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How Rates Are Set
How are rates set in Nova Scotia?
Nova Scotia Power (NSPI) uses many different sources of energy (e.g., coal, wind, oil, natural gas, etc.) to produce electricity. Read our Electricity Backgrounder to learn more about electricity in Nova Scotia.
At the start of each year, NSPI estimates what the costs of those sources will be. During the year, the true costs for any or all of them can go up or down. So at the end of the year, NSPI uses the Fuel Adjustment Mechanism to ensure that the rates customers pay reflect the true cost of the fuel that was used.
By law, NSPI must provide electricity at the lowest possible price.
The Nova Scotia Utility and Review Board regulates all electric utilities in the province, including NSPI. Their jurisdiction includes setting rates, tolls, and charges; investigating customer complaints; and more. For more information, visit their website.
How is electricity distributed?
Ever wonder how many transmission lines crisscross our province, getting electricity to our homes and businesses? Learn more here.
The answer is:
- 5,300 kilometres of bulk transmission lines (69 -345 kV) –these carry high-voltage electricity from the plants to the distribution substations
- 26,500 kilometres of distribution lines—these carry a lower voltage from the substations to our homes.
The Nova Scotia Power System Operator is responsible for the safe, reliable and efficient operation of Nova Scotia's bulk power system. It functions independently from other Nova Scotia Power operations under a Code of Conduct approved by the Nova Scotia Utility and Review Board.
Regulatory Components: How Rates Are Set
Utility and Review Board Act:
The Nova Scotia Utility and Review Board (UARB) was established on December 14, 1992 under this Act. Essentially, this represented a consolidation of four former boards, including: the Commissioners of Public Utilities, the Nova Scotia Municipal Board, the Expropriations Compensation Board and the Nova Scotia Tax Review Board.
The Public Utilities Act:
This Act provides the UARB with the powers to exercise general supervision over all electric utilities operating as public utilities within the province. The control of the overall level of rates is also governed by this Act.
General Rate Application:
Adjustments to rates charged by NSPI or any municipal electric utilities are generally initiated through this application process. The UARB is responsible for reviewing and approving all associated aspects of the cost of service ratemaking. A General Rate Application can include:
- Return on equity – The compensation provided to equity investors in return for using the investors’ money to build infrastructure and equipment with long lifespans. When setting a fair rate of return for shareholders, the UARB considers the riskiness of the investment compared to other alternatives and the view capital markets will take;
- fuel costs;
- management and labour costs;
- costs of reliability programs; and
- other operating, maintenance and generation costs.
Rates are set through a public process that allows all evidence to be scrutinized by intervenors representing interested parties and all classes of ratepayers.
Demand Side Management Charge:
Since its inception in 2010, Efficiency Nova Scotia Corporation (ENS) has been implementing the electricity Demand Side Management (DSM) program. The purpose of the DSM program is to promote and manage energy efficiency and conservation through the use of financial incentives and education.
The function of the ENS is regulated by the UARB.