Hydro president, consumer advocate face off over proposed rate hikes

The impact of Muskrat Falls was front and centre Monday as the Public Utilities Board held hearings into an application to increase power rates this summer and again in January.

While NL Hydro said it is doing what it can to prepare for "rate shock" when the Labrador megaproject comes online, the province's consumer advocate said Hydro is making a huge mistake.

"The whole system could be subject to some kind of death spiral," said advocate Dennis Browne. "They really don't know what they are doing, I don't believe."

Hydro has proposed a hike of 16.9 per cent hike, with 7.5 per cent of that taking effect on July 1 and the remainder on January 1, 2019.

The average consumer would see their bills go up by about $13 this summer, the company said in a backgrounder.

NL Hydro president Jim Haynes said the proposed rate increase, along with a plan to save by importing cheaper power through the Maritime Link, will put consumers in a better position in the long run.

Projections provided by Nalcor show domestic power rates reaching 32.46 cents per kilowatt hour by the year 2040  — about triple the current rate — if something is not done to stop it.

But Browne argued that the company should have considered other options.

"The consumers of the province, we're not the low-hanging fruit here," he said.

"[Like] our wallets have to be opened up to assist Nalcor and Hydro in this project. We're already paying enough as taxpayers. So the fact they would come forward with only one idea — their idea — is disheartening."

'This is not that inquiry'

In a preview of sorts for the upcoming Muskrat Falls inquiry, Browne spent two hours questioning Haynes, starting with his personal opinion of the Muskrat Falls hydroelectric megaproject.

At the time of the project's inception, Haynes said his task within NL Hydro was to find a replacement for the aging oil- fired facility in Holyrood.

When asked if there were better options than Muskrat Falls, Haynes said he supported the idea at the time, but there may have been other options that were not explored.

"But that's water under the bridge now," he said

Browne alluded to the tone of the back-and-forth, saying "We have an inquiry looking at that, but this is not that inquiry."

He then asked Haynes what he thought of the project today — behind schedule and billions over budget — and if it was a mistake.

"Hindsight is 20-20," Haynes said. "I don't have an answer. I've thought about it many times, but I do not have an answer."

Conservation — good or bad?

Under questioning, Haynes said NL Hydro has not consulted economists about how much consumers will bear before finding an alternative way to heat their homes.

"They don't even know how far it can go without consumers balking and leaving," Browne said afterwards.

Browne and Haynes also butted heads over the topic of conservation.

While Browne suggested everyone should get heat pumps, Haynes said the more power left unused by local consumers, the more will have to be sold off the island at lower rates — which would likely mean rising electricity costs for everyone.

Hydro boasts 'rate smoothing'

Haynes declined an interview on Monday, but NL Hydro sent along a statement on behalf of vice-president Dawn Dalley.

"We fully understand that customers are concerned about electricity rates and we, at Hydro, share those concerns," she said.

"As we move towards a fully interconnected electricity system there continues to be a great deal of uncertainty."

One of the things Hydro believes will ease consumers into the fray is the Off Island Deferral Account — money saved purchasing cheaper electricity through the Maritime Link or Labrador-Island Link.

It will allow Hydro to lessen its use of the expensive combustion turbine at Holyrood, and pile up the savings in a fund. When Muskrat Falls comes online, the fund will be given back to consumers to lower their rates in a move called "rate smoothing."

"This proposal would result in no benefit to Hydro as all funds in the proposed deferral account are intended to be returned to customers under the [PUB]'s oversight to help smooth in future rates," Dalley wrote.

The hearing will continue throughout the week with questions from other intervenors before wrapping up on Thursday.