creation of a new Regional Transmission Organization (RTO) 

On September 10, 2012, the Atlantic Energy Gateway (AEG), an initiative intended to enhance power utilities cooperation in Atlantic Canada, published and presented eight studies to the ministers of energy of the four Atlantic Provinces.

The studies explored a unique opportunity in Canada to create a new Regional Transmission Organization (RTO) between the four Atlantic Provinces, enhancing regional cooperation and efficiencies for market participants and regional power utilities alike. The studies identified a number of benefits that could be achieved through an RTO, including cost efficiencies, greater diversity in clean and renewable energy supply, and enhanced stability for ratepayers and lower greenhouse gas emissions.

The AEG’s studies present a unique opportunity for multiple provinces in Canada to consider the growing need for an RTO. The benefits would be potentially significant if applied to existing scenarios such as Newfoundland and Labrador’s development of new generation and transmission lines linking the Island to Labrador; Nova Scotia’s Emera in the construction of a transmission line enabling the transmission of electricity from Labrador to New Brunswick and abroad; the challenges faced by New Brunswick Power; and the potential of integrating wind power from Prince Edward Island. All of these elements point to the need to have a regional approach, enabling optimization of the investments in infrastructure and minimizing the issues faced by many market participants.

Read the Atlantic Energy Gateway’s news release.