N-52024-2025 Bates White FAM Audit Report - Redacted
196 passages
Bates White Economic Consulting ("Bates White")1 appreciates the opportunity to serve the Nova Scotia Energy Board (NSEB, or "the Board") as its independent consultant tasked with providing an audit of Nova Scotia Power, Inc.'s (NSPI's) Fu...
AI summary Bates White Economic Consulting has been engaged by the Nova Scotia Energy Board to audit Nova Scotia Power, Inc.'s Fuel Adjustment Mechanism for the period January 1, 2024, through December 31, 2025.
I.B. The Fuel Adjustment Mechanism The FAM is the cost recovery mechanism by which NSPI recovers the cost of fuel and purchased power from its customers. According to NSPI, the cost of fuel and purchased power is its largest expense in pro...
AI summary The Fuel Adjustment Mechanism (FAM) is used by NSPI to recover fuel and purchased power costs from customers. Over the audit period, NSPI incurred significant costs, and the FAM includes components like the Base Cost of Fuel (BCF), Actual Adjustment (AA), and Balancing Adjustment (BA) to ensure accurate cost recovery from ratepayers.
I.C. The FAM Audit Scope The FAM audit is provided for in the FAM Plan of Administration. Specifically, the FAM POA states: The amounts charged through the FAM shall be subject to periodic audit to assure completeness and accuracy and to a...
AI summary The FAM audit scope is outlined in the FAM Plan of Administration, emphasizing periodic audits to ensure the completeness, accuracy, and prudence of fuel and purchased power costs. The prudence standard is defined using guidance from the Illinois Commerce Commission, and the audit will be conducted by a qualified independent firm. The audit also covers mercury diversion programs and revenue from power exports and natural gas resale.
I.D. Our Methodology and Process Bates White's approach to the audit was to compile a record of information obtained from NSPI through formal data requests, phone interviews, online demonstrations, online sensitive document review, site vi...
AI summary Bates White conducted an audit of NSPI's fuel and power procurement processes, focusing on FAM-related items. The audit involved site visits, interviews, data requests, and document reviews. NSPI was cooperative and provided extensive documentation and resources to support the audit.
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.
II - Organization, Staffing, and Controls Conclusion II-10: The NSPI Risk Manual's current language regarding risk management organization is partially outdated, as it indicates delegation of risk responsibilities within Emera and NSPI to...
AI summary The NSPI Risk Manual requires updates to reflect current risk management delegations at NSPI and Emera. Additionally, the December 2025 internal audit of NSPI's hedging program was limited due to a cyber event, but it is recommended to complete the audit as soon as possible once data access is restored.
IV – Solid Fuel Procurement Conclusion IV-20: NSPI uses current index futures prices to evaluate index-priced solid fuel supply offers and does not add a risk premium associated with those bids when evaluating them against fixedpriced offe...
AI summary NSPI evaluates index-priced solid fuel offers without adding a risk premium and uses derivative contracts to hedge index price risk. The recommendations suggest accounting for index price risk, ensuring delivery periods in contracts, inviting all suitable vendors to RFPs, and improving Purchase Order details to align with Standard Terms and Conditions.
V – Solid Fuel Supply Management Conclusion V-16: On October 6, 2025, there was a derailment of five railcars of a northbound, 21-car coal train on the Sydney Coal Railway connecting the International Pier to the Lingan generating station....
AI summary This section discusses a railcar derailment on the Sydney Coal Railway in October 2025, which did not cost NSPI but highlighted the need for improved inspection and maintenance. It also addresses an error in coal blend data at Trenton 5, affecting heat rate calculations and requiring data corrections.
VI – Biomass Procurement and Supply Planning Conclusion VI-8: Given the low turnout to the June 2024 biomass supply RFP, NSPI could improve its RFP process by removing the stated preference for biomass supply contracts with terms that are...
AI summary The document discusses issues with NSPI's biomass procurement and supply planning, including low participation in RFPs due to contract term preferences, missing execution dates on contracts, and concerns with the energy balance process. It recommends revising RFP terms, clarifying moisture targets, and addressing inventory adjustments post-cyber event.
VII – Natural Gas Supply Planning Conclusion VII-1: NSPI does not appear to have completed the analyses made in Recommendation VII-1 from the previous FAM audit, which recommended that "[t]his quantification should include a quantification...
AI summary The document highlights that NSPI did not complete the analysis on risk mitigation strategies as recommended in the previous FAM audit, leading to missed opportunities in FT contract evaluations. Recommendations include re-analyzing the Freepoint FT capacity offer with updated assumptions and formalizing the ERM position on FT capacity for stakeholder review.
VIII – Natural Gas Procurement Conclusion VIII-6: NSPI has adequately addressed our natural gas procurement-related recommendations from the 2022-2023 Audit Report but note that a portion of Recommendation VIII-5 regarding the evaluation o...
AI summary NSPI has addressed most natural gas procurement recommendations from the 2022-2023 Audit Report, though some aspects of Recommendation VIII-5 remain unresolved. Recommendation VIII-1 calls for monthly documentation of gas sales by NSPEMI and NSPI, including transaction details and rationale.
X – Power Plant Performance Conclusion X-14: NSPI completed and provided ten Root Cause Analyses with another four reported in progress. The completed Root Cause Analyses contained recommendations that NSPI adopted, many of which NSPI has...
AI summary NSPI completed ten Root Cause Analyses and has implemented some recommendations, with 27 remaining in progress. An outage at Tufts Cove 2 was caused by elevated vibration levels due to blade deposits, and NSPI is recommended to provide an estimate of the incremental FAM and non-FAM costs associated with this event.
XII – Power Purchases and Sales Conclusion XII-14: NSPI and NLH agreed that all undelivered volumes during the Audit Period were Block A volumes. However, the parties remain in dispute regarding classification of 61.2 GWh of "undelivered"...
AI summary NSPI and NLH disagree on the classification of 61.2 GWh of undelivered Base Block energy, with implications for compensation. NSPI argues it should be classified as Block B, requiring NLH to provide compensation energy, while NLH claims it should be Block A. NSPI is recommended to update the Board on efforts to resolve the dispute. Additionally, NSPI is advised to report NLH's Surplus Energy offered under the EAA in its FAM Annual Report.
XIII – Hedging Conclusion XIII-18: Notwithstanding Conclusion XIII-20, we observed unexecuted hedges in seven out of eight quarters. On average, days elapsed between the date of the PLEXOS forecast and FST approval. Once traders had approv...
AI summary The text highlights that unexecuted hedges occurred in seven out of eight quarters due to delays between the PLEXOS forecast and FST approval. Energy markets can change rapidly, leading to price fluctuations and increased risk. A recommendation is made for NSPI to review and improve the efficiency of its hedging lifecycle.
XV – ELIADC Conclusion XV-2: ELIADC benefits as reported in the ELIADC annual reports are largely composed of the mandatory contribution to fixed costs. ( Recommendation XV-1 ) Recommendation XV-1: In the 2026 ELIADC annual report and all...
AI summary The document discusses issues with the ELIADC tariff, including the mischaracterization of mandatory fixed cost contributions as benefits, penalties for schedule deviations, and flaws in ADC benefit calculations. Recommendations include revising reporting practices, adjusting penalties, and modifying ADC benefit calculations to account for forecast and actual load and fuel price differences.
II.A. Background This chapter addresses NSPI's organization, staffing, and controls—including risk management related to fuel and purchased power.
AI summary This section provides an overview of NSPI's organizational structure, staffing, and controls, with a focus on risk management related to fuel and purchased power.
II.B.1. Organization NSPI's fuel and power purchasing and management is the responsibility of NSPI's Energy and Risk Management ("ERM") group. ERM buys solid fuel, natural gas, fuel oils, biomass fuel, and other fuels, additives, and relat...
AI summary This section outlines the organizational structure of NSPI's Energy and Risk Management (ERM) group, which is responsible for fuel and power purchasing and management. ERM interacts with various departments, including the System Operator and Portfolio Optimization, and its structure remained largely unchanged during the audit period, with some updates in 2025.
Incentive-Based Compensation ERM employee compensation is not a FAM-recoverable expense, but compensation in general for the employees chiefly responsible for FAM-related cost incurrence is relevant. While we did not audit employee compens...
AI summary NSPI offers two incentive-based compensation programs for ERM employees, designed to reward performance based on both individual and organizational achievements, including fuel cost savings and hedging targets. These programs are considered reasonable for aligning employee performance with corporate and departmental goals.
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.
ities include ensuring NSPI's risk management program is established, in place, and in compliance with Emera's overall risk management program, as well as monitoring compliance with the Fuel Manual.64 NSPI's risk management structure inclu...
AI summary The document outlines NSPI's risk management structure, emphasizing separation of roles between front, middle, and back offices to ensure compliance with Emera's risk management program and the Fuel Manual. The structure includes oversight by ERMC and the Fuels Finance team to manage procurement risks and maintain financial integrity.
II.B.3.b.ii. Risk Management Documents NSPI's risk management procedures are presented in the Fuel Manual. Provided as "Links" to the Fuel Manual, the key documents that contain NSPI's approach to risk management are (1) the NSPI Fuel Proc...
AI summary The document outlines NSPI's risk management procedures, including key documents such as the NSPI Fuel Procurement Risk Management Policy & Procedures, the Emera Credit Policy, and the NS Power Fuel Hedging Plan. These documents define roles and responsibilities, including those of the CROC and the middle office, in managing various types of risk.
II.B.3.b.iii. Risk Management Systems NSPI continues to use Allegro's Energy Trading and Risk Management ("ETRM") software as its energy trading and risk management system. ETRM is used for deal capture, credit and market risk monitoring,...
AI summary NSPI uses Allegro and Aligne Fuels as its energy trading and risk management systems. Allegro is used for deal capture, credit and market risk monitoring, and settlement, while Aligne Fuels is used to manage fuel information from procurement through to consumption. These systems interact with other NSPI systems like Oracle billing. The impact of a cyber event on these systems is discussed further in the report.
II.B.3.b.iv. Audit Period Results While we discuss in our FAM Accounting chapter more detail about NSPI's controls and their performance during the Audit Period, we generally observed that NSPI takes the role of the FST seriously and that...
AI summary The audit period results highlight that NSPI's Fuel Adjustment Mechanism (FAM) processes were well-managed, with appropriate approvals and risk assessments. NSPI adhered to its risk management policies, though it reached or exceeded solid fuel transaction limits during the audit period. As coal use declines due to environmental and regulatory factors, NSPI may need more detailed reviews of solid fuel procurement.
Internal Auditing NSPI's Fuel Manual contains provisions associated with NSPI's internal auditing process: NSPI's internal audit team is an Emera entity that is shared across the Emera companies, including NSPI.95 During the Audit Period,...
AI summary NSPI's internal auditing process was evaluated in three audits (February 2024, March 2025, and December 2025). The audits found the processes for FAM reporting, fuel forecasting, and hedging to be 'Acceptable.' Recommendations were made to improve access controls, training, and audit completion when data is restored.
II.D. Recommendations Recommendation II-1: NSPI should ensure its next Fuel Manual update revises the NSPI Risk Manual, as necessary, to make accurate references to risk management authority delegations at both NSPI and Emera. Recommendati...
AI summary The recommendations focus on updating NSPI's Fuel Manual and Risk Manual to ensure proper risk management authority delegations and completing an internal audit of NSPI's hedging program by December 2025.
III.A. Background The purpose of the Fuel Adjustment Mechanism—to ensure that power rates reflect the actual cost of the fuel used to produce the power and not simply a forecast of fuel need—highlights the importance of accurately forecast...
AI summary The Fuel Adjustment Mechanism (FAM) ensures power rates reflect actual fuel costs, emphasizing the need for accurate forecasting of energy and peak capacity requirements for NSPI's in-province customers and the least cost supply plan to meet those needs. This section outlines NSPI's forecasting and planning processes during the 2024-2025 Audit Period.
III.B. Findings NSPI's overall approach to FAM cost forecasting during the Audit Period was similar to the forecasting processes in place in recent years. The long-term load forecast remained the basis for fuel supply planning, investment...
AI summary NSPI's fuel adjustment mechanism (FAM) forecasting approach during the Audit Period remained consistent with recent years, using long-term load forecasts based on customer class models, including SAE models for residential and commercial classes and econometric models for industrial classes. These forecasts inform fuel supply planning and are aggregated into a Net System Requirement (NSR) and annual Load Forecast Report filed with the NSEB.
III.B.2. Fuel and Purchased Power Forecasting Fuel and Purchased Power ("F&PP") forecasts are prepared annually and updated quarterly, or more frequently if there are significant changes that suggest the forecast is no longer reliable (suc...
AI summary Fuel and Purchased Power (F&PP) forecasts are prepared annually and updated quarterly using PLEXOS. The process involves dispatch simulation modelling and financial model production. NSPI continued using PLEXOS during a cyber event by accessing local data. The forecasts are reviewed by relevant management teams as per the Fuel Manual.
III.B.2.a. Inputs and Assumptions used with PLEXOS in Fuel and Purchased Power Forecasting To accurately simulate the operation of the NSPI system, including accurate modelling of the transmission security constraints limiting the economic...
AI summary The document details the inputs and assumptions required for PLEXOS modeling in fuel and purchased power forecasting for NSPI. It includes load forecasts, transmission characteristics, fuel prices, generating unit data, operating costs, and emission assumptions.
III.B.2.b. Environmental Considerations in Unit Commitment and Dispatch Forecasting NSPI is subject to air quality regulations that dictate its fleetwide emissions of SO2, NOx, mercury, and GHGs. NSPI's F&PP forecasts incorporate these lim...
AI summary NSPI must comply with air quality regulations, which influence its unit commitment and dispatch forecasting. It uses tools like PLEXOS and PortOps to model emissions constraints, manage fuel blends, and incorporate OBPS cost adders for GHG emissions. Emissions compliance is reviewed by multiple teams, and adjustments are made to ensure adherence to environmental regulations.
III.B.2.e. PLEXOS Input Information Origination and Maintenance Appendix B of the FAM Plan of Administration documents the FAM Fuel Forecasting Methodology governing the process and assumptions used by NSPI to produce the fuel forecast req...
AI summary This section discusses the origination and maintenance of input information for PLEXOS, including data sources, update procedures, and modeling assumptions used by NSPI. It highlights the roles of EAM and ERM, the exclusion of major unplanned outages, and the modeling of operating reserves in accordance with reliability requirements.
Figure III-6: PLEXOS Assumptions - Q4 2025 Fuel and Purchased Power Forecast Group PLEXOS Assumptions Update Required Notes Update Received Date Generating unit start-up costs / shut down penalties No Updated from the unit performance mode...
AI summary Figure III-6 outlines PLEXOS assumptions for Q4 2025 fuel and purchased power forecasts, including updates to generating unit parameters, wind and tidal energy profiles, fuel prices, and market constraints. Some assumptions require quarterly updates, while others are permanent or unchanged.
Figure III-7: Comparison of Actual vs. Forecast Fuel Costs (2024) ^{123} Actual Forecast $ Variance % Variance Solid Fuel Cost $319,034,892 $265,660,172 $53,374,720 20.09% Natural Gas Cost $148,275,704 $109,186,050 $39,089,654 35.80% Bioma...
AI summary The figure compares actual and forecast fuel costs for 2024, showing significant variances across different fuel types, with solid fuel and bunker C costs exceeding forecasts by over 20% and 145%, respectively, while biomass and diesel costs were below forecasts.
Figure III-8: Comparison of Actual vs. Forecast Fuel Costs (2025) 124 Actual Forecast $ Variance % Variance Solid Fuel Cost $321,602,838 $291,312,788 $30,290,050 10.40% Natural Gas Cost $121,804,288 $176,366,243 ($54,561,955) -30.94% Bioma...
AI summary Figure III-8 compares actual and forecast fuel costs for 2025, showing significant variances across different fuel types. Solid fuel and bunker C costs exceeded forecasts, while natural gas and additives fell below. The overall variance for 2025 was $28.0 million, a much smaller deviation than the 26.8% variance in 2024.
d the OBPS costs and credits they generate. Conclusion III-11: NSPI also continued use of reasonable QA, QC, and verification processes to prevent errors in emissions data tracking and reporting. Conclusion III-12: In 2024, the overall var...
AI summary NSPI maintained reasonable QA and QC processes in 2024, but faced a 26.8% variance in fuel cost forecasts due to external factors such as lower-than-expected surplus energy and renewable generation. In 2025, the forecast was much closer to actual costs, with a 5.4% variance.
IV.A. Background Solid fuel—i.e., coal and petcoke—has historically been NSPI's largest fuel expenditure. The same remained true in this Audit Period. Figure IV-1 and Figure IV-2 show that for both 2024 and 2025, solid fuel accounted for 6...
AI summary This section provides background on Nova Scotia Power Inc.'s (NSPI) solid fuel procurement during the audit period, focusing on coal and petcoke as the largest fuel expenditures. It outlines the review of NSPI's solid fuel-fired fleet, consumption data, fuel sources, pricing, contracts, and procurement processes. Biomass is excluded and covered in a separate chapter.
NSPI consumed a total of metric tonnes of solid fuel in the Audit Period. This was about 26.9% above forecasted consumption of metric tonnes. Figure IV-4 provides these data in more detail, as broken down between 2024 and 2025.
AI summary NSPI's solid fuel consumption during the Audit Period was significantly higher than forecasted, reaching 26.9% above the expected amount. The breakdown of this consumption between 2024 and 2025 is detailed in Figure IV-4.
Figure IV-4: NSPI's Solid Fuel Consumption vs. Forecast (2024, 2025)133 2024 2025 Solid Fuel Type Consumption (MT) Forecast (MT) Comparison Consumption (MT) Forecast (MT) Comparison Solid Fuel There were a few key factors driving solid fue...
AI summary The figure compares NSPI's solid fuel consumption with forecasts for 2024 and 2025. Key factors include discrepancies in energy imports and increased coal-fired generation to compensate for lower-than-forecasted Surplus Energy imports.
IV.B.3. Solid Fuel Sources and Types Several of NSPI's thermal generators burn blends of solid fuel, including various types of coal and petcoke. (We explain below NSPI's approach to blending fuels and the relative benefits of each type of...
AI summary NSPI uses a mix of solid fuels, including coal and petcoke, with most being imported. Fuel consumption varies seasonally, peaking in winter. Coal types differ in heat content, emissions, and ash production, affecting efficiency and compliance with environmental regulations.
IV.B.4. Solid Fuel Prices Following a volatile period of market pricing in the prior audit period,151 coal prices moderated and enjoyed reduced volatility during the 2024-2025 period. The , which is the index against which many of NSPI's c...
AI summary During the 2024-2025 audit period, solid fuel prices for NSPI showed reduced volatility compared to the prior period. NSPI's coal costs-per-tonne consumed are based on already purchased fuel and are managed through hedging strategies to insulate ratepayers from price fluctuations. The audit also highlights differences in imported, domestic, and petcoke prices over the audit period.
Figure IV-12: Solid Fuel Prices by Plant, excluding additives ($/Tonne)156 Plant 2024 2025 Lingan Point Aconi Trenton 5 Trenton 6 Point Tupper Factoring in the additional cost of environmental additives (limestone, powder activated carbon,...
AI summary The document discusses the impact of environmental additives on the operational costs of solid-fuel fired power plants in Nova Scotia, with specific mention of Point Aconi. These additives increase operational costs and influence the relative costs of solid fuel-fired units, as illustrated in Figure IV-13.
155 Q1 2024 FAM Report through Q4 2025 FAM Report, inclusive, 3, 3(2), and 3(3). The missing data points for domestic coal and pet coke indicate months in which there was zero recorded consumption of either product, respectively. 156 Q4 20...
AI summary The text discusses the Fuel and Actual Management (FAM) reports from Q1 2024 to Q4 2025, noting missing data points for domestic coal and pet coke due to zero recorded consumption in certain months. It also highlights that the increase of 5.8% is heavily influenced by the cost of environmental adders, while other factors are impacted by 4-5 percent.
Figure IV-13: Solid Fuel Prices by Plant, including additives ($/Tonne)157 Plant 2024 2025 Average Increase in $/Tonne Attributed to Additives Lingan 4.5% Point Aconi 5.8% Trenton 5 4.2% Trenton 6 2.5% Point Tupper 4.6% As already noted, t...
AI summary The text discusses the cost of solid fuel prices by plant, including additives, and highlights that the data is a backward-looking measure. It also mentions a more accurate method of evaluating fuel costs based on replacement costs to reflect market price changes.
IV.B.5. NSPI's Solid Fuel Procurement Process Assessment NSPI's solid fuel procurement processes are clearly laid out in NSPI's Fuel Manual158 are designed to use competition to benefit FAM customers. The process allows NSPI to leverage it...
AI summary NSPI's solid fuel procurement processes are designed to use competition to benefit customers, with clear guidelines on supplier diversification and risk exposure. The RFP process encourages supplier participation and ensures fair evaluation based on price, transportation costs, and environmental factors. Procurement approvals are well documented and justified through management review.
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.
First Quarter 2024 NSPI entered into no new contracts for solid fuel supply in the first quarter of 2024.
AI summary NSPI did not enter into any new contracts for solid fuel supply during the first quarter of 2024.
Second Quarter 2024 NSPI entered into no new contracts for solid fuel supply in the second quarter of 2024.
AI summary In the second quarter of 2024, NSPI did not enter into any new contracts for solid fuel supply.
Third Quarter 2024 NSPI entered into new contracts for solid fuel supply in the third quarter of 2024. These are shown in Figure IV-18.
AI summary In the third quarter of 2024, NSPI signed new contracts for solid fuel supply, as illustrated in Figure IV-18.
Figure IV-18: NSPI New Solid Fuel Supply Contracts (Q3 2024) 164 Supplier Product Quantity (MT) Term 5 Mid-Sulfur purchases On May 27, 2024, NSPI issued an RFP for mid-sulfur coal, inviting over a dozen parties to submit an offer. The RFP...
AI summary NSPI issued an RFP for mid-sulfur coal in May 2024, seeking between 100,000 and 400,000 tonnes/year for 2024–2026. Offers were evaluated based on sulfur content and quality, with some disqualified due to potential derates and opacity issues. The remaining offers were assessed on delivered basis, considering environmental and quality attributes.
Fourth Quarter 2024 NSPI entered into new contract for solid fuel supply in the fourth quarter of 2024. This is shown in Figure IV-19. 168 "Pac Basin - 20240828 169 NSPI Q4 2024 FAM Report, Q3. evaluated prices (considering transporta...
AI summary In the fourth quarter of 2024, NSPI entered into a new contract for solid fuel supply. The contract was selected based on evaluated prices, considering transportation, heat content, quality, and environmental attributes, as shown in Figure IV-19 and the Q3 FAM Report.
Figure IV-20: October 2024 LSH, LSL Evaluated Bids ($/MMBtu) 2025 Bids Supplier Coal type Evaluated Price ($/MMBtu) LSL $7.41 LSL $7.50 LSH $7.88 LSH $7.88 LSH $7.96 LSL $8.09 LSL $8.12 LSL $8.18 LSL $8.19 LSH $9.13 2026 Bids LSL $7.50 LSL...
AI summary The Solid Fuels team is not recommending purchasing LSL coal due to uncertainty in the Q4 forecast and potential replacement of LSL with LSH coal. LSH coal offers greater flexibility in blending and meeting sulfur emission targets.
NSPI's evaluation process allows for direct comparisons of LSL with LSH offers, as it adjusts for coal quality, heat content, and environmental attributes, and does so on a fully-delivered basis (therefore accounting for transportation). A...
AI summary NSPI evaluated coal options, selecting LSH over LSL despite higher costs, citing performance and availability. The decision was approved by the FST, with NSPI providing rationale for temporary risk exposure exceedances. CROC highlighted risks associated with the transaction and NSPI's coal procurement practices.
transaction did subject NSPI to a material increase in risk, but that NSPI followed the dictates of its Fuel Manual and determined to exceed its stated risk thresholds based on a reasonable rationale. Additional LSH Cargo in 2024: As noted...
AI summary NSPI faced a material increase in risk due to additional LSH coal procurement in 2024, which was necessitated by an extended LIL outage and an unexpected outage at New Brunswick's Point Lepreau plant, limiting energy imports.
NSPI did not issue an RFP to meet this need, but rather canvassed Basin, its existing suppliers of LSH fuels at that time, given that these parties had offered viable supply for coal with sufficiently high heat content, unlike could not of...
AI summary NSPI did not issue an RFP for LSH fuel supply but canvassed existing suppliers. One supplier offered a single cargo of 58,000 tonnes at a fixed price in 2024, which was more favorable than another offer in Q3 2024.
Second Quarter 2025 NSPI reported entering into three new contracts for solid fuel supply in the second quarter of 2025. This is shown in Figure IV-21. LSL, LSH Purchases and Deferrals in Wake of CoV: On March 7, 2025, NSPI issued an RFP f...
AI summary NSPI entered into new solid fuel contracts in Q2 2025, but after receiving an SO2 CoV, adjusted its procurement strategy. The CoV allowed higher coal consumption and more use of mid-sulfur coal, reducing the need for LSH. NSPI deferred some LSH supply to 2026 and declined additional LSH procurement in 2025.
Third Quarter 2025 NSPI entered into two new contracts for solid fuel supply in the third quarter of 2025. This is shown in Figure IV-22. The and ontracts listed here are discussed in the prior section (IV.B.7.f).
AI summary NSPI signed two new solid fuel supply contracts in the third quarter of 2025, as detailed in Figure IV-22 and referenced in the prior section (IV.B.7.f).
Fourth Quarter 2025 NSPI entered into two new contracts for solid fuel supply in the fourth quarter of 2025. This is shown in Figure IV-23. Petcoke RFP: On October 9, 2025, NSPI issued an RFP for petcoke, seeking up to 250,000 tonnes for d...
AI summary In the fourth quarter of 2025, NSPI issued an RFP for petcoke, seeking up to 250,000 tonnes for delivery between December 2025 and 2026. NSPI did not purchase any petcoke for 2025 delivery due to higher prices offered in 2025 compared to 2026. Twelve suppliers submitted offers, with the most economic offers selected for 2026 delivery.
IV.B.8. Other Solid Fuel Contracts and Procurement NSPI's significant procurements in other services or products related to solid fuels are included in this section. Coal Trucking Contracts, Costs: During the Audit Period, circumstances le...
AI summary NSPI contracted two trucking companies to transport coal from Point Tupper Marine Terminal to Trenton due to early return of Trenton 5 from layup, leading to increased coal consumption. This decision aimed to maintain inventory levels at Trenton 6, crucial for SO2 compliance.
Figure IV-24: Trucked Coal Volumes, Cost (December 2024-March 2025) Supplier Volume (tonnes) Cost ($/tonne) Cost ($) In our view, NSPI acted reasonably in almost all aspects of this process. The one exception is in failing to invite all re...
AI summary The analysis concludes that NSPI acted reasonably in most aspects of the process, except for not inviting all regular trucking vendors to the October 2024 RFP, leading to the selection of a vendor that underperformed in volume delivery and safety standards. Inventory levels at Trenton remained above the target as of March 31, 2025.
According to NSPI, the underperformance also did not have direct incremental costs to FAM customers. We found no evidence to the contrary. The spilled coal (which was quite small) was cleaned up at expense. The spilled oil was cleaned up w...
AI summary NSPI reported that spilled coal and oil were cleaned up without direct incremental costs to FAM customers. Coal delivery to Trenton was affected by the loss of domestic supply from Stellarton Mine, leading to increased reliance on PTMT. NSPI is taking steps to manage coal availability and reduce trucking. Railcar leases are aging, with some over 40 years old, and NSPI does not own any railcars.
224 "NCL - 20190701 POA Ash Services," section 1.1.7. contract value of $ We confirmed that the separate three-year contracts for Point Aconi225 and Lingan226 had terms that matched offer. Coal Sales Agreement: On September 3, 2025, N...
AI summary The text discusses a coal sales agreement between NSPI and the government, with terms for selling coal over a five-year period, and mentions an audit recommendation from Bates White related to the 2022-2023 audit.
IV.C. Conclusions Conclusion IV-1: Consumption of solid fuel was 26.9% higher than the base cost of fuel forecast, due largely to lower than forecasted Surplus Energy, changes in fuel blends, and the sulfur emissions CoV. NSPI's Audit Peri...
AI summary NSPI's solid fuel consumption was 26.9% higher than forecast, driven by lower surplus energy and changes in fuel blends. NSPI relies heavily on imported coal, with South American coal increasing to 52% of total consumption. NSPI has no domestic coal sources and adjusted fuel blends at its plants to meet SO2 emissions constraints. Coal prices moderated during the 2024-2025 audit period.
IV.D. Recommendations Recommendation IV-1: NSPI should consider a method to account for index price risk when evaluating index priced offers against fixed price alternatives in its solid fuel procurement process, without sacrificing the be...
AI summary The recommendations focus on improving NSPI's procurement practices by addressing index price risk, ensuring clarity in fuel supply contracts, inviting all suitable vendors to RFPs, and ensuring Purchase Orders include necessary standard terms and conditions.
V.A. Background Effectively procuring solid fuel is one of two parts of a utility's effective approach to burning solid fuel for electricity generation. In this chapter, we review and assess the other essential part of this process—managem...
AI summary This section discusses NSPI's management of solid fuel supply, including procurement, tracking, weighing, sampling, contract administration, supplier compliance, and inventory management during the Audit Period.
receives its imports of solid fuel on marine vessels at two ports: the International Pier in Sydney and the Point Tupper Marine Terminal in Port Hawkesbury. These two piers, both of which are owned by NSPI, represent the two major hubs of...
AI summary Nova Scotia Power Inc. (NSPI) imports solid fuel via marine vessels at two ports, Sydney and Port Hawkesbury, which are owned by NSPI. These ports supply coal and petcoke to various generating plants. Domestic coal is also purchased and transported by truck to plants. Upon receiving imported fuel, NSPI records the quantity and cost, which are then transferred to generating plants as needed.
FAM Cost of Point Tupper Marine Terminal, International Pier and Capital Projects All fuel handling costs at the International Pier and Point Tupper Marine Terminal are recovered through the FAM. During the Audit Period, FAM-recoverable fu...
AI summary The document discusses the Fuel and Materials (FAM) recovery of fuel handling costs at the International Pier and Point Tupper Marine Terminal, showing significant decreases in costs during the Audit Period. NSPI is responsible for capital expenditures at these terminals, which are recovered through fixed cost recovery in rates. Inspection and next steps reports highlight infrastructure conditions and potential future capital costs.
V.B.2. Quantity and Quality Control of Solid Fuel NSPI's solid fuel supply contracts contain quantity and quality technical specifications that suppliers must meet in providing solid fuel and related services. Determining whether the solid...
AI summary NSPI manages its solid fuel supply through technical specifications and quality control processes, including testing at loading ports, receiving ports, and generating plants, as outlined in its Fuel Manual. This is crucial given the international sourcing of much of its solid fuel.
Imported Solid Fuel Consistent with the prior audit period, and as per the Fuel Manual, NSPI has engaged independent load port representatives acting on NSPI's behalf to witness the loading and sampling of each vessel at the load ports to...
AI summary NSPI ensures the quality and quantity of imported solid fuel by engaging independent load port representatives and labs to follow ASTM procedures for sampling and analysis. The process includes verifying compliance with purchase agreements and recording draft survey data on Bills of Lading.
Domestic Solid Fuel As explained in Chapter IV, NSPI received just a small volume of domestic coal (7,987 tonnes) during the Audit Period. This Donkin coal was delivered to Lingan. At Lingan, under NSPI's contract with Donkin coal delivere...
AI summary NSPI received a small volume of domestic coal (7,987 tonnes) during the Audit Period, which was delivered to Lingan and sampled under a contract with Donkin for comparison to technical specifications.
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.
V.B.3. Solid Fuel Contract Administration NSPI's solid fuel contract administration is under the direction of the Senior Manager of Fuels Strategy and Performance. The Senior Manager's team includes the Coal Procurement and Logistics Speci...
AI summary NSPI's solid fuel contract administration is managed by the Senior Manager of Fuels Strategy and Performance, with responsibilities divided between the Coal Procurement and Logistics Specialist and Senior Contract Administrators. Key activities include monitoring international shipments, managing inventory, and conducting site visits. Regular meetings and coordination with various teams and departments are part of the process.
Contract Quantities Each of NSPI's coal and petcoke contracts calls for a contract quantity, with a tolerance of some percentage that can be delivered above and below the contracted quantity. From these numbers, it is simple to determine t...
AI summary The document discusses NSPI's coal and petcoke contracts, which include tolerance ranges for delivered quantities and mechanisms for managing non-compliance. Five contracts were audited, and all suppliers performed adequately within the specified ranges.
Figure V-1: NSPI Solid Fuel Contract Deliveries vs. Contract Limits (Metric Tonnes)238 Supplier Contract Product Quantity Received Contract Minimum Contract Maximum Underdelivery MS 304,957.00 264,600.00 323,400.00 - LSH 335,808.79 208,800...
AI summary Figure V-1 presents a comparison of NSPI Solid Fuel Contract Deliveries against Contract Limits in metric tonnes. The table includes details on product quantity received, contract minimums, maximums, and underdelivery for various suppliers and products.
Bates White's Contract Administration Samples To test the contractual compliance of NSPI's solid fuel suppliers, we sampled seventeen shipments of solid fuel (coal, petcoke, additives). Specifically, we examined (1) the underlying confirma...
AI summary Bates White tested NSPI's solid fuel supplier contracts by examining seventeen shipments, verifying that all samples met contractual quantity tolerances and that pricing adjustments were accurate and reflective of fuel quality factors such as heat, sulfur, and mercury content.
NSPI's Approach NSPI's approach to solid fuel inventory management is contained in its Fuel Manual. It defines a governing principle, a series of targets that guide NSPI, and a series of thresholds that, if breached, require specific actio...
AI summary NSPI's approach to solid fuel inventory management is outlined in its Fuel Manual, focusing on 'winter readiness' to ensure sufficient fuel during peak demand. The approach includes defined targets, thresholds, and circuits (Point Tupper and Sydney), with specific storage locations and inventory levels to support continuous operation during the winter months.
Audit Period Results NSPI's actual inventories are provided in the following set of figures. Figure V-3 and Figure V-4 show solid fuel inventory, by month, at the two NSPI circuits for 2024. Figure V-5 provides NSPI's 243 NSPI Fuel Manual...
AI summary NSPI's solid fuel inventory levels in 2024 and 2025 were generally stable and within historical ranges, with no excess inventory identified. In 2025, two coal shipments were deferred due to compliance requirements, not inventory levels. Inventory levels at Point Tupper and Sydney circuits met or exceeded winter readiness targets in both years.
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.B.7. Bates White's 2022-2023 Audit Recommendations Our prior audit report contained one recommendation related to non-biomass Solid Fuel Supply Management. It stated: Recommendation V-1: NSPI should review its contract administration pro...
AI summary Bates White's audit report from 2022-2023 discusses a recommendation related to NSPI's contract administration process for the Donkin supply agreement. The recommendation was no longer applicable as the mine remained closed during the audit period and the contract expired in December 2024. NSPI's response was deemed reasonable.
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.A. Background In this chapter, we review and assess NSPI's procurement and supply management of biomass fuel. We begin by explaining NSPI's biomass fuel-fired generator, the Port Hawkesbury Biomass Unit ("PHB"). Next, we look at NSPI's...
AI summary This section provides an overview of NSPI's biomass fuel procurement and supply management during the Audit Period. It covers topics such as the PHB generator, fuel consumption, supply contracts, procurement process, and inventory adjustments, as well as actions taken in response to prior audit recommendations.
Figure VI-4: Biomass Prices ($/GMT) (Actual vs. Forecast)261 2024 2025 Solid Fuel Type Actual Forecast Actual Forecast Biomass Another measure for the cost of biomass fuel during the period is the daily fuel cost for the Port Hawkesbury bi...
AI summary The document discusses the daily fuel cost for the Port Hawkesbury biomass unit used by NSPI in system dispatching, highlighting the modeled cost of biomass fuel ranging from just below to a high of about /MMBtu in January 2025. Data from April 2025 to December 2025 was lost due to a cyber event and backfilled, affecting data reliability.
supply, which had the highest forecasted biomass consumption of any forecast observed. Also, in the table below, we are including the November 2024 contract for GMT of 275 " Biomass Amendment." 276 " Biomass Purchase Sale Agreeme...
AI summary NSPI procured more primary biomass fuel than forecasted, leading to surplus purchases and increased costs for FAM customers. However, the PHB unit generated significant OBPS credits, reducing costs for FAM customers. The procurement decisions reflect the dynamics of the biomass fuel market in Nova Scotia.
requirement is %. As it relates to biomass fuel, the energy balance process assigns "costs" between PHP and NSPI by adjusting NSPI's inventory levels and assigning debits or credits on PHP's invoices. As an initial matter, NSPI has been fu...
AI summary The text discusses the energy balance process between PHP and NSPI, emphasizing its complexity and the need for agreement between the two parties for modifications. The Energy Balance Worksheet is not included in the Shared Services Agreement due to its technical nature, and the audit period results have been reviewed.
assess the damaged structure and develop options. put forth three options ranging from refurbishment to demolition and complete replacement, with an estimated cost ranging from $ million to $ million. NSPI has explained that liquidated dam...
AI summary NSPI explained that their biomass fuel supply contracts lack liquidated damages clauses for underdelivery due to the nature of biomass as a byproduct. Despite underdeliveries in 2024 and 2025, NSPI claimed the underdeliveries were excused by contract terms covering events beyond their control.
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.
he PHB boiler, and consumption in 2025 was the highest in several years. NSPI has also taken steps to adapt to the challenges in procuring bark, including higher primary fuel blends in PHB's fuel mix. Conclusion VI-10: Some of NSPI's execu...
AI summary NSPI's executed contracts lacked execution dates, and in 2024, NSPI incurred FAM costs related to biomass inventory pile combustion from PHP. The contract language does not clarify NSPI's responsibility for incremental costs. NSPI also adapted to challenges in procuring bark by using higher primary fuel blends. The energy balance process was appropriately codified into the Shared Services Agreement.
The MN365 FT Contract With the advent of the MMBtu per day firm gas supply from Alberta, NSPI sought to match it with an MN365 FT contract on M&NE-CA because there was little doubt that this gas would be used by NSPI every day. This contra...
AI summary NSPI entered into an MN365 FT contract on M&NE-CA to match a daily MMBtu gas supply from Alberta, with flexibility to sell unused gas in NB/NS markets. The contract was renewed for 2024-2025 and extended to 2026, with a decision on 2027 deferred. Analysis showed declining utilization of FT capacity, leading to cumulative losses, prompting NSPI to conclude the capacity would be uneconomic.
The TCPL and PNGTS Open Seasons In July and August of 2025, TCPL and PNGTS issued coordinating Open Seasons for new FT capacity on their respective systems.320 The TCPL open season invited prospective shippers to bid on up to MMBtu/day of...
AI summary In 2025, TCPL and PNGTS launched coordinated open seasons for new FT capacity. NSPI modeled the economic implications of this opportunity, considering factors like generation capacity, gas prices, and pipeline costs. The analysis concluded that the increased costs of additional pipeline capacity make bidding unwise, with future open seasons to be evaluated using updated assumptions.
hat may evolve. Bates White offers its perspective on this position noting that the uncertain role of the new NS IESO in procuring gas for any new, gas-fired generation makes NSPI's role less certain. Bates White does not agree with ERM's...
AI summary Bates White disagrees with ERM's position on NSPI's management of natural gas procurement, emphasizing that natural gas is procured dynamically and requires continuous adjustments. Selling unneeded gas or releasing FT capacity is a standard practice, not speculative, and asset managers can manage FT contracts effectively.
VII.B.3. Bates White's 2022-2023 Recommendations In our report for the prior Audit Period, we included three recommendations regarding natural gas supply planning. The first recommendation read: Recommendation VII-1: On an annual basis, NS...
AI summary Bates White's 2022-2023 recommendations include a call for NSPI to annually quantify the optimal mix of short-term and long-term FT pipeline contracts and delivered gas supplies for FAM customers, including risk mitigation strategies. NSPI accepted the recommendation but did not clarify the term of the analysis, leading to the recommendation being considered unaddressed.
VII.C. Conclusions Conclusion VII-1: NSPI does not appear to have completed the analyses made in Recommendation VII-1 from the previous FAM audit, which recommended that "[t]his quantification should include a quantification of risk mitiga...
AI summary The conclusions highlight that NSPI did not complete risk mitigation analyses as recommended, excluded such analyses in evaluating FT contracts, and appropriately managed some FT contracts and tariff negotiations. NSPI also expects reduced reliance on natural gas due to environmental changes and has an evolving philosophy on long-term FT contracts.
VII.D. Recommendations Recommendation VII-1: NSPI should conduct the analysis described in Recommendation VII-1, that was accepted by NSPI, from the 2022 – 2023 FAM Audit. 331 Bates White's February 21, 2025, Rebuttal Evidence, page 9 line...
AI summary The recommendations outline actions for NSPI, including re-analyzing Freepoint FT capacity offers, formalizing ERM positions on FT capacity, and clarifying risk allocation related to over-paying for unneeded FT capacity and mitigation strategies.
VIII.A. Background In this chapter, we assess NSPI's natural gas procurement processes and results during the Audit Period. The natural gas market in Nova Scotia remains supply constrained, which limited the number of natural gas suppliers...
AI summary This section examines NSPI's natural gas procurement processes during the Audit Period, noting supply constraints in Nova Scotia's market, NSPI's role as a price taker, and the increase in natural gas prices from 2024 to 2025. The focus includes procurement decisions, contract management, and transactions with counterparties and Emera Energy.
VIII.B. Findings A review of NSPI's gas procurement and management practices indicated that NSPI personnel purchased term natural gas using competitive solicitations and selected offers based on lowest expected price at that time. For the...
AI summary NSPI's gas procurement and management practices were reviewed, revealing that purchases were made using competitive solicitations based on lowest expected price. In 2024, NSPI did not purchase the full quantity of term gas due to concerns about selling unneeded gas, and in 2025, no RFP was issued due to a Certificate of Variance. Documentation was detailed and clear, and NSPEMI's natural gas transactions increased significantly.
No RFP Issued for the 2025 Summer Period On February 24th, 2025, NSPI issued an RFP seeking gas supplies for the April-October 2025 time period based on the Q1 2025 forecast. Following RFP issuance, on March 12, 2025, NSPI met with the Nov...
AI summary On February 24th, 2025, NSPI issued an RFP for gas supplies for April-October 2025. However, following a meeting with NS ECC and a subsequent PLEXOS forecast, NSPI determined that no additional gas was needed beyond what was already contracted with BP, leading to the withdrawal of the RFP.
The Effect of Contracting for Firm Term Gas The term gas purchases were generally firm, which meant that NSPI could not contractually vary its daily gas purchases. Failure to take the gas would not necessarily be a breach of the base North...
AI summary The document discusses the implications of NSPI's firm term gas contracts, including the inability to vary daily gas purchases and the potential for selling unneeded gas at higher prices in other markets. It also mentions the tax issues and delivery points associated with gas sales and highlights the economic benefits of selling gas at high prices.
VIII.B.3. Prices Paid by NSPI for Spot Natural Gas For most of the Audit Period, NSPI captured its natural gas-related transactions in a software application called Allegro (also known as Horizon). Each transaction was assigned an individu...
AI summary NSPI used Allegro software to record natural gas transactions, including prices and counterparties. During a cyber event, NSPI relied on gas trade blotters to track trades. Prices were determined through arm's length negotiations and reflected market conditions.
VIII.D. Bates White's 2022-2023 Recommendations In its previous Audit Report, Bates White made five recommendations related to natural gas procurement.354 Our first recommendation was: Recommendation VIII-1: Develop the ability to sell and...
AI summary Bates White's 2022-2023 Recommendations include developing market access for NSPI, tracking gas prices, and other procurement-related actions. NSPI has accepted these recommendations and taken steps to implement them, with Bates White considering the responses satisfactory.
IX.A. Background Fuel oil is typically a small portion of NSPI's FAM costs and fuel purchases. This chapter addresses NSPI's procurement and management of Heavy Fuel Oil ("HFO") and Light Fuel Oils ("LFO"), which include diesel and furnace...
AI summary This section provides background on NSPI's use of heavy and light fuel oils, including their procurement, management, and applications. HFO is used at Tufts Cove and for co-firing coal units, while LFO is used for various purposes, including start-up and shut-down processes and vehicle fuel.
IX.B. Findings During the Audit Period, NSPI purchased cargoes of HFO364, of which came after an approved standing order for permission to purchase an additional cargo of HFO if required for the 2025/2026 winter period. LFO was purchased p...
AI summary During the Audit Period, NSPI purchased HFO364 under an approved standing order for the 2025/2026 winter period, and LFO was purchased periodically as needed under existing contracts.
IX.B.1. Heavy Fuel Oil (HFO) Findings NSPI can burn HFO at its solid fuel plants and at Tufts Cove units 2 and 3, with the majority of the storage and usage at Tufts Cove; HFO can no longer be burned at Tufts Cove unit 1. HFO is delivered...
AI summary NSPI uses Heavy Fuel Oil (HFO) at several plants, with storage primarily at Tufts Cove. Due to a cyber event, inventory tracking via Aligne was disrupted, and manual tracking in Excel was used. Audits showed minimal cost variance between Aligne and manual records, with proper accounting confirmed.
IX.B.1.b. Pre-Approval of HFO Cargo Purchase On December 18, 2025, a recommendation for standing approval to purchase HFO was approved. With a Dec 2025-Feb 2026 price forecast of delivered gas being at or above HFO, materially higher natur...
AI summary On December 18, 2025, a recommendation for standing approval to purchase Heavy Fuel Oil (HFO) was approved due to higher natural gas prices compared to HFO and active dispatch of Tufts Cove units. NSPI purchased one HFO cargo on the approval date, following an RFP issued on December 8, 2025.
IX.B.1.c. Light Fuel Oil (LFO) NSPI used LFO as start-up fuel, motor vehicle fuel, and for other applications at its generation plants, and burned diesel fuel at its combustion turbine facilities, such as Burnside and Victoria Junction. In...
AI summary NSPI used Light Fuel Oil (LFO) at its generation plants and combustion turbine facilities. The supply contracts for LFO had no minimum or maximum quantity provisions and expired on December 31, 2024. NSPI's diesel consumption was below budget, while furnace oil consumption was above budget. There was a discrepancy between the LFO costs recorded in Aligne and the Q4 FAM Report, which NSPI attributed to year-end true ups and General Ledger entries outside of Aligne.
IX.C. Conclusions Conclusion IX-1: NSPI's process for deciding to contract for and purchase HFO was well documented, along with the decision to purchase 1 percent sulphur HFO at a lower cost and still meet environmental constraints. Conclu...
AI summary NSPI's process for purchasing HFO and LFO was well-documented and included necessary protections for customers. Contract extensions were timely and reasonable, with minor discrepancies in fuel costs that were reconciled outside of Aligne.
395 Q4 2024 FAM Report, 11(3); Q4 2025 FAM Report, 11(3); Data for Victoria Junction (two units) and Burnside (four units) is aggregated. In tab 11(3) in the Q4 2025 FAM Report, average load (annual) is misreported as a sum. The values in...
AI summary The text discusses errors in the FAM Reports for Q4 2024 and Q4 2025, specifically the misreporting of average load as a sum instead of an annual average. It also references an ISO New England FAQ and a 2014-2015 Liberty FAM Audit Report for context.
X.B.3.b.i. Fuel Switching Results In a prior Audit Report, we concluded that Tufts Cove's dual-fuel units had numerous instances during the Audit Period of being limited in their ability to burn HFO.429 We concluded that limitations on the...
AI summary The audit found that Tufts Cove Unit 1 cannot fuel switch, while Units 2 and 3 successfully switched fuels multiple times during the audit period. However, external factors such as pipeline pressure limitations prevented fuel switching in some cases, potentially impacting the effectiveness of NSPI's natural gas price hedging strategy.
X.B.3.b.v. LM6000 engine efficiency impact on fuel costs Tufts Cove units 4 and 5 operates three LM6000 engines, with two in place and a third spare that can rotate and replace the others. The three engines are identified as: (1) Engine 19...
AI summary This section discusses the operational efficiency of LM6000 engines at Tufts Cove units 4 and 5, highlighting concerns raised by the Board regarding potential higher fuel costs due to lower-than-rated electrical efficiencies during extended operation. Two Board decisions related to capital investment requests by NSPI are referenced.
[The following graph is confidential.] NSPI assessed the OEM-provided heat rate performance curve against performance at Tufts Cove Unit 4 for two separate engine swap periods. The next figure compares the gross load performance of Engine...
AI summary NSPI compared the heat rate performance of two engines at Tufts Cove Unit 4 during two separate periods. The newly refurbished engine outperformed the one in extended operation, with a 3-4% lower gross heat rate. The analysis concluded that FAM customers did not face materially higher fuel costs due to inefficient engine performance.
X.B.4. OM&G Costs Operating, maintenance, and general ("OM&G") costs are not recoverable through the FAM. Nevertheless, OM&G costs remain worth summarizing here in our discussion of power plant performance. NSPI spent approximately $194.7...
AI summary This section discusses OM&G costs, which are not recoverable through the FAM. NSPI spent approximately $194.7 million in OM&G expenses during the Audit Period, with an 8.8% increase compared to the prior period. These costs do not include other OM&G expenses such as those for common capital spending.
481 Q4 2024 FAM Report, tab 9(3). 482 Q4 2025 FAM Report, tab 9(3). 483 2020-2021 Bates White Audit Report, page 214. 484 2022-2023 Bates White Audit Report, page 251. plant (~$147,000/MW) and NSPI's wind generation (~ $117,000/MW) were th...
AI summary The text references multiple FAM reports and an audit report, discussing the cost of different power generation units, with wind and plant generation being the most expensive and combustion turbines and hydro units being the least expensive.
485 2025 Annual FAM Report, A2; Figure X-26 does not consider common OM&G items, such as plant operations and ERM costs. 486 2022- 2023 Bates White Audit Report, Figure X-26.
AI summary The 2025 Annual FAM Report (A2) and the 2022-2023 Bates White Audit Report reference Figure X-26, which excludes common OM&G items like plant operations and ERM costs.
X.B.5. Sustaining Capital Sustaining capital investments related to NSPI's power plants are not recovered through the FAM. Despite the remainder of the capital investments being recovered through depreciation expense, and not through the F...
AI summary NSPI's sustaining capital investments for power plants are not recovered through the FAM but are accounted for via depreciation. In 2024 and 2025, NSPI invested $152.2 million and $146.0 million respectively, representing a 13.6% decrease from the prior audit period. These investments are intended to maintain the fleet's operational condition.
491 2024 and 2025 FAM Annual Reports, A7. 492 2022-2023 Bates White Audit Report, page 253; 2024 FAM Annual Report A7; 2025 FAM Annual Report A7. 493 2024 FAM Annual Report A2, A7; 2025 FAM Annual Report A2, A7.
AI summary The text references multiple FAM (Fuel Adjustment Mechanism) Annual Reports from 2024 and 2025, as well as a Bates White Audit Report from 2022-2023, citing specific pages and sections.
X.B.6. Power Plant Visits The FAM POA requires the fuel auditor to "[c]onduct on-site inspection for fuel handling, quality control, inventory management and performance monitoring." In May 2026, we completed the following in-person site v...
AI summary The FAM POA requires on-site inspections of fuel handling and inventory management. In May 2026, site visits were conducted at several Nova Scotia Power facilities, including biomass and coal plants, as well as inventory locations. These visits included interviews and facility tours.
X.B.7.a. NSPI's Compliance with Sulfur Dioxide, Nitrous Oxide, and Mercury Emissions Caps NSPI complied with all fleetwide SO2 and NOx limits during the Audit Period. Regarding SO2, NSPI was assisted by the receipt of the CoV for 2025, whi...
AI summary NSPI complied with SO2 and NOx limits during the audit period, aided by a CoV for 2025. However, NSPI exceeded mercury emissions limits in 2024 and 2025, though it used credits to adjust compliance limits. In 2025, emissions exceeded the credit-adjusted cap.
Figure X-34: OBPS Allowed Intensities (tonne/GWh) and Cost of GHG ($/tonne) (2023-2030)509 Fuel Type 2023 2024 2025 2026 2027 2028 2029 2030 Solid Fuels 925 925 925 925 900 850 650 370 Liquid Fuels 550 550 550 550 550 550 550 550 Existing...
AI summary The document presents data on OBPS allowed intensities and GHG costs from 2023 to 2030, along with NSPI's GHG emissions and compliance costs during the Audit Period. NSPI's compliance costs are reported as $42.3 million, but there is a discrepancy with the $40.9 million shown in Figure X-35. PHB generated the most OBPS credits, while Tufts Cove had the highest GHG compliance cost.
Figure X-38: PHB Boiler Steam Flow Across Different Fuel Moisture Content. 524 Test Date Moisture Target (%) Actual Avg Steam Flow (kg/s) 2024-09-25 50.38 55.6 2025-01-30 55 42 2025-02-04 60 38 These are insightful results that finally ach...
AI summary The PHB boiler steam flow results demonstrate the unit's ability to maintain steam supply under varying fuel moisture conditions. NSPI has addressed prior audit recommendations and presented these findings to the FAM SWG. However, challenges remain in predicting output and economic dispatch due to factors outside NSPI's control, such as fuel moisture content and PHP's OMs.
NSPI continue to use its root cause analysis process to improve its operations. As such, we include no further recommendations on this point and find NSPI to have fully addressed this recommendation. Our fifth recommendation related to pow...
AI summary The document discusses NSPI's response to recommendations related to its root cause analysis process and reporting of wind curtailment in its FAM reporting. NSPI has addressed these recommendations by providing relevant analyses and incorporating necessary reporting.
" December 19, 2024. 532 NSPI, "M11533 – 2022-2023 FAM Audit Action Plan Update – Recommendation X-4," December 19, 2024. 533 Bates White Rebuttal Evidence, M11533, February 21, 2025, page 7 line 9. NSPI accepted this recommendation and no...
AI summary The document discusses NSPI's acceptance of a recommendation to report wind curtailment data in its FAM Annual Report. The Consumer Advocate, John Wilson, recommended more frequent reporting, such as monthly, and the inclusion of monthly curtailment data in the FAM Annual Report. The rebuttal evidence supports the importance of reporting wind curtailment data and suggests that NSPI should aim for higher granularity, such as hourly reporting, in the future.
oach to wind curtailment reporting,537 and we noted that in some jurisdictions, wind curtailment data is reported on an hourly basis, a level of granularity NSPI should strive to achieve over time.538 NSPI has introduced wind curtailment d...
AI summary The document discusses NSPI's reporting of wind curtailment data in its FAM Annual Reports and the introduction of monthly wind curtailment estimates. It also mentions NSPI's engagement with the SWG to refine reporting formats and the handling of a damages claim related to the South Canoe wind farm.
544 2022-2023 Bates White Audit Report, page 250. NSPI's internal estimate of replacement energy volume is MWh. We conducted a rough, independent estimate for comparison. To do so, we reviewed South Canoe's output during these periods and...
AI summary The document discusses NSPI's internal estimate of replacement energy volume and cost, comparing it with an independent estimate based on South Canoe's output and BCF forecasts. It also mentions the cost of replacement RECs based on the purchase of 123 GWh.
both units. The faulty motor was replaced, and NSPI reported no further failed starts after July 31, 2025; in the remainder of 2025, the units started successfully 87 times without further recurrence. Conclusion X-16: Regarding the efficie...
AI summary The text discusses the replacement of a faulty motor at NSPI and the successful operation of LM6000 engines following adjustments. It also highlights a forced outage at Tufts Cove 2 due to blade deposits, leading to a recommendation for NSPI to estimate the incremental FAM costs of the outage.
X.D. Recommendations Recommendation X-1: NSPI should provide the Board an update on the status of the remaining 27 recommendations from the Root Cause Analyses at the end of 2026. Recommendation X-2: NSPI should provide its estimate of the...
AI summary The recommendations focus on NSPI providing updates and cost estimates related to forced outages and compliance costs. Key topics include FAM costs, forced outages at various facilities, and reconciliation of OBPS compliance costs.
nit or system conditions. During the operating hour, generation units are ramped up and down by ECC to balance energy production and consumption at all times while also maintaining system reliability. The PortOps model is used on a day ahe...
AI summary The document discusses the least cost dispatch process in Nova Scotia, where generation units are ranked by cost to meet forecast energy needs. Must-run units and contracted energy are scheduled first, followed by wind and small hydro, then coal, combined-cycle gas, and gas-fired units depending on natural gas prices. A cyber event in April 2025 affected merit order rankings.
Incremental Cost ($/MW) = ((Marginal Heat Rate \ (Fuel Price + Hg Adder + SO2 Adder + Limestone Adder)) + VOM + OBPS Adder) \ Transmission Loss Factor There are four different types of environmental adders to the Fuel Price that apply depe...
AI summary The incremental cost calculation includes environmental adders such as Hg, SO2, Limestone, and OBPS. NSPI managed SO2 compliance through fuel blending and received a certificate of variance (CoV) in 2025, increasing allowable emissions and removing the SO2 adder from the cost equation for Point Aconi.
emissions at Point Aconi are managed using an adder for the cost of limestone in addition to a PAC adder. It is included in the dispatch equation for Point Aconi for all hours during the audit period. GHG compliance costs under the Output-...
AI summary Emissions at Point Aconi are managed using an adder for limestone costs and a PAC adder in the dispatch equation. The OBPS applies to fossil fuel generation with GHG intensity above a specified level, with adjustments to heat rate curves for some units. These changes affect the dispatch stack, influencing unit operation to manage emissions.
Figure XI-2: Emissions (and other) Adders or Heat Rate Curve Adjustments in Dispatch Equation by Unit, 2024-2025 Unit PAC (Hg+SO2) Limestone (SO2) GHG OBPS Tufts Cove 1 x Tufts Cove 2 x Tufts Cove 3 x Tufts Cove 4 x Tufts Cove 5 x Tufts Co...
AI summary The document outlines emissions adders and heat rate curve adjustments for various units in the 2024-2025 dispatch equation. NSPI manages environmental constraints through fuel choice and blending, particularly for units like Lingan, Trenton, Point Aconi, and Point Tupper, which have no NOx adder in the dispatch equation due to compliance with emissions constraints.
omass was off-line in percent of all hours. Of the remaining hours, output was above 30 MWh in percent of the hours and below 15 MWh in percent of the hours, with an average output of 25 MWh per hour. Various fuels are used for steam produ...
AI summary The Port Hawkesbury Biomass Generator uses bark, wood chips, and natural gas for steam production, with bark being the lowest cost fuel. Natural gas is used for stabilization and during maintenance periods. Fuel prices and heat rate coefficients are modeled and fixed during the audit period, with the fuel price dropping significantly during a cyber event in April 2025.
XI.B.7. Out-of-Merit Dispatch of Solid Fuel Units In many hours during 2024, all the solid fuel units (Lingan, Pt Aconi, Pt Tupper, and Trenton) were scheduled out-of-merit. This largely coincides with the period that the SO 2 adder was in...
AI summary In 2024, solid fuel units were frequently scheduled out-of-merit, coinciding with the inclusion of SO2 adders in marginal cost equations. This led to discrepancies between unit marginal costs and day-ahead system marginal costs, suggesting that the day-ahead system marginal costs may have been understated.
audit period because limited SO2 allowances were managed with an additional fuel cost adder on solid fuel units that worked to raise the cost of solid fuel units relative to those run on natural gas. Under OBPS, the Port Hawkesbury Biomass...
AI summary The document discusses how Nova Scotia Power Inc. manages GHG emissions through the OBPS system, including the use of GHG OBPS Performance Credits and cost adders on fossil units to reflect emissions costs, impacting dispatch decisions and merit order reordering.
Figure XI-12: Annual Generation (MWh)573 Units 2022 2023 2024 2025 Unit 1 Unit 2 Lingan Unit 3 2,180,119 1,532,900 1,559,503 2,195,760 Unit 4 Point Aconi Unit 1 908,652 782,620 782,438 670,857 Point Tupper Unit 2 625,187 480,727 563,036 69...
AI summary Annual generation data across various units in Nova Scotia from 2022 to 2025 is presented, with significant fluctuations in output influenced by natural gas prices and OBPS adders. Higher gas prices in 2025 led to reduced dispatch of gas-fired units like TUC-1 and TUC-3, while solid fuel units were favored due to the OBPS adders.
Short-Term Purchases The Fuel Manual allows the NSPI and NSPEMI Energy Marketers to make day-ahead and hourahead power purchases and sales.626 Specifically, the Fuel Manual notes that NSPI's energy marketers will " ."627 The Fuel Manual re...
AI summary The Fuel Manual allows NSPI and NSPEMI Energy Marketers to make short-term power purchases and sales, with transactions requiring human decision-making and compliance with risk and credit policies. Most of NSPI's total system requirements during the audit period were met through imported power, largely due to increased deliveries from Muskrat Falls via the Maritime Link.
XII.B.1.c.i.1. Economic Imports We begin here with economic imports. Deciding to import power into Nova Scotia is not always based on a simple comparison of the cost of energy at the external source and . There are several other costs invo...
AI summary The document discusses the economic considerations of importing power into Nova Scotia, including transmission costs, fees, and the use of tools to evaluate the full cost of imports. NSPI's traders acted prudently, with most transactions providing economic benefits to customers, though one exception resulted in a loss due to unexpected price increases.
re caused by testing and commissioning activities on the Labrador Island Link.655 The Acceleration Agreement further stated that the first contract year of the EAA would begin on September 1, 2022.656 In the 2020-2021 audit period, portion...
AI summary The text discusses the background of transactions over the Maritime Link, including the Acceleration Agreement and its impact on the NS Block and Surplus Energy. It references audit reports and the Board's review of cost recovery applications and the prudence of the Acceleration Agreement.
Tracking of Undelivered, Makeup NS Block Volumes Entering the Audit Period, NSPI was owed a balance of 201,779 MWh of undelivered Base Block energy.662 On June 22, 2024, the undelivered Base Block volume net of makeup energy received reach...
AI summary At the start of the audit period, NSPI was owed 201,779 MWh of undelivered Base Block energy. By June 22, 2024, this balance was reduced to zero after receiving 1,666,975 MWh of Base Block and 506,086 MWh of makeup energy. The remaining undelivered volume at the end of the audit period was 793 MWh, which is considered small and manageable.
Figure XII-11: Base Block Volumes (MWh) Month Contract Volume (MWh) Hourly Deliveries up to Contract (MWh) Make-Up Energy (MWh) Total Base Block Deliveries (MWh) Net Over/(Under) Deliveries (MWh) Cumulative Undelivered Base Block Volume (M...
AI summary The table shows monthly base block volumes and related metrics for a period from January 2024 to December 2025. It includes contract volumes, hourly deliveries, make-up energy, and cumulative undelivered volumes. NSPI was owed 54,833 MWh of undelivered Supplemental Block energy at the end of the prior audit period, but this was resolved by November 21, 2024.
During the Audit Period, NSPI received 519,728 MWh of Supplemental Block, which was approximately 97 percent of the contract volume of 533,453 MWh. NSPI also received 75,355 MWh of make-up Supplemental Block energy. Factoring in the 54,833...
AI summary During the Audit Period, NSPI received a significant amount of Supplemental Block energy, resulting in a surplus of 6,797 MWh. The audit report and related benefits report are cited in the text.
Valuation of Undelivered, Makeup NS Block Volumes In our prior audit report, we explained NSPI's efforts to ensure that makeup volumes of NS Block energy meets the terms of the ECA. We also explained NSPI's mechanism for tracking the value...
AI summary The audit report discusses NSPI's efforts to ensure makeup volumes of NS Block energy meet the terms of the ECA, noting that NSPI has met requirements except for 82,341 MWh. The report highlights the importance of understanding the net impact on FAM customers and recommends continued pursuit of undelivered volumes.
Figure XII-13: NS Block Undelivered, Makeup Volume Valuation Results 691 Estimated Values ($M) NSPI Method Bates White Method In addition to these core calculations, we also considered the impact of SO2 emissions compliance costs. NSPI's m...
AI summary The text discusses the consideration of SO2 emissions compliance costs in addition to core calculations, referencing NSPI's memo that reasonably explained these impacts.
XII.B.1.d.iii. Surplus Energy Deliveries (Pursuant to EAA) Under the terms of the EAA, NSPI may (at its sole option) issue a competitive market solicitation ("EAA RFP") by June 15 for energy to be delivered in the next contract year.694 NL...
AI summary Under the EAA, NSPI can issue an EAA RFP by June 15 for surplus energy delivery. NLH must respond in good faith if it forecasts positive available energy, defined as energy beyond its native load and NS Block obligations. NLH is required to provide a forecast to NSPI by March, and forecasts for the Audit Period were received.
XII.B.2. Power Exports NSPI's energy marketers also export power on a short-term basis—i.e., day-ahead or real-time. In general, these export opportunities fall into two categories, but both categories are based on economics. One set of tr...
AI summary NSPI's energy marketers export power on a short-term basis when prices elsewhere are higher or during periods of high wind output. Exports during the Audit Period were minimal, totaling 4.5 GWh, or 0.02% of total system requirements, with limited revenue and gains.
Figure XII-18: NSPI's Short-Term Exported Power Volume, Cost 707 Year Volume (MWh) Volume as % of TSR Total Revenue Total Cost Gain (Loss) 2024 0 2025 706 Q4 2025 FAM Report, 7(3).
AI summary Figure XII-18 presents NSPI's short-term exported power volume and associated costs for 2024 and 2025, though the data is incomplete. A reference is made to the Q4 2025 FAM Report, which may provide further context.
707 Data compiled from Q4 2025 FAM Report, 2(3) and 7(3).
AI summary The text references data compiled from the Q4 2025 FAM Report, specifically sections 2(3) and 7(3).
XII.B.3. Affiliate Transactions NSPI's purchase and sale of power involves three different affiliate transaction types: (a) power import/export transactions in which NSPEMI transacts on NSPI's behalf; (b) purchases from the 708 Quantities...
AI summary NSPI's affiliate transactions include power import/export through NSPEMI, purchases from the Brooklyn Power facility owned by Emera, and payments to NSPML for Maritime Link charges. Discrepancies in quantities between reports may occur due to transmission limitations or reliability adjustments.
XII.B.3.c. NSPML The Maritime Link is owned by NSPML, a wholly-owned subsidiary of Emera and an affiliate of NSPI. Recovery of Maritime Link costs were subject to Board-approved annual assessments. Revenue of up to $163.5 million and $197....
AI summary NSPML, a subsidiary of Emera, is subject to revenue holdbacks until certain conditions are met. NSPML applied to end the holdback mechanism in M12696. In 2024 and 2025, NSPML received approved revenue amounts, and NSPI reported cost reductions related to the Maritime Link and FAM balance. Financial details and applications are discussed in various matters and decisions.
Our second recommendation read: Recommendation XII-2: NSPI should maintain its pursuit of recovery of missing NS Block energy volumes in a manner that recognizes the contractual provisions pertaining to missing and makeup energy, seeks to...
AI summary Recommendation XII-2 advises NSPI to recover missing NS Block energy volumes while adhering to contractual provisions and maximizing value for FAM customers. NSPI accepted the recommendation and committed to providing further context on 82,341 MWh of ineligible replacement energy. The response was deemed satisfactory.
rely on any of that 153 MW toward its planning reserve at all, considering its experience in October 2021 when the Labrador Island Link's unavailability meant zero MWhs flowed during the 31-day month. Moreover, once the Labrador Island Lin...
AI summary The document discusses NSPI's disagreement with an assessment that FAM customers are deprived of long-term capacity value due to undelivered NS Block quantities. NSPI argues that the current delivery of the NS Block meets capacity standards, but the opposing view emphasizes the unavailability of promised capacity until the Labrador Island Link is fully commissioned.
XII.C. Conclusions Conclusion XII-1: The sources of power that serve FAM customers continue to become more diverse and regionally-integrated as evidenced by continued increases in imports and third-party purchases, totaling 35.9% during th...
AI summary The document outlines conclusions regarding the diversification of power sources for FAM customers, NSPI's PPAs with renewable generators, and the increase in imported power, particularly from the Muskrat Falls project via the Maritime Link.
XII.D. Recommendations Recommendation XII-1: By the earlier of the resolution of the dispute or the end of 2026, NSPI should update the Board regarding its efforts to recover the value associated with Recommendation XII-2: NSPI should repo...
AI summary The recommendations suggest that NSPI update the Board on efforts to recover value by 2026 and report on NLH's surplus energy in its FAM Annual Report. These actions aim to ensure transparency and accountability in energy management and financial reporting.
XIII.A. Background To fuel its generating units, NSPI must buy fuel on the open market, which exposes NSPI—and FAM customers—to price risk. If fuel prices rise, NSPI must pay more (and charge FAM customers more) for fuel; if fuel prices fa...
AI summary NSPI must purchase fuel on the open market, exposing it and FAM customers to fuel price volatility. Hedging strategies are used to mitigate this risk and stabilize rates. The EPIA required NSPI to submit a Fuel Stability Plan for Board approval. NSPI updated its hedging plan in 2022 and 2023, aligning it with Nova Scotia's OBPS. The Fuel Hedging Plan remained largely unchanged during the Audit Period.
XIII.A.1. Summary of NSPI's Hedging Program during the Audit Period For individual fuels, NSPI's approach during the Audit Period was to hedge between % of its exposure.749 The Fuel Hedging Plan also calls for "quarterly rebalancing" of NS...
AI summary NSPI's hedging program during the Audit Period involved hedging between a percentage of its exposure for individual fuels, with a requirement for quarterly rebalancing of its hedged position as outlined in the Fuel Hedging Plan.
XIII.A.1.a.i. Permitted Financial Products and Trade Types Subject to approval of the Fuel Strategy Table, the general types of financial contracts permitted by the Fuel Hedging Plan are presented in Figure XIII-1 below, which also explain...
AI summary The document discusses permitted financial products and trade types under the Fuel Hedging Plan, subject to approval by the Fuel Strategy Table. It references various documents, including NSPI's rate application, an audit report, and the Fuel Hedging Plan itself.
751 Fuel Hedging Plan, pages 5 to 7. 752 One side of the commodity swap, the floating leg, is tied to the price of a commodity or a commodity index, while the payments on the other side, the fixed leg, are stipulated in the contract. It is...
AI summary The text discusses fuel hedging plans, specifically commodity swaps and swing options, explaining how they function and their use in managing price volatility. It mentions that NSPI's hedging products are outlined in Appendix B of the Fuel Hedging Plan and require pre-approval for any alternative products.
Figure XIII-2: Approved Hedging Products per the Fuel Hedging Plan 757 Fuel Primary Financial Hedging Index Secondary Financial Hedging Index(es) Physical Hedging Opportunities Coal HFO Natural Gas Power XIII.A.1.a.ii. Counterparties
AI summary The document presents Figure XIII-2, which lists approved hedging products per the Fuel Hedging Plan, with sections addressing counterparties involved in the plan. The figure includes categories for different fuels and their associated hedging indices and opportunities.
XIII.A.1.a.iii. Strategy and Rebalancing NSPI seeks to . Hedged volumes will incur a loss (gain) as prices fall (rise). Unhedged volumes can take advantage of the lower market prices but are exposed to increases in prices. The Fuel Hedging...
AI summary NSPI is required to rebalance its fuel hedging portfolio quarterly based on updated forecasts, liquidity in hedging products, and market price changes. The process involves adjusting existing hedges or procuring new ones to align with updated fuel consumption expectations derived from the Plexos model.
XIII.A.1.a.iv. Unhedgeable Risks NSPI notes in its Fuel Hedging Plan that there is "763 NSPI identifies four specific risks for which a direct economic hedge either is not available or would be of prohibitive cost:764
AI summary NSPI identifies four specific unhedgeable risks in its Fuel Hedging Plan, noting that direct economic hedging is either unavailable or prohibitively expensive for these risks.
XIII.A.1.a.v. Procedure and Oversight Planning, executing, monitoring, and reporting of hedges requires coordination across NSPI. The FST governs fuel procurement and hedging subject to both the Risk Management Policy and the Credit Policy...
AI summary NSPI's fuel hedging and risk management involve coordination across multiple teams, including the Portfolio Optimization Group and ERM. The Fuel Strategy Table (FST) governs fuel procurement and hedging, with quarterly reporting on hedge effectiveness and compliance. Credit risk from bilateral transactions is monitored by ERM and reported to management.
XIII.B.1. Assessment of NSPI's Hedging Program Results We assessed the effectiveness of NSPI's hedging activities during the Audit Period by first considering whether NSPI's hedging is meeting the goal of greater stability in electricity r...
AI summary The assessment evaluates NSPI's hedging program effectiveness in achieving rate stability, as outlined in its Fuel Hedging Plan. It considers the alignment of hedging activities with governing documents, portfolio-level risk analysis, and individual fuel-level impacts, including transaction costs and procurement processes.
XIII.B.1.a. Consistency with Fuel Stability Objectives While the Fuel Stability/Rate Stability Period was not in place during the Audit Period, we still begin with a review of the FAM results for the objective of stabilizing fuel costs. Du...
AI summary The audit period shows that NSPI over-recovered FAM costs in most months, but in 2024 there was a significant over-recovery due to a reduction in fuel costs from a federal loan guarantee. In 2025, actual FAM costs exceeded recovered costs, resulting in a balance of $101.6 million. Factors such as market prices, energy demand, and regulatory changes are discussed as influencing these results.
XIII.B.1.b. Consistency with Hedging Plan Requirements The next way we assessed NSPI's hedging activities during the Audit Period was to review NSPI's compliance with the plain language of the Fuel Hedging Plan regarding hedging targets. A...
AI summary The document assesses NSPI's compliance with the Fuel Hedging Plan by reviewing its adherence to hedging targets for forecasted fuel consumption and each fuel type during the Audit Period, referencing the Fuel Manual and various monthly reports.
XIII.B.1.c. Compliance with Quarterly Rebalancing Provisions of Fuel Hedging Plan The Fuel Hedging Plan calls on NSPI to actively update and manage its hedge portfolio throughout the hedging plan. Specifically, the Fuel Hedging Plan states...
AI summary The Fuel Hedging Plan requires NSPI to perform quarterly rebalancing of its hedge portfolio, using updated fuel consumption forecasts from Plexos. NSPI conducted quarterly rebalancing in all eight quarters during the Audit Period, with an interim rebalance in Q1 2025 due to changes in fuel mix expectations. The impact of energy flows from NLH on hedging activities is highlighted as a major theme from the prior audit period.
XIII.B.1.c.i. 2024 (First Quarter) Period in the discussion below. NSPI completed its quarterly rebalance for the first quarter of 2024 in March. NSPI's forecast of EAA Surplus Energy was limited to approximately GWh in 2024, and between a...
AI summary NSPI completed its first quarter 2024 rebalance, adjusting its forecast of EAA Surplus Energy and incorporating PHP's load into its 2026 hedging decisions. Uncertainty around full rating tests and software updates influenced the reduced forecast. NSPI also purchased power hedges for 2026 and updated its load forecast, leading to changes in fuel exposure and expected imports.
XIII.B.1.c.ii. 2024 (Second Quarter) In the second quarter of 2024, NSPI engaged in moderate rebalancing for purchased power, solid fuel, and natural gas. NSPI purchased an additional GWh of power hedges for 2026, initiating hedging for of...
AI summary In Q2 2024, NSPI engaged in moderate rebalancing for purchased power, solid fuel, and natural gas, including additional power hedges for 2026 and basis hedges to reduce winter 2024/2025 exposure. NSPI used all 2023 GHG OBPS performance credits to offset 2023 obligations, despite a lower net present value of spreading credits over seven years, to reduce the FAM balance and manage program risks.
XIII.B.1.c.iii. 2024 (Third Quarter) Entering the Audit Period, NSPI was in the midst of a two-year sulfur emissions compliance period, which limited NSPI's total SO2 emissions to 31.6 kt in 2024. In November 2023, NSPI implemented a compl...
AI summary NSPI faced challenges in complying with sulfur emissions limits in 2024 and implemented a compliance buffer. It also adjusted its load and surplus energy forecasts, leading to a portfolio rebalancing. NSPI increased its compliance buffer to 6 kt in 2025 and 2026 due to forecast changes and uncertainty around LIL maintenance.
XIII.B.1.c.v. 2025 (First Quarter) NSPI completed its quarterly rebalance for the first quarter of 2025 in March. NSPI noted no material changes to expectations regarding the timing of EAA Surplus Energy deliveries and made only modest reb...
AI summary NSPI completed its Q1 2025 rebalancing with minimal changes, unwound on-peak power hedges, and adjusted marine freight exposure. The CoV for SO2 emissions allowed higher emissions limits, making solid fuel consumption more economic. NSPI is expected to emit the maximum allowed SO2 in 2025.
XIII.B.1.c.ix. Portfolio-Level Assessment We next reviewed NSPI's hedging activities' effectiveness on a portfolio level. We sought to review, using statistical metrics, the effectiveness of NSPI's entire hedging portfolio on its entire ac...
AI summary The document discusses the portfolio-level assessment of NSPI's hedging activities, focusing on statistical metrics such as portfolio level regressions, portfolio VaR, transaction costs, and the procurement process. The analysis aims to evaluate the effectiveness of NSPI's hedging strategies on fuel consumption costs and exposure.
XIII.B.1.c.x. Portfolio-Level Regression Analysis Our first portfolio-level look at the effectiveness of NSPI's hedging activities was to consider how closely changes in the value of NSPI's hedge portfolio—comprised of both physical and fi...
AI summary The document discusses NSPI's portfolio-level regression analysis to evaluate the effectiveness of its hedging activities in offsetting fuel consumption costs during the Audit Period. While the R-squared metric indicates a strong fit in all quarters, the slope metric falls outside the acceptable range, suggesting the hedge was not effective in offsetting costs.
XIII.B.1.c.xii. Portfolio Hedging Costs Though effective by the measures noted above, NSPI's hedging activities have direct costs, and it is important to assess those costs and ensure they are not excessive relative to their risk-reducing...
AI summary NSPI's hedging activities involve direct costs that are recoverable through the FAM. These costs include commissions and fees, and NSPI finds them reasonable given the volume of transactions and the reduction in portfolio VaR. Interest expenses in margin accounts are not recoverable through the FAM.
Figure XIII-9: Portfolio Hedging Costs (FAM recoverable, by Quarter) Quarter Hedging Costs (USD) Q1 2024 $ Q2 2024 $ Q3 2024 $ Q4 2024 $ Q1 2025 $ Q2 2025 $ Q3 2025 $ Q4 2025 $ Total $ We also note here that even though it is not a measure...
AI summary The text discusses portfolio hedging costs related to the Fuel Adjustment Mechanism (FAM), noting that realized gains or losses from hedging are accounted for in inventory or consumption costs. NSPI's financial hedge contracts resulted in losses in 2024 and 2025, influenced by market conditions during procurement and expiration periods.
XIII.B.1.c.xiii. NSPI's Hedge Procurement Process NSPI's process for procuring hedges remains reasonable. NSPI can transact for hedges through a variety of vehicles, depending on the commodity, including the Intercontinental Exchange ("ICE...
AI summary NSPI's hedge procurement process is considered reasonable, allowing transactions through various platforms and brokers, with standardized agreements to reduce risk and costs. Traders execute transactions within a set price range, and unexecuted hedges were often due to market price shifts or lack of liquidity. NSPI reassessed and rebalanced its portfolio in some cases.
Figure XIII-10: Quarterly PLEXOS Forecast, FST Approval, Hedge Transaction Timing Forecast Date of Forecast Date of FST Approval Date of First Trade Days Between Forecast, FST Approval Days Between Forecast, First Trade Days Between FST Ap...
AI summary The document highlights the importance of FST approval in NSPI's process and notes the potential for energy market changes during the time between forecasting and hedge execution. It recommends NSPI review and improve the efficiency of its hedging lifecycle.
XIII.B.1.d. Fuel-Level Hedge Assessment Our next assessment was to consider NSPI's hedge effectiveness across individual fuels. This would demonstrate if NSPI's overall hedge portfolio results were masking any concerns regarding a particul...
AI summary The assessment evaluated NSPI's hedge effectiveness across individual fuels, finding that hedging significantly reduced Value at Risk (VaR) for solid fuel, natural gas, and power. However, HFO showed positive VaR due to inconsistent delivery volumes. Analysis for Q1 2025 was not completed due to a cyber event affecting the Allegro system.
XIII.C. Conclusions Conclusion XII-1: The hedging program as executed during the Audit Period generally conformed with the objectives of the Fuel Hedging Plan. Conclusion XIII-2: Our review shows that NSPI conducted quarterly rebalancing a...
AI summary The hedging program executed by NSPI during the Audit Period generally aligned with the Fuel Hedging Plan. Quarterly rebalancing was consistent with plan requirements, though impacted by liquidity issues and SO2 compliance verification. NSPI's success in shielding FAM ratepayers depends on the accuracy of fuel consumption forecasts, and changes in energy flows from NLH on the Maritime Link also influenced hedging activities.
XIII.D. Recommendations Recommendation XIII-1: NSPI should review the timing of its hedging lifecycle – from PLEXOS forecasting, to FST presentation development, to FST approval – to find areas for increased efficiency.
AI summary The recommendation suggests that NSPI should review and improve the efficiency of its hedging lifecycle, including steps such as PLEXOS forecasting, FST presentation development, and FST approval.
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.1. FAM Accounting – Fuel and Purchased Power Cost BDO reviewed NSPI's financial accounting process and inspected detailed financial accounting records that support the actual cost of fuel and purchased power claimed. BDO conducted a...
AI summary BDO conducted a remote review of NSPI's financial accounting processes and records related to fuel and purchased power costs. They sampled over 200 transactions and tested FAM model calculations to verify accuracy and compliance with regulatory standards.
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.3. FAM Reports to the Board The general context of the accounting resources, including the FAM tools and administration described above, provide the backbone information used to compile the monthly/quarterly/annual FAM reports submit...
AI summary NSPI prepares FAM reports for the Board using internal processes and tools. The reports are subject to a formal in-house review and approval process involving key personnel who provide feedback on draft filings.
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.6. Fuel Master Agreements and Purchase Order Controls Verification BDO's review and testing of fuel procurement, invoicing, and verification processes did not disclose any instances where costs paid for fuels procured exceed contract...
AI summary BDO reviewed NSPI's fuel procurement and invoicing processes and found no discrepancies in costs paid exceeding agreed prices. The review encountered challenges due to a cybersecurity incident and system upgrades, but alternative audit evidence was used without finding exceptions. Purchase orders and approvals were properly documented.
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.9. FAM Model Calculation – Weighted Average Cost of Capital and Interest Rates related to recoveries of Actual Fuel and Purchase Power Costs BDO's review and testing of the FAM model calculation for 4 months during the audit period i...
AI summary BDO conducted a four-month review and testing of the FAM model calculation, verifying inputs related to weighted average cost of capital and interest rates for fuel and purchased power cost recoveries. No errors or inconsistencies were found, and the model was concluded to be accurate.
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.
XV.B.1. Implementation of the ELIADC There are several important features of the ELIADC that relate to active demand control and pricing: - PHP's load is incorporated within PortOps during the Day Ahead and Intra Day schedule creation and...
AI summary The ELIADC (Extra Large Industrial Active Demand Control Tariff) incorporates PHP's load into PortOps for scheduling and optimization, with fixed rate payments based on forecasted costs. Due to the 2025 cyber incident, PortOps was unavailable for a period, leading to manual scheduling using PLEXOS and impacting real-time schedules until August 2025.
Figure XV-1: CBL Energy Charge, $/MWh819 Tariff Period CBL Energy Charge 2020 $59.99 2021 $53.02 2022 $57.99 ELIADC January 1 2023 - February 29 2024 $57.99 March 1 2024 - January 31 2025 $101.65 February 1 2025 - December 31 2025 $96.00 O...
AI summary Figure XV-1 shows the CBL Energy Charge over several years, with a notable increase in 2024. On July 5, 2023, the Board approved a change in the method to calculate the actual total incremental cost to serve, shifting from forecast replacement costs to historical weighted average fuel costs. This change did not impact the CBL Energy Charge, which is based on future incremental costs to serve PHP.
The ADC Credit is an adjustment calculated at the conclusion of the tariff year to share the system savings benefit of active demand control between FAM customers and PHP. PHP is entitled to 25% of the calculated benefit. When the CBL Ener...
AI summary The ADC Credit adjusts the system savings benefit of active demand control between FAM customers and PHP, with PHP receiving 25% of the benefit. The ELIADC Tariff requires PHP to make minimum annual payments based on NS Power's incremental costs and a fixed rate per MWh supplied. The calculation involves F&PP, VOM, and fixed cost components.
ts but rather the weighted average costs of fuel inventories. See NSUARB, "Board Decision Letter", M11021, July 5 2023, p. 2. b. $4.00 multiplied by the total number of MWh supplied in the year.832 In 2024, actual costs to serve PHP load w...
AI summary The text discusses the financial implications of the ELIADC tariff on PHP, including ADC benefits, Off-Schedule Charges, and net costs. In 2024, PHP had to make an additional payment, while in 2025, it received a benefit that was partially allocated to FAM customers. The Off-Schedule Charge was reduced and netted against a CBL Credit, resulting in a net cost to PHP.
XV.B.3. Scheduling and ADC Benefits Over the audit period, PHP's load (MWh) corresponded reasonably closely to the target energy (MWh) as adjusted for each month although there were several monthly outliers.839 Figure XV-9 compares PHP mon...
AI summary The document analyzes PHP's load performance in 2024 and 2025, comparing actual delivered energy to monthly and annual targets. It highlights significant deviations in August and October 2024 and notes the impact of paper product demand on 2025 performance. The ADC Benefit was positive in 2025, but factors like fuel costs and load variability can affect it.
XV.B.4.e. Cause Code 5: PDN Deviations – PHP Decision to Vary From Schedule NSPI identifies in its ELIADC annual reports the hours in which Cause Code 5: PDN deviations occur and the magnitude of those deviations. The cost or "penalty" for...
AI summary This section discusses the calculation and application of penalties for Cause Code 5: PDN deviations under the ELIADC Tariff. NSPI calculates penalties based on price differences and has reduced the penalty in 2025, but this reduction is criticized as not supported by the tariff and potentially weakening incentives for PHP to follow the schedule. The document also highlights a correction recommendation for the penalty calculation.
XV.B.5.a. Comparison of FAM and PHP Load Co-optimization of PHP load and NSPI generation should allow for PHP load to be reduced when FAM load is high and system conditions are relatively tight, and to increase PHP load when FAM load is lo...
AI summary The analysis compares the Fuel Adjustment Mechanism (FAM) load and Peak Hour Load (PHP) load, showing a modest inverse relationship (-0.28 correlation) over the audit period. In winter months, the correlation strengthens to -0.74, suggesting benefits from co-optimization. On-peak PHP load is smaller relative to FAM load compared to off-peak periods, consistent with daily co-optimization under the ELIADC.
XV.B.7. Bates White's 2022-2023 Audit Recommendations In our report for the prior audit period, we made three recommendations related to the ELIADC benefits calculation, the CBL Energy Charge, and annual reporting. Recommendation XV-1: NSP...
AI summary Bates White recommends that NSPI develop a benefits calculation considering hourly PHP load deviations based on quantities and prices by cause code type. ADC benefits are calculated from scheduling PHP load in lower cost hours, with benefits being the difference between actual costs and a fixed rate, netted annually.
Figure XV-19: Deficiencies in NSPI's Reported Information Requested Information Provided in 2024 ELIADC Annual Report Provided in 2025 ELIADC Annual Report 2022-2023 FAM Audit – Recommendation XV-3 More detailed quantification of actual lo...
AI summary The document highlights deficiencies in NSPI's reported information regarding the ELIADC tariff, including a lack of detailed quantification of load shifting benefits, incomplete narrative discussions on beneficial deviations, and insufficient information on tariff improvements. NSPI has partially complied with previous audit recommendations but continues to provide incomplete data, which limits the ability of FAM customers to assess the ELIADC tariff objectively.
XV.C. Conclusions Conclusion XV-1: The ELIADC tariff, as shown by benefits reported in the ELIADC annual reports, has minimally achieved the intent of the Board during the Audit Period. FAM customers did not bear the average costs to serve...
AI summary The conclusions highlight deficiencies in the ELIADC tariff's implementation, including flawed ADC benefit calculations, inadequate deviation tracking by NSPI, and lack of transparency in annual reports. The ELIADC tariff has not fully achieved its intended benefits, and there are inconsistencies in how PHP load is managed and reported.