Nova Scotia Power to challenge $10M penalty at public hearing
Utility is appealing fine incurred for failing to meet renewable energy targets
Two years after the Nova Scotia government slapped Nova Scotia Power with a $10-million fine for failing to meet renewable energy targets, the utility is poised to argue in a public hearing that it shouldn't have to pay.
Lawyers for Nova Scotia Power will appear before the Nova Scotia Energy Board this week in a hearing that's expected to last several days. They'll try to convince the board that the utility should not be punished for missing the legislated target because it did all it could to meet it.
In a pre-hearing submission made to the board, Nova Scotia Power described the decision to apply a fine as "flawed" and "illogical."
The utility is asking the board to overturn the penalty entirely or to have the fine reduced.
Nova Scotia Power fell 8 points short
Nova Scotia Power was supposed to be generating 40 per cent of its electricity from renewable sources by 2020. When it missed that deadline because of delays to the Muskrat Falls hydroelectric dam in Labrador, the province granted some leeway, creating an "alternative compliance plan."
Under the new plan, Nova Scotia Power was to deliver a three-year average of 40 per cent renewables by the end of 2022.
But as the deadline approached, the utility conceded that it would again fall short. It achieved an average of about 32 per cent renewable energy from 2020 to 2022. Again, it blamed the problem-plagued Muskrat Falls project.
Nova Scotia Power is arguing that even though it didn't meet the target, the penalty was not warranted because it did its due diligence and "honestly believed" energy from Muskrat Falls would be flowing to Nova Scotia in time. Both of those are listed as acceptable defences in the province's electricity regulations.
Energy from Muskrat Falls started flowing to Nova Scotia before the end of 2022, but it wasn't enough to meet the modified target.
Nova Scotia Power said there was no time to pivot to other renewable energy sources to make up the shortfall, noting that new wind projects take about five years to bring into operation, and importing hydro through New Brunswick would have been impractical "even if cost were not a consideration."
"Unfortunately, it was a race against time and NS Power did not quite get to the finish line," the company said.
The province chose the maximum allowable fine under the law, but Nova Scotia Power says the fine "is grossly disproportionate and without any justification" since it came close to meeting the 40 per cent target.
The regulations prohibit the utility from recovering the penalty through rates. In other words, Nova Scotia Power customers can't be put on the hook for the $10 million.
The cost would ultimately fall to shareholders of Emera, Nova Scotia Power's parent company.
Province 'cannot trust' NSP
A pre-hearing submission made on behalf of Nova Scotia's energy minister defends issuing the penalty and says it's the only mechanism available for encouraging compliance.
"[The minister of energy] cannot trust that NS Power will meet future [renewable energy standard] obligations, or, more critically, its sustainability standards legislated for 2030."
The submission questions whether Nova Scotia Power exercised due diligence in trying to hit the target. It says "there were options" the utility could have explored to mitigate the Muskrat Falls shortfall.
Nova Scotia is asking the board to uphold the penalty, or put it back in the hands of the energy minister to reconsider the amount.
Challenges of renewable transition
The penalty is just one example of how the transition to more renewable energy has been challenging for Nova Scotia Power.
The utility had to scramble to buy alternate fuels because of the Muskrat Falls delays, and the price was much higher than the hydro electricity would have been. Nova Scotia Power eventually secured a federal bailout to avoid a massive rate hike for customers.
Nova Scotia has more renewable energy targets coming up, which also come with the risk of penalties. Nova Scotia Power is supposed to get off coal and hit 80 per cent renewable energy by 2030. The energy board has called the timeline "very tight."
Adam Fremeth, an associate professor of business, economics and public policy at Western University, said the renewable transition is proving difficult for other jurisdictions, too. He said more hiccups should be expected.
"The energy transition is not a linear process," he said. "It's up and down, there's obstacles that are … going to come in the way. Some are going to be technical, some of them are just going to be the nature of such a large change in a major industry."
Fremeth, who specializes in the study of energy policy, said penalties for utilities that fail to hit renewable targets are common across North America. But, he added, many other jurisdictions have more clarity in their rules than Nova Scotia.
He said he hopes the dispute between Nova Scotia Power and the provincial government leads to updates of Nova Scotia's renewable electricity regulations.
"I think that type of development would be a positive turn for this," he said.
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