N-5NSPI (SBA) RIR - 1 to 3
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Key Credit Rating Considerations The ratings of Nova Scotia Power Inc. (NSPI or the Company) are based on its integrated electricity operations under the Nova Scotia Utility and Review Board (NSUARB). The Stable trends reflect the Company'...
AI summary Nova Scotia Power Inc.'s (NSPI) credit ratings benefit from 2024 developments, including the sale of FAM regulatory assets and a federal loan guarantee, reducing debt and rate pressure. Bill 404 streamlines NSPI's responsibilities, but concerns remain about potential political interference in future regulatory reviews impacting NSPI's cost recovery.
1. Low-risk regulated electricity business The Company's current regulatory framework is based on a cost-of-service (COS) methodology, under which NSPI can recover all prudently estimated operating expenses and earn a reasonable return on...
AI summary The Company's regulatory framework uses a cost-of-service (COS) methodology allowing NSPI to recover operating expenses and earn a reasonable return. The 8.75%-9.25% ROE range is deemed reasonable. A Fuel Adjustment Mechanism (FAM) mitigates fuel price risks by deferring cost differences. However, recent provincial intervention in the GRA process has increased regulatory risk and instability.
2. Political intervention in the ratemaking process In November 2022, the Province passed Bill 212, which amended the Public Utilities Act to cap the baserate increase for NSPI's most recent GRA at 1.8% during the 2022 to 2024 period, excl...
AI summary In November 2022, the Province passed Bill 212, amending the Public Utilities Act to cap NSPI's GRA baserate increase at 1.8% (excluding DSM and fuel costs) and limit ROE and deemed equity. The text argues political interference in ratemaking introduces instability and undermines regulator independence, negatively impacting credit.
5. Regulatory lag NSPI faces some regulatory risk with respect to the timeliness of fuel cost recovery, although this risk is lower now than when the FAM was not in place. Although the FAM allows the Company to recover fluctuating fuel exp...
AI summary NSPI faces lower regulatory risk in fuel cost recovery due to the Fuel Adjustment Mechanism (FAM), which allows annual recovery of fluctuating fuel costs with NSUARB approval. Future renewable energy from the Muskrat Falls Hydroelectric Project is expected to reduce the impact of fluctuating fuel prices.
Appendix 2—Regulation - NSPI operates under the NSUARB's regulatory environment using a COS methodology that allows the Company to recover all prudently estimated operating expenses and earn a reasonable return on approved capital investme...
AI summary NSPI operates under NSUARB regulation with a target ROE range of 8.75-9.25%. Bill 212 capped base-rate increases at 1.8% (2022-2024) and limited ROE to 9.25%. A 2023 rate settlement approved a 6.9% average increase, including DSM and fuel adjustments. NSUARB also approved a Storm Rider in 2024. NSPI's FAM allows fuel cost recovery, with a 2024 asset sale to the Province. NSPML's 2024 debt issuance reduced FAM liabilities.
Page 12 of 13 Assessment of Regulatory Framework Page 12 of 13 Criteria Score Analysis Page 12 of 13 1. Deemed Equity Page 12 of 13 Page 12 of 13 Excellent Good Satisfactory Below Average Poor NSPI's target-regulated ROE is based on an act...
AI summary The document evaluates the regulatory framework for NSPI, highlighting aspects such as deemed equity, allowed ROE, fuel cost recovery, and political interference. Bill 212 is noted for capping equity and ROE, introducing volatility, and limiting rate increases. The NSUARB's role in auditing fuel costs and disallowing some recovery is also discussed.
Credit Highlights The provincial government of Nova Scotia recently proposed to compensate Nova Scotia Power Inc. (NSPI) about $117 million to offset the deferred fuel cost liability. NSPI generally recovers the incurred fuel cost from cus...
AI summary Nova Scotia's government proposed a $117 million compensation to NSPI to offset deferred fuel costs, which would otherwise increase customer bills. NSPI was fined $10 million for non-compliance with the Renewable Electricity Regulations (RER) and faces challenges in meeting renewable energy targets, requiring significant investments and potential government support.