Emera wins approval to charge N.S. Power customers $1.7B for Maritime Link

Halifax-based utility Emera Inc. has been given "final cost" approval to recover $1.7 billion from Nova Scotia Power customers for the Maritime Link megaproject.

The overland and subsea transmission system was built to deliver hydroelectricity from the Muskrat Falls hydro project in Labrador across Newfoundland and under the Cabot Strait into Nova Scotia.

In a 94-page decision issued Wednesday, the Nova Scotia Utility and Review Board said Emera subsidiary Nova Scotia Power Maritime Link prudently and effectively managed the project despite numerous setbacks, including the failures of two major contractors.

"The planning and development of the Maritime Link Project was a significant endeavour. There have been numerous examples across North America of substantial cost overruns and construction delays of energy megaprojects," the board said in its decision.

"The completion of the Maritime Link Project on time and on budget was a commendable achievement attributed to NSPML's actions throughout all phases of the project."

35 years to repay Emera

Ratepayers in Nova Scotia will be paying down the $1.7-billion approved cost over 35 years, including a nine percent rate of return. In 2022, the bill amounts to $169 million

While electricity from Muskrat Falls, known as the Nova Scotia block, recently began flowing into the province at contracted levels, there have been lengthy delays in delivery from Newfoundland.

Emera's partner, Newfoundland and Labrador's Nalcor Energy, is years behind schedule and billions over budget with the Muskrat Falls project.

To protect Nova Scotia Power customers, starting in April the board ordered Emera to hold back $2 million per month it collects from ratepayers. If less than 90 percent of the Nova Scotia Block is delivered the money will be used to pay for replacement energy.

Lawyer Bill Mahody, representing Nova Scotia Power residential customers, said the holdback is an important protection.

"In the event the energy is not received from Muskrat, Nova Scotia Power is likely to have to go out and replace that energy at additional costs. The $2-million amount on a monthly basis can be used to offset those costs and will not be paid by ratepayers," Mahody told CBC News.

Bonuses chopped

The regulator also disallowed some costs Emera wanted to charge ratepayers.

It disallowed 50 per cent, or $6 million, in executive bonuses, $300,000 in charitable donations unrelated to the project, $700,000 in above-market-price rent paid to another Emera subsidiary, and $500,000 in operating and maintenance costs.

In a statement Emera said it will satisfy all directives in decision.

"We remain focused on working with Nalcor to ensure Nova Scotia customers continue to receive the full benefits of the Maritime Link project," the company said.

"NSP Maritime Link committed to completing the Maritime Link project on time and on budget. The team delivered on that commitment, as the UARB has acknowledged in its decision today."

How Emera jammed the regulator

The review board delivered a mixed verdict on the so-called "acceleration agreement" between Emera and Nalcor that triggered the flow of the Nova Scotia Block, allowing Emera to file its "final cost" application for the Maritime Link.

Not surprisingly, given the history of problems and delays, less than 20 percent of contracted amounts of Nova Scotia Block electricity were actually delivered between August 2021 and the regulatory hearing in December.

"Had the Board known at the time the hearing was set down that only 19% of the energy would flow between August 15 and November 30, 2021, the Board would not have agreed to have the hearing at this time," the board wrote.

However, the board sided with the company in its claim the acceleration agreement got hydro into Nova Scotia much faster than had it waited for final commissioning of the project.

That has been held up by software bugs in Nalcor's Labrador Island Link, a 1,100-kilometre high-voltage DC transmission line from Muskrat Falls in central Labrador, site of the 824-megawatt power-generating station, to Soldiers Pond on Newfoundland's Avalon Peninsula.

Final commissioning is not expected until the end of May at the earliest.

"Moreover, the NS Block provides valuable renewable energy which counts towards NS Power's Renewable Electricity Standards requirements and addresses some of the Utility's [greenhouse gas] requirements, with potentially significant financial implications if not satisfied by the end of the current compliance period on December 31, 2022," the board wrote.

Project still needs tracking

The decision frequently refers to the lengthy delays in delivery of Muskrat Falls hydro, noting that Nova Scotia Power "overpromised and under-delivered when they described benefits from the Maritime Link."

And the board remains skeptical, despite praise for the management of the project itself. It ordered the company to continue filing quarterly reports.

"It is clear that delivery of the expected energy and capacity via the Maritime Link has not materialized. It is also clear that delays continue to be experienced with commissioning the [Labrador Island Link]."