NSP rates tied to wind farm process 

Provincial officials knew all along that Nova Scotia Power planned to fold its $93-million share of the capital cost of the South Canoe wind farm into its overall power operations and rate structure.

More than that, they planned the bidding contest around that fact, said Bruce Cameron, executive director of sustainable and renewable energy at the Energy Department.

Proposals backed by Nova Scotia Power won all three of the contracts available in an independently administered bidding process to select renewable electricity producers. Nineteen projects were submitted, most of them by independent power producers.

“We made it clear that we wanted to test the two models,” Cameron said in an interview Tuesday.

“In our minds, it was right from the beginning that the process we were testing was whether Nova Scotia Power … could come in at a lower cost, to the benefit of the ratepayers, than the independent power producers.”

There are limits and caveats to the energy giant’s participation, but they are separate from the bidding process and were never meant to be taken into account, said Cameron.

It is now up to the provincial Utility and Review Board “to make sure that we get that savings,” he said.

Meanwhile, the province’s renewable electricity administrator said he doesn’t recall being told that Nova Scotia Power would include its capital costs for the project in rates.

But John Dalton, president of Power Advisory LLC, also said Tuesday he doesn’t think the utility’s move would have affected the outcome of a competitive bid process, as some developers are saying.

“Our decision wouldn’t change, based on the evaluation framework that we had in place,” Dalton said in an interview.

Nova Scotia Power owns a 49 per cent stake in South Canoe, a $200-million wind farm in the New Ross area of Lunenburg County.

The project will sell its electricity to the utility at a fixed price for 20 years under the contract, awarded in August.

Oxford Frozen Foods and Minas Basin Pulp and Power Co. Ltd. are South Canoe’s lead developers.

The project is actually two wind farms, each majority owned by the Bragg or Jodrey families, because of size limits on proposed projects.

South Canoe, at 102 megawatts, is slated to be operational by Jan. 1, 2015, and will become the province’s largest wind farm.

A Nova Scotia Power vice-president told the provincial regulator last week that he believed the administrator was aware of the utility’s plan to include the project in rates.

A group of seven developers who say it was a surprise to them have urged the board to reject the utility’s plan, saying it will lead to higher costs for ratepayers.

A decision is expected at a later date, although the hearing panel has said its mandate doesn’t include renewing the administrator’s process or decision.

The losing bidders say Nova Scotia Power wants to transfer potential risks related to the project to ratepayers. That could result in South Canoe not being the best value for ratepayers, the developers said.

Dalton said Tuesday he does agree that allowing the utility to charge its capital costs back to ratepayers does give the project “a different risk profile” that other proposals had.

But the utility-backed projects would likely still come out on top, taking into account various price and non-price factors, he said.

“The real thing that drove the outcome, as indicated in our report, was the lower price offered.”

The independent administrator, a Massachusetts consultant, evaluated 19 projects from 12 different developers. One proposal was disqualified because the developer failed to provide the required security deposit, he said in his final report to the province in November.

The other winning wind farm, $25-million Sable Wind, also has Nova Scotia Power as a minority partner. That 14-megawatt project is led by the Municipality of the District of Guysborough.

Dalton said he was in the process Tuesday of taking another look at the South Canoe bid proposal to confirm his recollection. He said he was reviewing the documents “for my own purposes” and wasn’t planning to raise the matter with the department.

Earlier this week, Energy Minister Charlie Parker said the South Canoe bid was $8 per megawatt less than the lowest non-winning one. That represents a $2.5-million annual saving, or $50 million over 20 years, for ratepayers, he said.

South Canoe represented the best value for ratepayers, followed by Sable Wind, the administrator’s report said.

Sable Wind’s evaluated price, which takes into account non-price factors, was 4.4 per cent lower than the top loser’s. The report didn’t identify that project.

Sable Wind’s delivered price, which is adjusted to include location-related energy losses, was 11 per cent lower that the top loser’s.

Another four projects had evaluated prices that were within five per cent of the top loser’s, which shows how competitive the process was, the administrator said.