N-52024-2025 Bates White FAM Audit Report - Redacted
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es for the period. Residual BA at the end of a year is applied to the following year and is used in the determination of future BA rates. In this way, only actual costs are recovered from customers.16 Again, in a typical FAM rate cycle, th...
AI summary The Fuel Adjustment Mechanism (FAM) involves setting Base Cost of Fuel (BCF) rates for multi-year periods and using Annual Adjustment (AA) and Balancing Adjustment (BA) mechanisms to ensure recovery of actual fuel costs. The Electricity Plan Implementation (2015) Act required NSPI to file a Fuel Stability Plan for 2017-2019, with rates approved in 2016. In 2019, NSPI filed for new BCF rates for 2020-2022, based on forecasted fuel and purchased power costs.
cuted by NS Power and NSPEMI for the period under review for prudency and for compliance with the Fuel Manual - Review of NS Power's use of hedging to appropriate accounting and performance standards - Review of system sales - Review of in...
AI summary The FAM Audit Scope outlines the review of NS Power and NSPEMI's activities, including prudency and compliance with the Fuel Manual, use of hedging, system sales, and audit reports on fuel procurement. It also includes a follow-up on NSPI's response to 2020-2021 FAM Audit recommendations.
I.E. Structure of this Report Our report proceeds as follows. We have fourteen substantive chapters, each addressing a different aspect of our scope of work—and NSPI's FAM-related activities: - Chapter II—Organization, Staffing, and Contro...
AI summary The report outlines its structure, consisting of fourteen chapters covering various aspects of NSPI's FAM-related activities, each with a consistent format including Background, Findings, Conclusions, and Recommendations sections. Chapter XIV was primarily authored by BDO USA, P.C., with review by Bates White. All currency figures are in CAD.
XIV – FAM Accounting Conclusion XIV-7: NSPI should maintain a detailed listing of invoices included in each payment batch to enhance the audit trail of cash disbursements. The listing should identify the invoices processed, related vendors...
AI summary The document recommends that NSPI maintain a detailed listing of invoices in each payment batch to improve audit trails, internal controls, and payment tracking, thereby reducing the risk of duplicate or unauthorized payments.
Fuel Manual NSPI's 700+ page Fuel Manual remains a useful tool for NSPI to hold its employees accountable to its policies and for the Board to hold NSPI accountable for its decisions related to fuel and power purchasing. Revision 13 of the...
AI summary The Fuel Manual, now in its 14th revision, serves as a key tool for NSPI to ensure accountability in fuel and power purchasing. It outlines policies, guidelines, and risk management practices, providing a framework for employees and stakeholders to assess NSPI's performance during the Audit Period.
IV.B.6. NSPI's Suppliers of Solid Fuel In this section, we address NSPI's suppliers of solid fuel, including coal and petcoke. Later, we discuss NSPI's procurement of other products and services associated with the solid fuel generating un...
AI summary This section discusses NSPI's suppliers of solid fuel, including coal and petcoke, and details the master agreements and short-term confirmations used for procurement. It also mentions the use of ASTM standards for quality specifications and the inclusion of additives and transportation services as FAM expenses.
Quality and Quantity Control at NSPI's Plants With the exception of Point Tupper, NSPI's plants have certified truck scales that weigh the incoming deliveries. Imported supply for the Trenton units arrive by rail and is weighed at the Poin...
AI summary NSPI's plants use certified truck scales and various measurement systems to ensure accurate fuel quantity control. Fuel is weighed at Point Tupper Marine Terminal, and data is manually entered into Aligne and PI systems. Measurement equipment is calibrated regularly, and consumption data is reconciled monthly. Quality testing is conducted both on-site and by third parties.
NSPI's coal supply contracts contain recourse in the event the supplier fails to meet specified requirements for quality. Failure to meet technical specifications is managed through rejection rights or forms of compensation specified in th...
AI summary NSPI's coal supply contracts include provisions for handling failures to meet quality specifications, such as compensation or delivery suspension. During the Audit Period, no instances of suppliers failing to meet contractual obligations were reported.
V.B.6. Physical Inventory Measurement and Adjustment Per the Fuel Manual, plant management is responsible for solid fuel inventory supplies at NSPI's plants, while ERM is responsible for monitoring inventories at Point Tupper Marine Termin...
AI summary The document outlines the procedures for physical inventory measurement and adjustment at NSPI's plants and marine terminals. It details the responsibilities of plant management and ERM, the quarterly survey process, and the criteria for inventory adjustments based on variances between physical and book inventory levels.
V.C. Conclusions Conclusion V-1: NSPI's use of Aligne to track solid fuel remains appropriate. Aligne allows NSPI to reconcile the entire solid fuel supply chain and interacts directly with other NSPI programs, including NSPI's billing sys...
AI summary The conclusions affirm NSPI's appropriate use of Aligne for solid fuel tracking, note Aligne's unavailability due to a cyber event from April 25 to October 30, 2025, and confirm that NSPI's solid fuel receipt processes remain reasonable and effectively managed.
VI.B.13. Inventory Adjustments As is shown in Figure VI-15, the biomass unit had several adjustments during the Audit Period. In the aftermath of the cyber event, when NSPI did not have access to Aligne Fuels, NSPI did not conduct any adju...
AI summary During the audit period, the biomass unit experienced several inventory adjustments. Due to a cyber event, NSPI could not access Aligne Fuels and avoided making adjustments until access was restored. Once access was regained, NSPI applied a Q4 2025 inventory adjustment.
VI.B.14. Bates White's 2022-2023 Audit Recommendations In our report for the prior audit period, we offered five recommendations related to biomass fuel. This section assesses NSPI's actions related to those recommendations. 309 2022-2023...
AI summary This section of the audit report discusses NSPI's implementation of five recommendations from the 2022-2023 Bates White audit, focusing on biomass fuel procurement, inventory processes, and agreement amendments. NSPI has taken several actions to address the recommendations, including revising RFP processes, updating the Fuel Manual, and executing agreement amendments.
nergy balance process into the Shared Services Agreement. The energy balance process has been revised and includes a complex Energy Balance Worksheet that is not part of the Shared Services Agreement. Conclusion VI-13: NSPI has appears to...
AI summary The energy balance process under the Shared Services Agreement has been revised, but concerns remain regarding its rigidity and fairness, particularly for PHP and FAM customers. The process allows PHP to carry negative balances indefinitely and lacks clarity on chip deficit pricing. NSPI's biomass fuel processes are reasonably explained in the Fuel Manual.
o term RFPs), if applicable. Solid fuel is priced at the prompt quarterly forward price. This method does not involve a PortOps run, but rather is an Excel-based exercise that uses marginal cost data. The "Monthly Accounting Method" varied...
AI summary The document discusses two methods for valuing undelivered and makeup NS Block Volumes: the Hourly Replacement Method and the Monthly Accounting Method. The Monthly Accounting Method uses average monthly prices and weighted-average costs, while the Hourly Replacement Method considers hourly cost impacts. The Hourly Replacement Method was found to have flaws related to coal prices, and the Monthly Accounting Method was criticized for its accuracy during periods of high fuel price volatility.
XIV.A. Background A 2009 NSEB order approved the implementation of NSPI's Fuel Adjustment Mechanism ("FAM"). The FAM provides for an annual adjustment to recover fuel and purchased power costs on a more current basis, in order to address t...
AI summary The document discusses the Fuel Adjustment Mechanism (FAM) implemented by Nova Scotia Power Inc. (NSPI) in 2009, its accounting review by BDO for 2024 and 2025, and the impact of a 2025 cybersecurity incident on NSPI's financial reporting systems. The incident led to the loss of access to Oracle EBS and the use of alternative processes for financial reporting, including manual records and a new ERP system.
XIV.B.2. Accounting Resources for FAM Administration The Plan of Administration ("POA") serves as the principal governing document for FAM accounting. This plan sets forth the policies and procedures guiding FAM calculation and determining...
AI summary The document discusses Nova Scotia Power Inc.'s (NSPI) accounting resources for Fuel Adjustment Mechanism (FAM) administration, including the Plan of Administration (POA), accounting systems, and procedures. BDO evaluated NSPI's processes and found them to be reasonable and adequate for FAM accounting and reporting.
XIV.B.4. FAM Accounting Policies and Procedures Verification BDO tested and verified NSPI's FAM accounting policies and procedures that underline fuel and purchased power costs reported for the Audit Period. This portion of BDO's work incl...
AI summary BDO tested and verified Nova Scotia Power Inc.'s Fuel Adjustment Mechanism (FAM) accounting policies and procedures for fuel and purchased power costs during the Audit Period. NSPI provided updated documents with an effective date of the first quarter of 2026.
XIV.B.5. Fuel and Purchased Power Accounting Verification As it has done before, NSPI continued to maintain vendor master files and adheres to organization and authority approval levels for fuel and purchased power procurement. Data from p...
AI summary NSPI maintains proper vendor master files and adheres to approval levels for fuel and purchased power procurement. BDO verified that costs contracted and paid are in conformity, and found no exceptions in the reviewed data. Procedures were adjusted due to a cybersecurity incident, but no findings were identified.
XIV.B.7. FAM Process Accounting and Controls Verification NSPI's accounting department generally has continued since the last Audit Period to rely on the same activities and reporting checklists when preparing monthly FAM accounting suppor...
AI summary NSPI's accounting department continues to use established activities and reporting checklists for monthly FAM accounting support. BDO reviewed and tested the accounting controls and found them to be effective, with no findings identified during the audit period from January 1, 2024, to December 31, 2025.
XIV.B.8. Accounting System Flexfield Codes NSPI's Chart of Accounts includes information that describes its fourteen-digit "Accounting Flexfiled" code system. This five-segment system allows for unique identification by company, account, a...
AI summary NSPI's Chart of Accounts includes a five-segment 'Accounting Flexfield' code system for unique identification of costs. BDO reviewed the system and found no concerns regarding the consistency of cost classification or material differences between recorded and reported FAM costs. The system provided sufficient transparency for analyzing FAM cost elements.
XIV.B.10. Bates White's 2022-2023 Audit Recommendations In our prior audit report, BDO provided one recommendation regarding FAM Accounting. The recommendation was: Recommendation XIV-1: NSPI should include contract numbers and purchase or...
AI summary Bates White's 2022-2023 audit report notes that NSPI implemented a recommendation to include contract and purchase order numbers on all purchase order documents, which was confirmed as fully addressed by BDO.
XIV.C. Conclusions Conclusion XIV-1: While the April 2025 cybersecurity incident increased the complexity and risk associated with the audit, it did not materially impair BDO's ability to perform the planned audit procedures or reach its c...
AI summary The audit by BDO concluded that the April 2025 cybersecurity incident did not significantly impact the audit of Nova Scotia Power Inc.'s Fuel Adjustment Mechanism (FAM). NSPI's accounting systems and processes for fuel and purchased power were found to be sufficient and compliant with policies. However, BDO recommended improving the audit trail for cash disbursements.
XIV.D. Recommendations Recommendation XIV-1: NSPI should maintain a detailed listing of invoices included in each payment batch to enhance the audit trail of cash disbursements. The listing should identify the invoices processed, related v...
AI summary NSPI is recommended to maintain a detailed listing of invoices in each payment batch to enhance the audit trail of cash disbursements, including details such as vendors, payment amounts, dates, and batch references.
due to the inability of the PortOps model to converge, - iii. Calculation of costs/benefits would be highly dependent on assumptions, if load rebalancing post deviation is required for the analysis, - iv. Costs associated with the initial...
AI summary The document discusses challenges in calculating costs and benefits related to load rebalancing and dispatch decisions due to limitations in the PortOps model and lack of logged deviation data. It also highlights the inability to quantify load shifting benefits for real-time ADC and the potential for net costs from real-time load deviations.
XV.D. Recommendations Recommendation XV-1: In the 2026 ELIADC annual report and all future reports, NSPI should report the amounts collected under the $4/MWh (or any other) mandatory contribution to fixed costs, but should not characterize...
AI summary The recommendations focus on improving reporting and cost allocation practices related to the ELIADC and PHP. They include changes to how fixed costs are reported, modifications to ADC benefits, real-time deviation reporting, and adjustments to the calculation of Cause Code 5 penalties.