Penalty doubles for failed Muskrat Falls electricity deliveries to Nova Scotia

Regulators in Nova Scotia have increased the financial penalty levied on Halifax-based Emera for failed deliveries of hydroelectricity from the Muskrat Falls power-generating project in Labrador.

Wednesday's ruling from the Nova Scotia Utility and Review Board (UARB) is a defeat for the company which argued the penalty — in the form of a $2-million monthly holdback — should be eliminated entirely because electricity flows have significantly improved lately.

The holdback is money from Nova Scotia Power that is diverted from its payments for the Maritime Link, an overland and undersea electrical-transmission cable running between Newfoundland and Nova Scotia.

Nova Scotia Power then uses the holdback to pay down its fuel bill, which increases when it must generate replacement electricity because hydroelectricity delivery targets from the troubled Muskrat Falls facility aren't met.  

Since 2018, the holdback has been used to protect consumers who have been paying for the $1.5-billion Maritime Link.

Rather than scrap it, the board decided to double the monthly holdback to $4 million starting in December — a sign of lingering skepticism surrounding the reliability of electricity from Muskrat Falls and concern about its impact on ratepayers in Nova Scotia.

"In the board's opinion, a much longer period of consistent performance is required to show that the Maritime Link is providing energy at levels which were originally contemplated," the three-member UARB panel said in the decision.

The holdback will continue until Nova Scotia receives 12 consecutive months of hydroelectricity from Muskrat Falls.

Company response

Emera said it was still reviewing the decision.

"While the decision includes an increase in the holdback amount, it also emphasizes the recent strong performance and customer benefits of the Maritime Link," spokesperson Dina Bartolacci Seely said in a statement to CBC News Wednesday.

Bartlcuci Seely said this year the Maritime Link has delivered over one million megawatt hours to Nova Scotia, equivalent to 115 per cent of contractual requirements, and over 250,000 megawatt hours of additional market-priced energy.

"We anticipate this strong performance to continue."

How holdbacks work

In granting final approval for Maritime Link last year the board ordered an Emera subsidiary, Nova Scotia Power Maritime Link, to hold back $2 million per month to pay for replacement energy if hydro did not flow. NSP Maritime Link gets the money back provided it receives 90 per cent of contracted deliveries, known as the Nova Scotia block, and additional electricity from Muskrat Falls to make up for earlier contracted deliveries that were missed because of delays.

In this case, regulators reviewed one year of monthly deliveries ending this spring and found they fell short of the 90 per cent target six times. In three months, the 90 per cent target was reached by using makeup electricity.

The board ordered that $12 million in holdbacks be applied to the Nova Scotia Power fuel bill and rejected Emera's request to end the monthly holdbacks.

Increasing the holdback to $4 million reflects the higher cost of the fuel used to generate replacement electricity.

That was an argument made by lawyers representing NSP customer groups. The consumer advocate — on behalf of residential ratepayers — wanted the holdback increased to $6 million per month.

"The current holdback is inadequate to pay for replacement energy costs. N.S. Power has consistently incurred costs to replace undelivered energy from the N.S. Block well in excess of the current holdback level," consumer advocate consultant John Wilson said in evidence filed in this case.