Hydro cites aging assets, rising costs as reasons for rate increase
Newfoundland and Labrador Hydro wants to charge more for electricity to customers in this province in order to upgrade and maintain its aging generation and distribution network, and to pay the higher costs associated with delivering a reliable and cost-efficient service.
The utility is also requesting that its rate-of-return essentially double to just under nine per cent, which would then be reinvested into the electrical system, said Rob Henderson, vice-president of Newfoundland and Labrador Hydro.
In an amended general rate application submitted Monday to the Public Utilities Board, the company is seeking a 2.8 per cent increase for residential customers on the island portion of the province who are connected to the main grid.
This would see prices increase from 12.6 cents per kilowatt hour to 13 cents for some 246,000 customers.
A similar increase in proposed for some 26,000 commercial customers on the island.
In Labrador, the nearly 10,000 residential customers connected to the interconnected power grid could see about a two per cent increase, with the price going from 3.9 to 4.0 cents.
The same rate of increase is proposed for some 1,300 commercial customers in Labrador.
If approved by the PUB, it will be the first general rate increase since 2007 that is not related to the increasing costs of fuel for the Holyrood thermal generating station.
"Hydro has worked to manage rates for customers despite rising costs during that time," said Henderson.
Lowest rates
According to Hydro, island residential customers currently have the lowest electricity rates in Atlantic Canada, while customers on the Labrador interconnected system — Labrador west and central — have the lowest electricity rates in Canada, largely because they receive low-cost power from the Churchill Falls hydroelectric facility.
Hydro announced the details of the new application during a news conference.
It is a major shift from what the utility had proposed last year.
Hydro has worked to manage rates for customers despite rising costs during that time.- Rob Henderson
In July 2013, Hydro announced it intended to hit Labrador customers with a substantial increase of 25 per cent, blaming the proposed hike on the economic boom, and new customers that need to be hooked up.
Customers on the island were to have seen see a slight reduction.
Henderson said the utility re-evaluated its position following a flood criticism.
"We took a review and listened to the intervenors," said Henderson, adding that the subsidy for those serviced by isolated, diesel-generated power systems will now be shared by customers on the Labrador and island interconnected system.
He said this change will mean an increase of roughly one per cent for customers on the island.
Aging infrastructure
Henderson said most of Hydro's assets are now more than 40 year old, and many have to be either replaced or refurbished.
These shortcomings were highlighted in January during a series of rolling blackouts that occurred during a blast of cold winter weather.
This year alone, the company is spending $260 million on capital investments, Henderson explained, including the purchase and installation of a new 123-megawatt combustion turbine generator at Holyrood.
He added that Hydro is also hiring some 50 additional staff, joining its current complement of roughly 900 workers.
Henderson said these extra employees are required in order to address increased operations and maintenance needs, and an overall increase in demand for electricity in the province.
He noted that despite the loss of several significant industrial customers in recent years, namely the paper mills in Grand Falls-Windsor and Stephenville, the demand for electricity has grown because of increases in the residential and commercial sector.
Meanwhile, this latest application could still bring significantly higher rates for some customers in Labrador.
The roughly 2,100 residential customers in isolated Labrador communities served by diesel-generated electricity could see an average increase of 11.4 per cent, while Hydro is requesting an increase of 19 per cent for more than 500 commercial customers.
These new rates, if approved, will take effect Feb. 1, 2015.
As for the increase in the rate-of-return, Henderson said it is consistent with other utilities across Canada and will "ensure we are in a strong financial position to continue investments into the power system."
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