Topic:"Fuel Cost Adjustment" in M12394

has determined that, due to certain cost projection uncertainties, it is appropriate to apply for a single-year assessment for 2026. Further information on this item is contained in Section 2.0 below. • Collection of Marine Survey Costs: I...

AI summary The document discusses NSPML's 2026 single-year assessment application, including the collection of marine survey costs and the submission of an asset management plan. The Board requested how the 2027 marine survey costs should be collected, and NSPML plans to recover these costs in 2027. The asset management plan includes a 10-year outlook with near-term expenditures such as a cable protection project and HVDC station upgrades.

10 As has been the case since 2018, NSPML will continue to invoice NS Power for 11 recovery of its approved 2026 assessment in equal monthly instalments ($13.25 million 12 per month), apart from FLG2 costs that will be collected in the mon...

AI summary NSPML will invoice NS Power for the recovery of its approved 2026 assessment in equal monthly instalments of $13.25 million, excluding FLG2 costs, which will be collected in the month prior to payments being due. Invoices will be issued on the first day of each month starting January 1, 2026.

1 expense as a result of a reduction in NSPML's approved Project Costs arising from the 2 Final Cost Decision. 3 4 The debt financing of ML under the ML Credit Agreement is based on the $1.3 billion 5 of bonds issued by ML Financing Trust...

AI summary The document discusses the impact of the Final Cost Decision on NSPML's Project Costs, including the amortization of Deferred Financing Charges and the debt financing under the ML Credit Agreement. The reduction in coupon interest costs and the recovery of Deferred Financing Costs in the 2026 revenue requirement are highlighted.

4.0 MARINE SURVEY COST RECOVERY As detailed in the 2024 Assessment and approved in the Board's Decision, NSPML has smoothed the associated 2024 marine survey costs over three years (2024, 2025 and 2026) to assist in softening the year-by-y...

AI summary NSPML proposes that future marine survey costs be collected and expensed in the year incurred, rather than smoothing them over multiple years. This decision is based on considerations such as the efficiency of tracking expenses in a single balancing account and the impact on WACC. The proposal is intended to better match expenses with the assessment received.

5.0 FEDERAL LOAN GUARANTEE 2 ("FLG2") In 2024, NSPML completed a $500 million federally guaranteed ("FLG2") bond offering. The FLG2 was provided to assist in management of a large negative balance in the Fuel Adjustment Mechanism (FAM) acc...

AI summary In 2024, NSPML issued a $500 million FLG2 bond to address a large negative balance in the FAM account, caused by delayed NS Block deliveries and increased fuel costs due to the war in Ukraine. A refund of $485.9 million was transferred to NS Power's FAM account, with the remainder refunded in May 2025. NSPML excludes the loan from its regulated capital structure and has requested a $39.7 million recovery for 2026, including interest, principal, and guarantee fees.

1 Figure 22: Jurisdictional Comparison of Financing and Flexibility Adjustment Jurisdiction Adj. Docket/Proceeding Notes Alberta 50 bps 2018 GCOC Decision 22570-D01-2018 and 2024 GCOC Decision 27084- D02-2023 Adjustment of 50 bps is normal...

AI summary The document compares financing and flexibility adjustments across various Canadian jurisdictions, noting that most have implemented a 50 basis point adjustment for flotation and financing flexibility, with some exceptions. Nova Scotia's 2023 rate application was resolved through a settlement agreement that did not specify whether flotation costs or financing flexibility were included in the authorized ROE.

1 Figure 24: Risk Premium Results Using 30-Year Treasury Yield Using 30-Day Average Yield on 30-Year Treasury Bond Using Q3 2025–Q3 2026 Forecast for Yield on 30-Year Treasury Bond50 Using 2027- 2031 Forecast for Yield 30- Year Treasury Bo...

AI summary Figure 24 presents risk premium results using the 30-Year Treasury Yield under different scenarios, including 30-day average yield, Q3 2025–Q3 2026 forecast, and 2027–2031 forecast. The resulting return on equity (ROE) decreases as the yield increases.

NSPML Responses to Nova Scotia Energy Board Information Requests 1 Request IR-02: 23 financial crisis of 2007-2009, that has changed in the last several years, as actual interest 24 rates have exceeded the level of forecasts due to higher-...

AI summary NSPML explains that using current actual interest rates instead of forecast bond yields in their CAPM and Risk Premium analysis would have resulted in higher ROE results due to higher-than-expected inflation and actual interest rates exceeding forecasts.

APRIL 2025 IRELAND Population - 5.2mn (Mid 2023, UN) Histori ical Data Consensu s Forecasts Nominal GDP - US$545.7bn (2023) 2021 2022 2023 2024 2025 2026 Gross Domestic P roduct (% change on previous year) 16.3 8.6 -5.5 1.2 3.3 2.7 Industr...

AI summary The document provides economic data for Ireland, Israel, and Nigeria, including population, nominal GDP, GDP growth rates, industrial production changes, consumer price inflation, and current account balances for various years up to 2026. It also includes forecasted data and interest rates for Ireland.

The news on April 2 that the US wanted to levy tariffs against a broad range of countries hit the price of oil which saw big sell-offs, as this hikes the probability of recession in the global economy. Brent fell to US$65 per barrel at one...

AI summary The text discusses the impact of US tariffs on oil prices, leading to a drop in Brent crude from US$77.78 to US$66.13. It also mentions OPEC+ increasing oil production by 411,000 barrels per day, which may be a response to US pressure for lower prices, though uncertainty remains in the market.

NON-CONFIDENTIAL 1 NSPML has taken these risks into consideration when trying to accurately reflect costs (as 2 it would relate to a multi-year assessment) which are years away while also keeping in 3 mind that global trade policies contin...

AI summary NSPML acknowledges the risks associated with foreign currency and variable tariffs, which affect cost estimation and contract management. These factors have influenced NSPML's decision not to conduct a multi-year assessment in 2026, citing the unpredictability of pricing and potential financial implications.

12.3 Own Property Damage For the avoidance of doubt, it is the Parties' intent that, subject to any right a Party may have to seek compensation from a third party who caused the Loss or from insurance, each Party shall be responsible for a...

AI summary The Parties agree that each is responsible for Losses to its own property, including facilities, equipment, and materials on the site of Defined Assets, regardless of the cause, including O&M Activities or the actions of the other Party or its affiliates. This applies unless compensation from a third party or insurance is available.

2.4 Nalcor Bid Price In pricing the Nalcor Bid Energy offered pursuant to Section [2.3](#page-19-0) , Nalcor shall consider, in respect of the applicable time periods covered by the Nalcor Bid, NSPI's market alternatives for Energy procure...

AI summary This section outlines the pricing mechanism for Nalcor's bid energy, ensuring it does not exceed the higher of the ISO-NE Day-Ahead Price or alternative market opportunities, considering factors such as transmission, storage, and generation capacity.

(a) Nalcor and Emera Variance Amounts (i) Subject to Section [5.5(a)(ii)](#page-27-2) , in each Contract Year following a Variance Trigger Date, Emera shall make available to NSPI, in accordance with this Agreement, an amount of Energy tha...

AI summary This section outlines the Emera Variance Amount, which is the amount of Energy Emera must make available to NSPI in a Contract Year following a Variance Trigger Date, subject to a maximum of 300 GWh.

tem in NS; " NS Transmission Utilization Agreement " means the agreement dated July 31, 2012 between Emera and Nalcor relating to the provision of transmission rights through NS by Emera to Nalcor; " NSPI " means Nova Scotia Power Incorpor...

AI summary This text defines key terms and acronyms used in a transmission utilization agreement between Emera and Nalcor Energy in Nova Scotia, including definitions related to payment, confidentiality, and interest rates.

NSPML Responses to Nova Scotia Energy Board Information Requests 1 Request IR-41: 2 3 IR-32 to IR-44 Reference Exhibit N-1, Appendix A, Concentric Expert Evidence (refer to 4 Appendix page numbers at the bottom of each page). 5 6 Page 55 s...

AI summary NSPML responds to an information request regarding its operational and contract management risks, which could lead to disallowances. NSPML argues that its higher complexity compared to traditional operators supports a higher ROE, but its requested ROE of 9.0% is below the market-based estimate of 10.10% to 10.35%.

Description S&P Fitch DBRS Moody's Maturity Date Bid Yield Ask Yield Mid-Point Fortis Alberta Inc A- A(low) Baa1u Oct-52 4.779 4.724 4.7515 Fortis BC Inc A(low) Baa1 Jul-47 4.962 4.876 4.919 CU Inc A A(high) Nov-50 4.769 4.716 4.7425 Enbri...

AI summary The table presents credit ratings and bond yield data for various Canadian utility companies, including Nova Scotia Power Inc. The analysis suggests that 4.9% is a good estimate for the current bond yield for Canadian utilities, with NS Power having a slightly higher yield of 4.97%, which will be used as the starting point for the BYPRP estimate for NS Power.

6.1 NS Power's Credit Rating Reports NS Power's January 2025 debt ratings are BBB high (stable) from DBRS Morningstar (DBRS); and, BBB-(stable) from S&P. Both reports mention the $117 million received from the provincial government for fue...

AI summary NS Power's January 2025 debt ratings are BBB high (stable) from DBRS Morningstar and BBB- (stable) from S&P, citing favorable developments like $117 million from the provincial government and a $500 million federal loan guarantee. Both reports highlight NS Power's low-risk regulated electricity business and strong business risk profile.

ns over approved ROE. ERP) do not change one-for-one with the change in risk-free rate and bond yield spread; rather, they change to some lesser degree in response to fluctuations in those variables.

AI summary The text discusses how changes in the Government of Canada (GoC) bond yield and utility bond yield spread affect adjustment factors, noting that the equity risk premium (ERP) does not change proportionally with these changes but rather to a lesser extent.

Panel Determination Beta is a key input into the CAPM and relies on a proxy group of companies to estimate the risk of FEI and FBC compared to the whole market. Consistent with common practice, Mr. Coyne uses five years of data in his anal...

AI summary The Panel evaluates the use of beta in the CAPM for FEI and FBC, considering data from Value Line and Bloomberg. It agrees with Mr. Coyne's approach of averaging these sources and removes two utilities from the proxy group. The Panel also accepts the use of Blume-adjusted betas despite previous BCUC decisions, based on expert recommendations.

b. Business Risk Analysis In order to assess NSPI's business risk, Concentric examined the following factors: - 1) the generation ownership of NSPI relative to other investor-owned electric utilities, and in particular the percentage of th...

AI summary Concentric assesses NSPI's business risk by evaluating factors such as generation ownership, macroeconomic trends, operating risks, cost recovery, and competition from alternative fuels. Changes since the previous GRA filing are also considered.

f. Recovery of Fuel and Purchased Power Costs NSPI recovers prudently incurred increases and/or decreases in its cost of fuel outside of general rate proceedings through periodic adjustments to customer rates via its Fuel Adjustment Mechan...

AI summary NSPI uses a Fuel Adjustment Mechanism (FAM) to recover changes in fuel costs outside of general rate proceedings. The Board approved the FAM in 2007, requiring a meaningful audit process. This mechanism allows for timely information sharing regarding NSPI's fuel costs with the Board and other stakeholders.

21 g. Alternative Fuel Risk Although NSPI continues to face competition from alternative fuel sources, this risk is declining due to government policy that promotes electrification of buildings and increased purchases of electric vehicles....

AI summary NSPI faces declining alternative fuel risk due to government policy promoting electrification and rising electric vehicle adoption. The percentage of residential electric heating in Nova Scotia increased from 51.1% in 2020 to 60.2% in 2024. Heat pump adoption has grown significantly, impacting NSPI's electricity usage and load management.

1 j. Conclusions on Business Risk 2 As discussed in this Section, NSPI's risk profile is characterized by the following factors: 1) 3 ownership of substantial regulated generation assets; 2) the need to retire a substantial amount 4 of the...

AI summary NSPI's business risk profile includes regulated generation assets, retirement of thermal generation, capital investments for renewable transition, FAM audits, volumetric risk, weaker economic trends, and storm exposure. The company requests continuation of the storm rider pilot. Credit agencies are closely monitoring NSPI's decarbonization risks.

b. Recovery of Fuel and Purchased Power Costs NSPI is the only Canadian investor-owned electric utility that owns significant regulated generation, and the Company has an annual FAM. While the FAM includes an incentive component whereby NS...

AI summary NSPI is the only Canadian investor-owned electric utility with significant regulated generation and an annual FAM. The FAM includes an incentive component that was suspended during the 2017-2019 period and again under the 2020-2022 fuel stability plan. The provincial government has purchased a $117 million receivable to reduce deferred fuel costs. Other Canadian utilities, such as FortisBC and Maritime Electric, have different mechanisms for recovering fuel and purchased power costs.

c. Comparison to U.S. Electric Utility Proxy Group As a preliminary matter, Concentric notes that from investors' perspective, both short-term and long-term risk are important. Regulation generally is better at addressing short-term risk,...

AI summary This section compares Nova Scotia Power Inc. (NSPI) to the U.S. Electric Utility Proxy Group in terms of business risk and ratemaking mechanisms. NSPI has significant coal-fired generation assets, unlike most U.S. companies, and has fewer risk-insulating ratemaking mechanisms available compared to the proxy group.

3 d. Conclusions on Business Risk of NSPI Compared to U.S. Electric 4 Utility Proxy Group 5 Based on the business risk analysis, we conclude that NSPI has similar business risk to the U.S. 6 Electric utility proxy group on many factors tha...

AI summary NSPI has similar business risk to the U.S. Electric utility proxy group in the short and intermediate term, but differences exist, including greater carbon transition risk due to reliance on coal and higher volumetric risk due to lack of a decoupling mechanism. NSPI also funds a DSM program but cannot recover lost revenues through an LRAM.

5. Risk Analysis Conclusions 4 Based on the results of the financial and business risk analyses discussed throughout this report, 5 Concentric concludes that: - NSPI's generation ownership distinguishes the Company from other investor-owne...

AI summary Concentric concludes that NSPI's business risk remains elevated, particularly due to environmental compliance requirements and regulatory challenges. NSPI faces higher risks compared to other Canadian and U.S. utilities, including regulatory lag and lack of protection against volumetric risk. The company also failed to achieve its authorized ROE in recent years.

Submissions OEB staff submitted that the OEB's current practice of reviewing the prescribed interest rates for DVAs quarterly should be maintained, with updates only if the formulaic approach results in a change in interest rates of 25 bas...

AI summary OEB staff recommend maintaining the quarterly review of prescribed interest rates for DVAs, with updates only if changes exceed 25 basis points. They suggest using the Bloomberg ticker BVCAUA3M BVLI Index (3-month) for consistency with DSTDR and note three alternatives for calculating these rates, with option (2) being administratively simpler.

Alternative Formula If at any point, the BVCAUA3M BVLI Index (3-month) becomes unavailable in its current form, the OEB concludes that it is reasonable to calculate the DSTDR using the actual CORRA reference rate as at September 30. Applie...

AI summary The OEB proposes an alternative formula for calculating the DSTDR using the CORRA reference rate and an average spread from a survey of Canadian banks, should the BVCAUA3M BVLI Index become unavailable. The formula is updated annually in September, with potential adjustments if market conditions change significantly.

[17] In the prior year assessment decision, the NSUARB directed NSPML to address the collection of future marine survey costs. In the current application NSPML proposed that the 2027 survey costs be fully expensed in 2027 rather than smoot...

AI summary The NSUARB previously directed NSPML to address future marine survey costs, and NSPML now proposes expensing 2027 costs fully in that year rather than spreading them over three years. NSPML argues that using the Fuel Adjustment Mechanism (FAM) for balancing is more efficient and less costly than deferring payments, but the Industrial Group opposes full payment in 2027, preferring a collaborative process.

[103] The Risk Premium model was used by both Concentric and Dr. Cleary, but in entirely different ways. A summary of the components used by Concentric and Dr. Cleary is set out in the table below: Risk Premium Concentric Dr. Cleary A-rate...

AI summary The document discusses how Concentric and Dr. Cleary used the Risk Premium model differently, with Concentric employing regression analysis on historical utility data and multiple bond yield forecasts to estimate return on equity, while Dr. Cleary used a simpler approach with lower risk premium assumptions.

asts are publicly available without cost. For simplicity, the Commission considers that averaging the forecasts from three banks, RBC, TD and Scotiabank, is sufficient. Should a forecast from one or more of these banks be unavailable, ther...

AI summary The Commission uses forecasts from RBC, TD, and Scotiabank to estimate long-term GoC bond yields, averaging them for accuracy. It also considers the approach of D. Madsen and Dr. Cleary, using actual historical yields to smooth out daily volatility. The Commission prefers using monthly averages over single-day yields. The Board acknowledges that risk-free rate estimates from Concentric and Dr. Cleary are similar but notes their inherent weaknesses.

References: - (A) On page 24 (footnote 24) of its evidence, Concentric refers to the following source for the "forecast" data for "Long-Term Forecast for 10-Year Government Bond Yields" for Government of Canada bonds that is used to prepar...

AI summary Concentric references a 2025 Consensus Economics forecast for 10-year government bond yields and confirms that the OEB's deemed long-term debt rate has been 40 basis points lower than actual rates since 2010, with similar findings by Dr. Cleary.

[17] In the prior year assessment decision, the NSUARB directed NSPML to address the collection of future marine survey costs. In the current application NSPML proposed that the 2027 survey costs be fully expensed in 2027 rather than smoot...

AI summary NSPML proposes expensing 2027 marine survey costs fully in that year rather than spreading them over three years. The NSUARB previously supported cost smoothing but is concerned about NSPML earning a return on deferred costs. NSPML argues that using the Fuel Adjustment Mechanism (FAM) would be more efficient, while the Industrial Group opposes full payment in 2027 and suggests a collaborative process.