Nova Scotia Power’s Shady Tariffs and Pilot Programs
What Residential Consumers Should Know
SubOptimal – October 9, 2024
Fuel Adjustment Mechanism (FAM): A Forced Gamble on Fuel Prices
The Fuel Adjustment Mechanism (FAM) is one of the most problematic charges for residential consumers. This forced practice automatically adjusts electricity rates based on volatile fuel prices, and every residential customer is subject to it. The FAM ensures that NSP can pass along any fluctuations in fuel prices—whether due to global market changes or NSP’s own procurement decisions—directly onto consumers.
- What’s Shady: There is no transparency on how these fuel costs are managed or optimized by NSP. Since NSP doesn’t bear the burden of absorbing these costs, there is little incentive for the company to hedge fuel prices or manage its fuel procurement efficiently. Instead, consumers are left to deal with the consequences, paying more when fuel prices spike, often with no explanation of the breakdown.
Storm Cost Recovery Rider: Paying for Nature’s Wrath
With the increasing frequency of severe storms, the Storm Cost Recovery Rider shifts the cost of repairing storm-damaged infrastructure directly onto consumers. This is a mandatory rider applied to every residential customer, meaning that every time a storm hits, customers see an extra charge on their bill to cover the repairs NSP undertakes.
- What’s Shady: NSP is a for-profit utility company with an obligation to maintain and upgrade its infrastructure. Passing these costs directly to consumers rather than using its profits for such emergencies is questionable at best. This rider makes consumers bear the financial risk of severe weather events, with no option to opt-out, despite the fact that the maintenance of the grid is a core responsibility of NSP.
Demand Side Management (DSM) Cost Recovery Rider: Paying for Programs You Might Never Use
The Demand Side Management (DSM) rider charges consumers to fund energy efficiency and conservation programs. While the aim is to promote energy savings and long-term benefits, all consumers—regardless of whether they directly benefit from these programs—are forced to contribute to the costs.
- What’s Shady: The lack of clear outcomes or tangible benefits for consumers makes this rider suspect. While NSP benefits from promoting itself as an energy-efficient company, the costs of these programs are placed squarely on the shoulders of consumers, many of whom may see little to no benefit from them.
The Pilot Program That Never Ends: Critical Peak Pricing (CPP) and Time-of-Use (TOU)
Perhaps the most perplexing part of the UARB decision is the continued pilot status of the Critical Peak Pricing (CPP) and Time-of-Use (TOU) tariffs. These programs were introduced as pilot projects to encourage load shifting and reduce peak demand. However, they have remained in pilot mode for years, with no clear path to evaluation or completion. This extended pilot phase allows NSP to continue experimenting with consumer pricing while avoiding full regulatory accountability.
- What’s Really Shady: The ongoing pilot status raises serious red flags. Pilots are typically short-term programs designed to test new ideas, gather data, and determine whether a program should become permanent. The fact that these tariffs have remained in pilot status for so long suggests that NSP may be using this status as a loophole to avoid regulatory scrutiny. By keeping these programs as pilots, NSP avoids having to answer questions about the effectiveness or fairness of these tariffs. In the meantime, consumers are subject to potentially higher prices during Critical Peak Events, which can be scheduled by NSP with limited notice and discretionary timing.
Why Does This Matter to Residential Consumers?
All of these mechanisms—the FAM, Storm Cost Recovery Rider, DSM Cost Recovery Rider, and extended pilot tariffs—have a direct and financially harmful impact on the average residential consumer. They represent an approach that shifts financial risk from NSP to its consumers, ensuring that NSP maintains its profit margins while consumers are left to shoulder rising, unpredictable costs. The lack of transparency and the UARB’s repeated approval of these mechanisms only adds to the concern.
Conclusion
Nova Scotia Power’s tariff structure, as approved by the UARB, forces residential consumers into bearing a growing number of costs. Whether through fuel price volatility, storm-related damage costs, or energy programs they may not benefit from, the average Nova Scotian is paying more while receiving little in return. The extended pilot status of the CPP and TOU tariffs is especially concerning, as it suggests a lack of regulatory oversight and a willingness to keep consumers in a perpetual state of uncertainty.
As these forced practices continue, consumers should demand greater transparency and accountability from both Nova Scotia Power and the UARB. Without it, residential users will continue to face rising energy bills with little control over the charges that appear on their monthly statements.